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This sample business plan has been made available to users of Business Plan Pro, business
planning software published by Palo Alto Software, Inc. Names, locations and numbers may have
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Confidentiality Agreement
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_________________________ in this business plan is confidential; therefore, reader agrees not to
disclose it without the express written permission of _________________________.
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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


Chart: Highlights...........................................................................................................................2
1.1 Objectives....................................................................................................................................3
1.2 Positioning Statement.............................................................................................................3
1.3 Keys to Success.........................................................................................................................3
1.4 Mission...........................................................................................................................................4
2.0 Company Summary......................................................................................................................4
2.1 Start-up Summary....................................................................................................................4
Chart: Start-up..............................................................................................................................4
Table: Start-up...............................................................................................................................5
Table: Start-up Funding..............................................................................................................6
2.2 Future Financial Predictions..................................................................................................6
3.0 Services.............................................................................................................................................7
3.1 Service Guarantee....................................................................................................................7
4.0 Order Process.................................................................................................................................7
4.1 Order Number.............................................................................................................................8
4.2 Return Policies............................................................................................................................8
4.3 Return Label................................................................................................................................8
4.4 Sequence of Process................................................................................................................9
5.0 Benefits Summary........................................................................................................................9
5.1 Benefits to Merchants............................................................................................................10
5.2 Benefits to Consumers..........................................................................................................10
5.3 Benefits to Online Community...........................................................................................10
6.0 Market Analysis Summary.......................................................................................................11
6.1 Service Description.................................................................................................................11
6.2 Promotion, Sales, and Marketing......................................................................................13
6.3 Distribution and Information Structure..........................................................................15
6.3.1 Strategic Alliances...........................................................................................................16
6.4 Market Segmentation............................................................................................................16
6.4.1 Description of Items Sold............................................................................................17
Table: Market Analysis..............................................................................................................18
Chart: Market Analysis (Pie)...................................................................................................18
6.5 Market Needs............................................................................................................................18
6.6 Service Business Analysis....................................................................................................19
6.6.1 New Markets.....................................................................................................................19
6.6.2 New Services.....................................................................................................................20
6.6.3 New Customers................................................................................................................20
7.0 Competition...................................................................................................................................21
7.1 Direct Competitors..................................................................................................................21
7.2 Internal Competitors..............................................................................................................21
7.3 Channel Competitors.............................................................................................................22
8.0 Strategy and Implementation Summary...........................................................................22
8.1 Pricing..........................................................................................................................................24
8.2 Sales Forecast..........................................................................................................................25
Page 1

Table of Contents

Table: Sales Forecast.................................................................................................................26


9.0 Business Model and Structure................................................................................................26
9.1 Organizational Structure......................................................................................................26
Table: Personnel..........................................................................................................................27
10.0 Financial Plan.............................................................................................................................27
10.0 Financial Plan.............................................................................................................................27
10.1 Projected Cash Flow............................................................................................................27
Table: Cash Flow.........................................................................................................................28
Chart: Cash...................................................................................................................................27
10.2 Break-even Analysis............................................................................................................29
Chart: Break-even Analysis....................................................................................................29
Table: Break-even Analysis.....................................................................................................29
10.3 Important Assumptions......................................................................................................30
Table: General Assumptions...................................................................................................30
10.4 Projected Profit and Loss...................................................................................................30
10.4 Projected Profit and Loss...................................................................................................30
Table: Profit and Loss................................................................................................................31
10.5 Projected Balance Sheet....................................................................................................32
10.5 Projected Balance Sheet....................................................................................................32
Table: Balance Sheet.................................................................................................................32
10.6 Business Ratios......................................................................................................................32
Table: Ratios.................................................................................................................................33
Table: Personnel....................................................................................................................................1
Table: Sales Forecast...........................................................................................................................2
Table: Sales Forecast...........................................................................................................................2
Table: General Assumptions.............................................................................................................3
Table: General Assumptions.............................................................................................................3
Table: Profit and Loss..........................................................................................................................4
Table: Profit and Loss..........................................................................................................................4
Table: Cash Flow...................................................................................................................................5
Table: Cash Flow...................................................................................................................................5
Table: Balance Sheet...........................................................................................................................6
Table: Balance Sheet...........................................................................................................................6

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NoHassleReturn.com

1.0 Executive Summary


NoHassleReturn.com is an e-commerce start-up company positioning itself to become the
market leader in offering online merchants and consumers a uniform and trouble-free way to
return merchandise purchased online. The company offers a business-to-business solution to
online merchants of physical, non-perishable products. The company utilizes a consolidation
approach in handling all product returns that allows online merchants to instantly save bad
sales, restore customer satisfaction and stimulate repeat sales, while offering consumers a
convenient, centralized online location to claim returns. By creating a new service category and
utilizing the first-mover advantage, NoHassleReturn.com positions itself for rapid growth and
gains a strong opportunity to raise entry barriers for possible competition.
The Market
E-commerce continues to accelerate and the amount of money spent on purchases made
through the Internet shows no sign of decline. During the past holiday season (November 20 to
December 19), retailers saw online revenues quadruple, jumping 300% to about $11 billion and
far exceeding expectations, according to a study by Shop.org and Boston Consulting Group. The
study of 30 retailers in such categories as apparel, books and music, home and garden,
specialty foods and electronics showed a 270% growth in the number of orders. The study
indicated that online sales were growing at 145% annually and it projected online retailer
revenues of more than $36 billion for last year. An earlier study conducted by Ernst & Young,
before the holiday frenzy, already estimated that total revenues for online retail and consumer
products for the calendar year just completed were around $25-30 billion. Currently, the
average rate of returns for Internet-based companies is 9%. In the coming year the value of
returned merchandise was $1.5 billion. This indicates an amazing opportunity.
Service Offerings
NoHassleReturn.com's services streamline the entire return process for retailers. They allow
retailers to outsource a large part of their business, allowing the retailer to concentrate on their
core competencies and not get distracted with activities that add little value.
NoHassleReturn.com will reduce capital expenditures of a company that uses their services,
increase customer service of the retailer, increase sales opportunities, increase revenues, and
improve inventory management. Customers will benefit by having a convenient, easy way to
return their purchases as well as the ability to track their returns.
Keys To Success
NoHassleReturn.com has three ambitious and obtainable keys to success. The first is the
development of a customer service / customer satisfaction software application. This robust
software will be NoHassleReturn.com's engine that ensures a seamless management of all of
their business activities. Their second key is the formation of strategic relationships with online
merchants, shippers, and credit card companies. The relationships with merchants will allow
NoHassleReturn.com to quickly grow their customer base of retailers served. Alliances with
shipping companies will be formed since the actual cost of shipping is their largest cost driver.
Partnerships with credit card companies will allow NoHassleReturn.com to offer the respective
cards as the preferred credit card thereby generating an additional source of revenue.

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NoHassleReturn.com

Management Team
There are two principals that are responsible for the idea and the progress of the firm up. They
recognize as the companies quickly grows, certain positions such as CEO and CFO will need to
be filled. The company was founded by Steve Logic and Dan Codder. Steve has spent the last
ten years at Federal Express. While at FedEx, Steve was responsible for their logistics system.
Steve has the incredible skill of perceiving business needs and creating a solution to address
the need. At FedEx, Steve was the architect behind their benchmarked logistic system that has
the ability to track customer packages and share the information with the client. What this
meant for FedEx is that they could tell the customer exactly where their package is at any one
point. This logistics system is the main driver behind FedEx's exponential growth. Dan Codder is
a twenty-year veteran in the computer industry. Self taught, Dan has worked at IBM, Cadence,
Tektronix, and several other companies. Dan has the ability to design and write computer code
very quickly and accurately. NoHassleReturn.com will leverage Dan's skills for the completion of
their customer service software engine.
Financials
NoHassleReturn.com's financials are conservative yet quite promising. Once they are up and
running and sign up some merchants as customers, NoHassleReturn.com will quickly gain
momentum and generate impressive sales. Revenue for year two will be $19 million, climbing to
$59 million by year three. Net profit for these years respectively will be $4.7 million and $27.3
million. Even more impressive is NoHassleReturn.com's net profit margin. Year two will only see
a net margin of 25%, but the following year will see a sustainable 45%. NoHassleReturn.com
will be creating a new service category leveraging their first mover status and seizing the
incredible market potential of Internet-based retailers.

Chart: Highlights

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NoHassleReturn.com

1.1 Objectives
The ultimate benefit of the program is that it enhances the overall image of the online
merchant. Consumers demand not only convenience but a peace of mind. The proposed
program offers both, and it will increase the number of online shoppers, thus causing a market
expansion for online merchants. The first retailers who implement the proposed program will
also be able to differentiate themselves and capture larger market shares in their respective
segments. Once embraced by the majority of retailers, the program will become an industry
standard. Due to lack of current competition, NoHassleReturn.com has the first-mover
advantage and is well positioned to establish itself as the leader in the newly created service
category. NoHassleReturn.com therefore has an enormous upside potential and is poised for
rapid growth. By securing agreements with companies such as AOL.com and Yahoo! that host
large numbers of merchants, NoHassleReturn.com will raise high entry barriers for possible
competition and will significantly minimize the replication factor.
1.2 Positioning Statement
NoHassleReturn.com strives to position itself as a strategic partnership between online
merchants, Web hosting companies and portals, shipping companies, and online payment
agents such as credit card issuers. Due to demand aggregation, the strategy will produce
reduced or totally free shipping of returned merchandise to consumers. This differentiating
element will multiply the consumer acceptance factor and will draw more revenues to all
participating companies. The proposed program is therefore a win-win solution to all parties
involved. Moreover, the software architecture and website format will be wireless-friendly thus
designing the service in such a way that consumers will later be able to easily use it via cellular
phones and other personal wireless devices.
1.3 Keys to Success
In order for the company to operate, a number of specific ingredients are needed. Following are
things to put in place before the service can be offered.
1. Develop a customer service & customer satisfaction software application that uses order
number (of a merchandise item) and merchant's Web address to:
o Retrieve all pertinent information on a participating merchant.
o Match appropriate return procedures against the returning item.
o Present procedures to the consumer in the most concise format.
o Provide reference to the merchant's entire return policies if requested.
o Inform the merchant of the entire transaction as it occurs.
o Gain authorization from the merchant to return merchandise if needed.
o Present the merchant's website to consumer for selling opportunities.
o Provide confirmation emails to the customer of the actions taking place if requested.
o Interact with the merchant's database for further customer details if needed.
o Maintain a record of the transactions for the company's own database.
2. Develop successful relationships with online merchants to facilitate exchange of information.
3. Develop strategic alliances with online merchants, shipping companies, and credit card
issuers to negotiate reduction or elimination of the shipping costs to consumers on returned
merchandise.
4. Design, maintain, and promote a user-friendly website, the corporate trademark, that offers
an easy and trouble-free merchandise return procedure for consumers.

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NoHassleReturn.com

1.4 Mission
Our mission is to enhance customer service of online merchants, boost their customer retention
and increase their sales. We strive to improve the overall image of the online merchant and
therefore stimulate growth of online shopping. We put our efforts to increase customer
satisfaction when consumers deal with retailers, to enhance the interaction process when
retailers communicate with consumers, and to streamline the problem resolution order in all
possible ways.
2.0 Company Summary
The vision behind the company is to provide a return service that is safe, convenient, and easy
to use.
2.1 Start-up Summary
NoHassleReturn.com is currently looking for early-stage funding and strategic partnerships to
execute the program. The company plans to raise up to $2.6 million in two rounds of financing
during Year 1, along with securing access to additional $1.4 million for the cash flow purposes,
before making its program fully available to online merchants and consumers. The preliminary
rollout timing is set for Thanksgiving this year. Based on conservative financial projections, the
company will become profitable from early Year 2. The dual-pricing strategy generates solid net
income and nearly eliminates the downside risks. By Year 5-end , the $4 million investment will
produce $150 million in cash flows, all internally generated. The company can go public as early
as Year 2. Should an IPO be undertaken at Year 3-end, the financial standing of the company
should support a market capitalization of more than $1.4 billion.
The table below outlines the start-up expenses.

Chart: Start-up

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NoHassleReturn.com

Table: Start-up

Start-up
Requirements
Start-up Expenses
Legal
Stationery etc.
Brochures
Consultants
Insurance
Rent
Research and development
Expensed equipment
Other
Total Start-up Expenses

$200
$50
$450
$0
$100
$500
$400
$1,100
$200
$3,000

Start-up Assets
Cash Required
Other Current Assets
Long-term Assets
Total Assets

$47,000
$0
$0
$47,000

Total Requirements

$50,000

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NoHassleReturn.com

Table: Start-up Funding


Start-up Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required

$3,000
$47,000
$50,000

Assets
Non-cash Assets from Start-up
Cash Requirements from Start-up
Additional Cash Raised
Cash Balance on Starting Date
Total Assets

$0
$47,000
$0
$47,000
$47,000

Liabilities and Capital


Liabilities
Current Borrowing
Long-term Liabilities
Accounts Payable (Outstanding Bills)
Other Current Liabilities (interest-free)
Total Liabilities

$0
$0
$0
$0
$0

Capital
Planned Investment
Co-owner
Co-owner
Other
Additional Investment Requirement
Total Planned Investment

$25,000
$25,000
$0
$0
$50,000

Loss at Start-up (Start-up Expenses)


Total Capital

($3,000)
$47,000

Total Capital and Liabilities

$47,000

Total Funding

$50,000

2.2 Future Financial Predictions


The company anticipates to start approaching potential investors in February of this year. The
first round of finance needs is estimated at approximately $600,000. The funds will be used to
develop the core of the proprietary software program, begin designing the website, test-market
the service, and set up corporate headquarters. Also, recruitment of the key sales
representatives will begin and major strategic alliances initiated.
The second round of financing is estimated at $2 million and should take place in the Summer
Year 1. The funds will be used to fully cover the software, systems and website development;
test-run and fine-tune the operational process; provide necessary staffing; and start the
industrial marketing campaign. The company plans to offer its services right before
Thanksgiving of this year. As part of the promotion, and to simplify accounting for revenues,
services for the remainder of Year 1 will be offered free of charge and no revenues will be
recorded during that year.

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NoHassleReturn.com

According to the financial statements, the company will need to raise $2.6 million during the
two rounds of financing. At the same time, the company may need to have access to additional
$1.4 million to support adequate cash flows during the early stages.
An exit strategy for the primary investors will be the initial public offering. The company may go
public as early as Year 2. According to the financial statements, however, the company is
capable of supporting growth internally, as well as generating sizable cash flows. It may be
prudent to go public at Year 3-end when the company will have substantial revenues that
should support a market valuation of more than $1.4 billion. The funds raised during the IPO
will be used to further strengthen the market leader position, raise entry barriers through
continuing brand-building programs, establish a more bureaucratic corporate structure, fund
expansion initiatives, and to retire any financial obligations created during the first two rounds
of financing.
The company has no immediate plans for acquisitions. Neither has it a preferred list of potential
acquirers. Although all reasonable offers will be considered, the company plans to utilize the
first-mover advantage to establish itself as the market leader and to remain a stand-along
corporation for the foreseeable future.
3.0 Services
The service offered by the company simplifies and streamlines the entire product return
procedure. By accessing the NoHassleReturn.com website consumers can claim product returns
in a quick and trouble-free fashion. The only necessary inputs are merchant's domain name,
item's order number, consumer's last name (for verification only), reason for return, and
preferred way to resolve the issue (refund, replacement, or exchange). NoHassleReturn.com
serves as a centralized online location that matches the return policy of a given merchant
against the returning item, obtains authorization if required by merchant, and assists
consumers in following the return time frames. The company's website also generates and
prints a return label to ease the shipping process for consumers.
3.1 Service Guarantee
It is important to note that during the interaction process with consumers, NoHassleReturn.com
does not ask for or tries to obtain consumer's credit card numbers. The company therefore
avoids consumer security concerns and substantially limits its possible liabilities.
4.0 Order Process
Only two input variables are needed to easily find the merchant and identify a particular
merchandise item. The customer's last name is asked for verification purposes only.
NoHassleReturn.com website serves as a centralized online location for consumers to claim and
process returns for participating merchants. As online shopping continues to grow, the added
convenience of one single online destination to do returns for multiple merchants will increase.
At the same time, participating merchants will place NoHassleReturn.com banner on their pages
under return policies so that consumers could access the service directly from there. That way
the domain name of the merchant will be pre-entered and the initial step even further
simplified.

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NoHassleReturn.com

In case the merchandise was sent as a gift to another person who does not have access to the
Internet, a toll-free telephone number will be provided to call in. An operator, with access to the
Internet, will use the same exact sequence of onscreen entries and will relay options and
procedures to the customer over the phone.
4.1 Order Number
The order number should ensure that the right item is identified. However, it is possible that the
customer has ordered a few similar items but only wishes to return one of them, or the order
number included multiple items. Hence a modification option is added to address that. In case
the order number was assigned to a shipment that included multiple items, all items will be
displayed and the customer will be asked to select those they wish to return.
In case a wrong item is identified, the customer will be taken one step back and asked to reenter the initial information.
4.2 Return Policies
Once the item has been identified, the return policies that apply to that particular item will be
retrieved. NoHassleReturn.com will summarize the return policy to the point of available
options. This means that based on the item (regular merchandise, on-sale merchandise, etc.)
different return options and procedures may apply. The customer will be given the shortest
description of what needs to be done and when.
While some merchants have "no-questions-asked" return policies, others require justification to
return merchandise. For the purposes of uniformity and the reasons described below, the
customer should courteously be asked to provide reasons for return. The answer format is quite
simple (check marks and short narrative) and it eliminates much of the ambiguity. The
narrative part is also a chance for consumers to "vent out" their concerns or frustrations.
The customer will be given three options to resolve the issue: exchange, refund, or
replacement. During this stage the merchant is informed that a particular item is claimed for
return and why. In case of exchange or replacement, the merchant receives an invaluable
opportunity to instantly sell another item to the customer (the merchant's website will appear
onscreen for selection and shopping). Should the reason be incorrect or defective item, the
merchant can send the correct/new item right away, thus instantly restoring customer
satisfaction and saving the sale. The terms of the new sale are up to the merchant to decide
(charge customer's credit card right away, give grace period for the returning item to arrive,
etc.)
An option to look up the merchant's entire return procedures will also be given to consumers. A
link will be established that brings up the page containing return procedures in a separate
window. Once reviewed, the window can simply be closed.
4.3 Return Label
Once the merchant has authorized the return, if required, the customer will be asked to print
the return label for shipping. If customer does not have access to a printer, a larger view of the
label will be presented onscreen for the customer to copy down necessary information. The
customer may also be given an option to make adjustments to certain information on the label
before printing it. The label will have the merchant's address (destination where the returning
item should be forwarded), returning item's identification (Returned Merchandise Authorization

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NoHassleReturn.com

Number), the customer's return address, and possibly tracking and payment information for the
shipping company. The customer will also be advised on refund, exchange, or replacement
options, and when it will occur.
Since some companies already include pre-printed return labels in all shipments, the printing
step may be skipped. But because consumers sometimes lose or throw away enclosed labels,
the online print version will always be there as a backup thus adding convenience and peace of
mind. More importantly, NoHassleReturn.com will strike strategic alliances with shipping
companies to take and deliver all returned items so the printing of the labels will add uniformity
to the entire return process. The label can then incorporate the shipper's information, and as a
consolidator and demand aggregator of all returns NoHassleReturn.com will be able to negotiate
a rate reduction.
As an add-on to its customer service, NoHassleReturn.com will offer an email reminder service
to ship the claimed item. It may also offer customers a confirmation email to record the claim.
Customer's email address will then be asked for. For its own database purposes,
NoHassleReturn.com will record all transactions and details thereof.
Once the customer has finished the online entry process, the merchant's website will appear
where the merchant will be able to approach consumers with new sales offers. This will be an
additional selling opportunity for the merchant, which is part of the overall NoHassleReturn.com
service.
4.4 Sequence of Process
The list below describes the sequence of actions taking place during the return process.
1. Consumer claims an item through NoHassleReturn.com.
2. NoHassleReturn.com gains merchant's authorization, if required, and alerts the merchant
about what is claimed for return and why.
3. Merchant tries to save the sale by offering a replacement or other products.
4. Consumer makes a new purchase, unless refund is demanded.
5. NoHassleReturn.com generates a return label for the returning item.
6. Merchant's website appears again to offer new products to the consumer.
7. Consumer makes a new purchase.
8. Consumer ships back the returning item.
9. Shipping company delivers the item to the merchant.
10. Consumer buys more from the merchant knowing that the return process is easy and
trouble-free.
5.0 Benefits Summary
At NoHassleReturn.com, we feel we provide a value-added service to a variety of consumers. By
having a safe and easy-to-use return service, the company benefits more people than simply
the average customer.

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NoHassleReturn.com

5.1 Benefits to Merchants

Increase revenues! NoHassleReturn.com turns the systemic problem of product returns into
new selling opportunities.
Enhance customer satisfaction and retention with the quick and easy return process and
boost repeat sales! NoHassleReturn.com provides the opportunity to instantly deal with
returns, save bad sales, and turn unhappy customers into loyal patrons.
Improve customer service with a simple, trouble-free way to return merchandise!
NoHassleReturn.com makes it easy for consumers to return products and follow return
procedures.
Simplify the shipping hassle for consumers! NoHassleReturn.com provides the option to
print a shipping label since pre-printed labels sometimes get lost or misplaced, which
provides added convenience and peace of mind to consumers.
Improve inventory management and logistics! NoHassleReturn.com immediately alerts you
when your customer initiates the return process so that you can act on it right then, not
when the merchandise arrives at your door.
Fine-tune your internal efficiencies and product offerings! NoHassleReturn.com provides you
with invaluable new data on all your product returns by customer group, product category,
etc., so you can analyze your operations better.
Enhance your image! NoHassleReturn.com underscores your customer orientation, which
you can use to promote your business.

5.2 Benefits to Consumers

Return merchandise with ease! NoHassleReturn.com provides one centralized online location
with a simple and trouble-free way to return merchandise in just a few easy steps.
Buy online, return online! No need to call in or email your merchant if authorization is
required--NoHassleReturn.com does the communication for you.
No need to look up every single merchant for return policies every time!
NoHassleReturn.com summarizes it for your particular item and makes sure the return time
frames are followed.
Generate a shipping label! NoHassleReturn.com generates a shipping label for you so that
you do not have to worry about misplacing the pre-printed label or spending extra time at a
shipping company's counter if the pre-printed label is not included.
Reduce or eliminate shipping costs! Through strategic alliances, NoHassleReturn.com
reduces or completely eliminates the cost of shipping.
Keep track of your returns! If you would like, NoHassleReturn.com will remind you to ship
the claimed item and will maintain a file of your returns for your records.

5.3 Benefits to Online Community

Increase awareness in the community! NoHassleReturn.com serves as a "returned


merchandise credit bureau," providing discrete information to consumers on merchants and
to merchants on consumers.
Cross reference marketing leads! NoHassleReturn.com maintains a database of purchases
that help custom-target online buyers in a more efficient way.
Improve the overall image of the online merchant! NoHassleReturn.com enhances customer
service of online merchants and overall customer satisfaction by simplifying and
streamlining the return process.

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NoHassleReturn.com

6.0 Market Analysis Summary


Based on publicly available survey data, the average rate of online returns is 9%, meaning that
in 2000 alone the value of returned merchandise will be more than $1.5 billion. The company
generates revenues by utilizing a dual-pricing approach. First, it charges online merchants a flat
fee for the program, which averages only 0.5% of a given merchant's total sales. Secondly,
NoHassleReturn.com charges merchants a low flat 8% rate on every item's listed price that has
been claimed through its website. The pricing structure reflects the benefits of the easy and
trouble-free return process for consumers, restored customer satisfaction, selling opportunities
created during the claim process, and all repeat sales thereafter. The program is estimated to
cost merchants less than 1.5% of their total revenues, whereas it will increase sales to
merchants by at least 15%.
6.1 Service Description
The service positioning in the eyes of online merchants is imperative to the success of the
enterprise. The service proposed by the company is a business-to-business solution offered to
online merchants of physical, non-perishable products. However, because online consumers will
deal directly with the company via its website, the proposed solution also incorporates some
features of a business-to-consumer service. It is therefore of utmost importance to clearly
define what this company offers is a customer service & customer satisfaction program for
online merchants. The most unique feature is that the proposed company takes the systemic
problem of product returns and turns it into new selling opportunities for online merchants.
It is also important to note that NoHassleReturn.com does not try to position itself as a
competitor to any incumbents with a similar service, online merchants, or shipping companies.
The proposed company strives to position itself as a strategic partner to all parties participating
in handling product returns. If nothing else, NoHassleReturn.com should be viewed as an
outsourcing company to online merchants with the core competency and focus in handling
returned merchandise.
The service offered by NoHassleReturn.com is designed to enhance customer retention and
loyalty by offering an easy and trouble-free merchandise return process to online shoppers.
According to Jupiter Communications, the goal of the 1999 holiday season was not about
generating impressive sales, but rather securing long-term relationships. Retailers now need to
focus on retention and loyalty. NoHassleReturn.com will help to achieve just that through
establishing lasting, productive relationships with online merchants. Providing an easy, uniform,
and trouble-free return process to all online shoppers will enhance the overall image of online
merchants. While the number of retailers continues to grow, consumers will not have to look up
every single one to find out about return policies and later keep abreast for possible changes. A
centralized Internet location--the company's website--will retrieve, summarize, and present the
appropriate policies. Based on product information, it will make sure the correct procedures are
used. The company's banner with a notation "For an Easy, Trouble-Free Product Return Click
Here" will be placed visibly on retailers' websites and will serve as a symbol of customer
orientation and care.
Moreover, the shipping process will be streamlined. Customers will be able to generate a
shipping label on the company's website thus reducing the hassle at the shipper's counter.
Although some online retailers already supply pre-printed shipping labels for sold items,
customers sometimes lose, or throw away, those labels when they first see and like the
products they ordered. Shortly after they may change their mind and would like to return a
particular item, but the label is gone. With the proposed program, the label is always available
online so that consumers can have peace of mind and also reduce the amount of documents

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they need to keep just in case. The service therefore offers a dual benefit to consumers. The
retailers may then choose to stop including a pre-printed return label with every outgoing
shipment thus reducing costs of selling. From a shipping company's perspective, the shipping
process is streamlined because the online-generated label will have all the necessary
information, possibly including a tracking number if it is going to be shipped by UPS. That way
consumers do not have to spend time at UPS counters filling out forms--both a customer
service and operations improvement for UPS. NoHassleReturn.com will be a strategic merger
between online merchants, carriers, and their partners targeted at overall improvement of
customer satisfaction and ultimately the bottom line of merchants.
Another important feature of NoHassleReturn.com is that shipping of returned merchandise
should be free of charge to consumers. (Means of achieving it are discussed in more detail in
the Pricing and Revenue Generation section.) This differentiating feature will tremendously
increase the consumer acceptance factor of the proposed service. The fact that products
purchased online can be returned in an easy and trouble-free way, and that shipping is also
free, will help expand the entire online shopping industry. The added convenience and peace of
mind consumers will gain with NoHassleReturn.com will translate into more shopping with those
online merchants that participate in the NoHassleReturn.com program.
When customers go through the sequence of online entries on the company's website, the
retailer whose product is being claimed for return will be offered at least one selling
opportunity. At the end of the sequence the retailer will be able to target the consumer with any
new sales offers as its website will appear onscreen. Should an exchange or replacement be
preferred by the customer during the online return process, the retailer will receive an
additional selling opportunity as its website will appear with offers during that step. These
opportunities will translate into more sales for retailers. This will also stimulate customer
retention, which means repeat sales. All in all, the program will increase customer satisfaction
and generate more sales.
The program has a number of unique features. First, it alerts the retailer that a particular
customer is claiming a particular product for return as it happens. That way the retailer knows
about it as it occurs and not when the merchandise arrives at its warehouse. This allows to plan
ahead. Since 9% of all products are returned, this feature offers useful information to better
handle logistics and inventory.
Secondly, and more importantly, by asking consumers during the online sequence why they
want to return a particular item merchants gain an invaluable piece of information. If the
reason for return is defective product (30% of all reported returns), the retailer can save the
sale and turn an unhappy customer into a delighted one by sending a new item right away. If
the reason for return is wrong color, wrong size, or wrong product altogether (28% of all
reported returns), the retailer may choose to send the correct product right then, thus instantly
restoring customer satisfaction and saving a bad sale. It will be up to the retailer to decide on
payment and credit terms of the exchange. These benefits ultimately translate into increased
customer retention, reduced costs, more sales, and improved bottom line.
It is estimated that the program will generate an average sales increase for merchants of at
least 15%. Online shopping is still at the early stage of consumer adoption. As stated earlier,
about half the people who have not shopped online cited the cost and hassle of returns as a
significant factor for not shopping online. Another recent survey found that 89% of online
buyers said that return policies influenced their decision to shop with an online retailer.
Consumers demand not only convenience but peace of mind. The proposed program offers both
and it should increase the number of online shoppers, thus causing a market expansion for
online merchants. The first retailers who implement the proposed program will also be able to

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differentiate themselves and capture a larger market share in their respective segments. Once
embraced by the majority of online merchants, the program will become an industry standard.
It is important to note that during the entire process the company will not ask for, or try to gain
access to, consumers' credit card numbers. This will significantly limit possible liabilities and
security/confidentiality concerns.
6.2 Promotion, Sales, and Marketing
Promotion of the service will be executed through both push and pull strategies. The push
strategy will call for the use of direct sales force and industrial marketing to introduce the
service to online merchants. Once success has been achieved in the push strategy, the pull
strategy will utilize a large-scale advertising campaign to further build up consumer demand.
Push Strategy
Because the company's service is a business-to-business program, it will be initially promoted
to online merchants by direct sales force. Personal selling will be necessary to reach decision
makers within online organizations. At first, contacts will be made with Internet service
providers, such as America Online, that host online stores and shops. America Online claims to
have 20% of the total Internet service provider market in the U.S. Therefore, arranging a
strategic partnership where NoHassleReturn.com becomes the preferred or exclusive choice for
all returned merchandise bought at AOL.com shops will be invaluable for establishing a wellrecognized brand and building up entry barriers for any possible competition. Ideally, a
company's banner with a notation "For an Easy, Trouble-Free Product Return Click Here" will be
visibly displayed throughout the shopping section of AOL.com. Portals such as Yahoo! will be
approached as well. Reportedly, Yahoo! hosts nearly 6,000 merchants where it charges each
merchant at least $100 to $300 per month. Arranging a strategic partnership with Yahoo! will
provide a strong leverage in negotiating return contracts with individual merchants. Similar to
that of America Online, the company's banner will be displayed throughout the entire shopping
section of Yahoo!
Large online merchants such as Amazon.com and Buy.com will be targeted by the direct sales
force during the first stage as well. Those companies have already achieved significant volumes
of sales--and therefore product returns--and will find the uniform return process of much
benefit to them. Strong "category killers" such as eToys and CDnow are also first sales targets.
Auction houses such as eBay.com and uBid.com will be approached with a service offer for
products sold to consumers by merchants and direct manufacturers.
Wherever possible, smaller online retailers will be personally approached by the sales force. To
stimulate awareness and service penetration among smaller players, industrial marketing
techniques will be utilized. Those will include advertising in specialized publications such as
Internet World and Red Herring, as well as referral fees for retailers who already use the
service. Email campaigns will be used to reach decision makers at smaller companies. The email
messages will have an invitation to the NoHassleReturn.com website where a specially designed
presentation will explain the benefits of the new service. An invitation to be contacted by a
service consultant to discuss details will be included.
The company plans to offer its services right before Thanksgiving 2000. In order to stimulate a
quicker adoption of the services, the remainder of the year 2000 will be offered free of charge.

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Sales Structure and Customer Approach


It is estimated that the initial expenses to hire a sales force and a customer service unit of up
to five people during the first year will be close to $400,000. Another $200,000 will be needed
for sales program development, marketing activities, and training (excludes advertising). The
initial compensation package for sales force will include a nominal base salary and a progressive
commission structure. This should ensure that during the early stage of the company's growth
not only that sales targets are met, but also that customer (customer here means merchant)
satisfaction and retention are fully addressed. The sales force will initially be located at the
corporate headquarters. A territorial approach will later be implemented, with sales people
located in regions. After one year, sales force members will split into two distinct groups. The
first group will include pure sales people, the "go-getters" who will be placed in regions and will
work on pure commissions. The commission structure will become more progressive and
rewarding for such individuals, including a bonus structure. The estimate for an average
commission paid on sales is approximately 5-10%. The second group will include client care
professionals who will concentrate on customer satisfaction and retention to ensure the
continuity of the program. These individuals will remain at the headquarters and will have a
base salary with a bonus structure. The base salary for client care professionals is in the midfive figures. Industrial advertising and promotional expenses in 2000 are estimated at
$250,000.
It is also a possibility to sell the services to merchants via the Internet hosting service
providers, portals, and software developers. Those companies will then serve as distributors
and agents, compensated on commissions. This approach will eliminate the need for a large
sales force. The final layout will depend on how quickly agreements with companies such as
America Online and Amazon.com are negotiated, how aggressively they will be able to promote
the services, and on what conditions.
The following diagram describes the customer approach (customer here means merchant).
Service consultants are the direct sales force that approaches prospective customers with
service offers. Once a customer has been signed, a service consultant will only approach the
client with new service offers and product upgrades. A client care professional is then assigned
to each customer to deal with all customer service issues. Each customer will be advised to
direct all service inquiries to the professional. A professional will also proactively call on
customers to ensure high quality of service and customer satisfaction. The consultants and
professionals will have direct communication lines between themselves to ensure open
information exchange and a quick and efficient problem-resolution culture. This structure will
guarantee an aggressive sales approach, client-oriented service, and efficient post-sales
support.
Pull Strategy
It is important to gain critical mass in the number of signed retailers before a nation-wide
advertising campaign targeted at consumers can start. Once major retailers have been signed
and awareness achieved among the overall online merchant community about
NoHassleReturn.com, the company plans to roll out a nationwide TV advertising campaign. The
campaign may start as early as the first quarter of 2001; however, the timing will depend on
how quickly NoHassleReturn.com gains market share. The campaign should prompt consumers
to make sure that online retailers they buy from have the NoHassleReturn.com service.
Participating merchants will have the company's banner with a notation "For an Easy, TroubleFree Return Click Here" visibly displayed on their websites. The banner later will become the
symbol of customer orientation. Successfully executed, the TV ad campaign will prompt

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consumers to ask their merchants for the Easy and Trouble-Free Return process. This, in turn,
will prompt online merchants to call on the company. The demand from the merchants will then
be "pulled." The estimated budget for the TV campaign in 2001 is up to $5 million, all internally
generated. However, the amount can be reduced if the preceding industrial marketing campaign
achieves the key goals. Once the objectives of service awareness and acceptance have been
achieved, subsequent marketing budgets will be used to build up and protect the brand. This
will include print, radio, and TV.
6.3 Distribution and Information Structure
The service will be made available to consumers via the Internet. The company will maintain a
website with its Easy and Trouble-Free Return procedure. The domain name will underscore the
ease and convenience of the merchandise return process. (The name NoHassleReturn.com may
not be the final choice.) Also, company's banners will be placed on participating merchants'
websites, most likely under return policies sections, so that consumers could access the service
directly from online stores. NoHassleReturn.com will then be effectively incorporated into the
customer service of participating merchants as an outsourcing partner that specializes in
product returns.
Consumers who do not have access to the Internet but want to return e-gifts received from
friends or relatives will be provided with a toll-free telephone number. Telephone operators, with
access to the Internet, will follow the same exact set of onscreen entries. They will relay options
and procedures to the consumers over the phone. The shipping sequence will remain the same.
Ideally, the toll-free numbers should be operated by the online retailers themselves. That way
they only have to make sure their operators have access to the Web. Should a customer decide
to exchange gifts or make a purchase during the return process, the retailers' operators will be
best suited to handle it. Another option is a consolidated toll-free telephone service provided by
NoHassleReturn.com for a fee to retailers. Such service would be outsourced.
High-speed communication lines will be established between the company's software that
registers and processes all returns and individual merchants. Every time a product is claimed
for return by a consumer via the company's website, the corresponding merchant is advised on
the transaction as it happens. This is an integral part of the entire program. The connection
between the company and the merchants will be established via the Internet. The company's
website will have a merchant login screen where a record of all returned items will be
maintained. The merchants will be able to sort data by various categories and copy/paste it into
other software packages such as MS Excel; the data format will be spreadsheet-friendly. The
Internet connection will be secure and password protected. While the majority of
communication will be via the Internet, company's client care professionals will routinely call on
their counterparts to ensure that all information and service needs are fully met.

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For its own database purposes, NoHassleReturn.com will record all transactions and details
thereof. While consumers are not asked to give their home addresses during the online entry
process, such information should be provided by the corresponding merchant as part of the
information exchange agreement. This information will be needed for the return label to be
generated online. Credit card numbers and other sensitive information will not be asked for. At
the end of the online authorization process the consumer will be offered a notification email to
make a record of the return. Should customer decide to have a confirmation, his or her email
address will be obtained. The company may offer a membership program with a consumer
login, in which case all necessary information details will be obtained. The company will also
offer a "reminder service" to consumers once they have processed a return online. If the
product has to be shipped back before a deadline, an email with a reminder will be sent prior to
that.
6.3.1 Strategic Alliances
For shipping and handling purposes, the company will strike strategic alliances with carriers and
package service providers. Most likely, UPS will be the preferred carrier of all shipments. UPS
has an extensive network, excellent track record of quality, and a number of agreements with
package service providers such as Mail Boxes Etc. and PostNet. Its ground shipment option
appears to be the most optimal option so far, both from the quality and price standpoints. While
retailers are able to negotiate discounts with carriers for outbound shipments, most consumers
are forced to pay published rates on returned merchandise because each return is viewed as a
single transaction. NoHassleReturn.com will act as a demand aggregator bundling all returns
claimed through its website and will negotiate discounts with carriers. Moreover, the company
will join membership organizations such as National Retail Association that provides member
discounts of up to 42% on published rates with Airborne Express. All that will be utilized to
eliminate the shipping costs for online shoppers, which will only speed up the company's
acceptance by consumers.
Other possible strategic alliance companies include VISA, MasterCard, American Express, and
large banks such as Citibank and Chase Manhattan. Credit cards are a preferred way of
payment for online purchases. Since tens of billions of dollars are now spent online, credit card
issuers can notably increase their revenues by partnering with NoHassleReturn.com. A credit
card issuer can offer a partial rebate of shipping charges for returned items as long as
consumer paid for the items with the credit card. This may later become a standard feature
similar to certain kinds of insurance built into some credit cards. Also, an issuer can cover the
interim risk when a merchant sends consumer a new item or a replacement before receiving
the returned item back. This offers mutual benefits to consumers and merchants, while the
credit card issuer makes its cards more superior thus attracting more customers. Co-branded
promotional campaigns can be designed to promote NoHassleReturn.com along with more
established companies.
6.4 Market Segmentation
As stated in the previous section, the estimated online retail revenues for 1999 were around
$25-36 billion. Both sources providing the estimates indicated that only merchants selling
physical products (books, CDs, electronics, apparel, etc.) were included in the breakdown by
category. No mention was made of services such as online hotel reservations, news
subscriptions, or online brokerage being included in the total figures. However, it would be
advisable to use a more conservative approach when estimating the total revenues of online
merchandise sales. Presented below are estimates for Internet retail sales made by National
Retail Federation shortly after the 1998 holiday season.

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Year

Total Internet Retail Sales

1999

$10,800,000

2000

$17,000,000

2001

$26,000,000

2002

$40,600,000

6.4.1 Description of Items Sold


The next step is to identify the number of items sold. According to a Jupiter Communications
press release, during the 1999 holiday season 250 million online consumers spent $7 billion.
This means that an average online purchase was $28 (7 billion over 250 million). However, a
single purchase may have included more than one item. A study of 1999 holiday shopping
conducted by WebAssured.com indicates that an average online shopper purchased 12 items,
whereas the average purchase price was $1,613. Using these two extremes, the average price
of an online item is therefore estimated at approximately $100 ((28+161)/2=94.5). Knowing
the average price, the number of total items sold is easily calculated.
Year

Internet Retail Sales

Total Items Sold

1999

$10,800,000

108,000

2000

$17,000,000

170,000

2001

$26,000,000

260,000

2002

$40,600,000

406,000

Of all items sold, some will be returned to retailers. A study of 1998 online holiday shopping
conducted by PC Data Online indicated that 9% of respondents reported returning gifts. A
slightly earlier study by the same company indicated that 12.3% of all respondents were
returning items. A survey of 1999 holiday shoppers conducted by Greenfield Online confirmed
the first figure by indicating that 9% of shoppers planned to return an e-gift. The 9% figure is
still a conservative estimate. A recent survey of the retail industry by American Express found
that 46% of all respondents typically return anywhere between one and ten holiday gifts every
year.
Year

Internet Retail Sales

Items Sold

Items Returned

1999

$10.8

108,000

9,720

2000

$17.0

170,000

15,300

2001

$26.0

260,000

23,400

2002

$40.6

406,000

36,540

The table above shows that more than 15 million items will be returned to online merchants in
the year 2000 alone. Total merchandise shipped back will be worth over $1.5 billion. The figures
more than double in 2002. There is clearly an expanding market for a "returned merchandise"
service provider.

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Table: Market Analysis

Market Analysis

Potential Customers
Books/CD/Video
Toys/Games
Electronics
Computer
Total

Year 1

Year 2

Year 3

Year 4

Year 5

48,000
76,000
65,000
90,000
279,000

60,000
106,400
84,500
148,500
399,400

75,000
148,960
109,850
245,025
578,835

93,750
208,544
142,805
404,291
849,390

117,188
291,962
185,647
667,080
1,261,877

Growth
25%
40%
30%
65%
45.83%

CAGR
25.00%
40.00%
30.00%
65.00%
45.83%

Chart: Market Analysis (Pie)

6.5 Market Needs


E-commerce continues to accelerate and the amount of money spent on purchases made
through the Internet shows no sign of decline. During the 1999 holiday season (November 20
to December 19), retailers saw online revenues quadruple, jumping 300% to about $11 billion
and far exceeding expectations, according to a study by Shop.org and Boston Consulting Group.
The study of 30 retailers in such categories as apparel, books and music, home and garden,
specialty foods and electronics showed a 270% growth in the number of orders. The study
indicated that online sales were growing at 145% annually and it projected online retailer
revenues of more than $36 billion for 1999. An earlier study conducted by Ernst & Young,
before the holiday frenzy, already estimated that total revenues for online retail and consumer
products for the calendar year 1999 were around $25-30 billion.
While a notable amount of positive publicity about the Internet shopping has recently appeared
in the media, the number of problems encountered by online shoppers actually increased more
dramatically than the sales figures. According to a poll conducted by WebAssured.com, the

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number of complaints filed between November 25, 1999 and January 13, 2000 was up 404%
over the same period last year. Over 62% of the respondents claimed they had experienced at
least one problem with an online transaction. Misrepresentation/misinformation and delivering
defective products each accounted for at least 22% of all complaints. In the breakdown of types
of problems occurred, delivery of a wrong item accounted for 17.2%. These kind of problems
ultimately result in product returns that cause additional costs to the consumers and both costs
and lost revenues to the retailers.
Presently, not all online retailers have established simple and trouble-free return procedures.
Pure e-tailers such as eCost.com have no physical presence and therefore require consumers to
ship back the merchandise without offering much help in the process. Even some well-known
retailers such as BestBuy.com, an extension of Best Buy, do not allow consumers to return
items purchased online at their physical stores. To make things worse, the return policies are
not always well displayed on retailers' websites, and customers are sometimes required an
authorization prior to returning any merchandise such as in cases of Buy.com and eCost.com.
Consumers may have to read through the entire return policies, including the notorious "fine
print," in order to make sure they use the right procedures and that required time frames are
followed. This creates additional aggravation--on top of having to return the merchandise-which all reflects in reduced customer satisfaction. The significance of an "easy return" cannot
be underestimated as about half the people who have not shopped online cited the cost and
hassle of returns as a significant factor for not shopping online. Moreover, a recent survey by
BizRate.com, an online shopping center, found that 89% of online buyers said that return
policies influenced their decision to shop with an online retailer.
When a wrong, defective, or misrepresented item was delivered to a consumer, the return
process often proved uneasy. According to recent findings by PC Data Online, 30% of all
consumers who returned items found the return process difficult. It is apparent that existing
return procedures are inadequate and sometimes irritating. The solution, however, does not lie
in forcing all online retailers to establish a "no-questions-asked" return policy and to post it
clearly at the top of their websites. The entire sequence a consumer has to follow, starting from
looking up the procedures on the Web and then having to make a trip to UPS or the Post Office,
has to be streamlined. There is clearly a need, as well as an opportunity, for a new service
company to improve the overall return process for online shoppers. As a result, the consumer
satisfaction will be enhanced and it will translate into increased repeat sales for online retailers.
6.6 Service Business Analysis
The "returned merchandise" market is there and it is growing. Listed below are a few major
expansion opportunities for the new company.
6.6.1 New Markets
Geographic expansion will be needed in order to provide global return services for the online
community. This will include both within-borders services and across-the-borders operations. A
number of companies such as Amazon.com and eToys have already opened operations in the
United Kingdom, not counting a growing local online merchant community. This in itself
presents an opportunity to replicate the service in other countries for domestic online retailers.
NoHassleReturn.com will partner with local carriers and shippers when operating there. A
country-by-country approach may be utilized; however, there may be an opportunity to
establish a centralized, consolidated operation within the European Union.
As across-the-borders e-commerce keeps increasing, so does the need for a global service. Of
all consumer product complaints recently registered with WebAssured.com, over 4% were about

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companies located outside the United States. While many domestic online retailers are limited
to shipping within the U.S. only, the consumers are already buying overseas. Having to ship
back overseas adds to the hassle and costs of returning a product. Once established and
running in the U.S., NoHassleReturn.com will be best positioned to take advantage of the global
trend and offer international services.
6.6.2 New Services
As more and more consumers shop online, the need to keep track of purchased products will
grow. Currently, many online retailers offer an option to track a purchased item, but not always
through the entire delivery process. An item itself may have an availability "window" of up to a
few weeks, plus the shipping time of a few days--the customer is never quite sure when he or
she will actually receive it. As more purchases are made, there will be more items to track. To
do that, the customer has to look up websites of the merchants or use carriers' websites to
inquire on shipping status and read through the flock of notification emails from the merchants.
There is a growing need to consolidate all this information in one location for easy reference. A
software that records all online purchases, tracks their status, and presents the findings to
consumers in an easy-to-read format will be of much value to consumers. Having developed
partnership and information exchange agreements with online merchants and shipping
companies, NoHassleReturn.com will be well positioned to offer such tracking services to
consumers.
While NoHassleReturn.com builds its core competency around product returns, it is also gaining
the most knowledge why returns actually occur, what kind of online products are most
frequently returned, by what kind of consumers, etc. The company will therefore be best
positioned to advise and consult the online merchant community on how to improve operations
and minimize product returns. Since product returns is a systemic problem of the retail industry
and most likely it will not be totally eliminated, NoHassleReturn.com does not run the risk of
putting itself out of business. Quite the contrary, it will secure the leadership position in that
segment of consulting services and will naturally expand its core competencies of merchandise
returns into advisory.
6.6.3 New Customers
NoHassleReturn.com will not limit its services to the online merchants only. Direct-mail orders
and catalogs also experience the same returned merchandise problem. Recent publications
indicate that there are more than 8,500 consumer catalogs in the U.S. alone. According to the
National Mail Order Association, U.S. mail order sales were a staggering $357 billion in 1998.
Despite the growth in online shopping, the 1998 sales figure represented a 12% increase over
1997. Consumer product sales accounted for $109 billion of the total--roughly ten times that of
the online merchandise sales for the same year. Based on a recent comment provided by the
association, the rate of returned merchandise in this business is around 10-15%. Categories
such as apparel may experience a return rate close to 20%. Reportedly, some large catalog
houses have to maintain separate returned merchandise facilities just to handle the volume of
returned products. A number of catalog companies, including Lands' End, have been
aggressively embracing the Internet as a new distribution channel. While catalog business has a
long history and experience in dealing with returns, there is definitely an expansion opportunity
for the new company in offering its returned merchandise services to the catalogers. The
service will further streamline their operations and enhance customer satisfaction.
Many department stores such as J.C. Penney and Macy's now also use the Web to sell products.
Most of them allow customers to return merchandise purchased online at physical stores. This
serves as a goodwill, and customer satisfaction, builder. As an add-on to that,

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NoHassleReturn.com can still offer its services to the pro-Internet shoppers who do not wish to
make an extra trip to the store to only return products. The company will provide at least one
selling opportunity during the online return process, which will compensate for possible
purchases a customer may make while at a store. This will underscore the convenience of
online shopping, improve the return procedures by preventing the returned merchandise from
spreading across physical stores, and enhance the image and bottom line of "click-and-mortar"
department stores.
When dealing with multi-distribution channel retailers such as Macy's department stores, Macy's
catalog and Macy's Internet store, NoHassleReturn.com will be able to offer one returned
merchandise procedure that will cover all channels. It will streamline the entire process by
relieving the retailers from having multiple return facilities and extra work force to operate
them.
7.0 Competition
The company foresees three types of competition for the services we offer:
1. Direct
2. Internal
3. Channel
These types of competitors are discussed in the following three sections.
7.1 Direct Competitors
Based on the current intelligence, there is no independent company out there specializing in a
"returned merchandise" service to online consumers. No single company is known to be
employing a concept of establishing a single point of presence on the Internet for consumers to
claim returns. The current situation allows the new company to gain the first-mover advantage
and build entry barriers for any possible new entrants.
7.2 Internal Competitors
The first competitors to the new service are the online retailers themselves. Since
NoHassleReturn.com will need to strike partnerships and strategic agreements with retailers in
order to offer its services, they are classified as internal competitors. Retailers may perceive
that their internal return procedures are adequate and fully meet customer demands. However,
the discussion under the Need Assessment section of this plan clearly indicated that there are
significant drawbacks and shortcomings in the return process across the entire industry. Even
companies like Amazon.com that touts a quick and easy return policy now sees its customers
go to Barnes & Noble superstores to return books. Partnering with brick-and-mortar retailers
may be seen as a solution by some e-tailers. However, from the consumer perspective, there
still will not be a centralized location to return merchandise, no quick and easy return
procedure, and no savings on shipping costs. Consumers may end up having to go from one
physical retailer to another to return various items.
Online retailers may try to partner with carriers and service providers such as UPS, Mail Boxes
Etc., or Rite Express. Reportedly, eBay.com is working out an agreement with Mail Boxes Etc. to
appoint them as a preferred/exclusive service for product returns. eBay.com may receive
rebates per shipment for directing its clients to Mail Boxes Etc., but consumers again will have
little or no benefit. The standard shipping rates are applied, the choice of carriers is now

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limited, and online merchants are not informed about product returns ahead of time so that bad
sales could be saved. With NoHassleReturn.com, at least one selling opportunity will be given to
retailers while consumer is on the Web--something a partnership with a carrier cannot provide.
Moreover, serving as a demand aggregator NoHassleReturn.com should be able to arrange
necessary agreements and provide consumers with greatly reduced, or even free, shipping for
all returned merchandise.
7.3 Channel Competitors
Thinking in reverse to the previous paragraph, service providers such as Mail Boxes Etc. and
PostNet may try to forge strategic partnerships with numerous online retailers to simplify the
return process. But as it was described, online retailers will be shortchanged in overall customer
satisfaction, information exchange, total costs, and additional selling opportunities. Consumers,
on the other hand, will lose out on the limited number of "exclusive" carriers for particular
retailers, and uniform simplicity in the return process will not be achieved. Moreover, both Mail
Boxes Etc. and PostNet combined do not have sufficient physical presence in the market.
Carriers such as UPS and FedEx may try to enter the arena. Those organizations have extensive
networks of facilities, experience in shipping, and a track record of quality. The U.S. Postal
Service has recently started a TV advertising campaign of a service for online merchants that
allows consumers to print return labels online. This is a step towards addressing the shipping
end of the return problem, but it falls short of saving bad sales and creating new selling
opportunities for merchants. No single shipping company can fully provide the range of benefits
the proposed company can. NoHassleReturn.com will be able to arrange strategic alliances with
numerous carriers and even play one against the other in negotiating rate reductions and
preferential service terms for both merchants and consumers. Being a smaller company with a
focus on the e-commerce community, it will also have a greater degree of flexibility in adjusting
to customer needs.
8.0 Strategy and Implementation Summary
The company will utilize a dual-pricing approach to ensure a recurring revenue model. Online
retailers will be charged a flat annual or quarterly program fee based on their sales volume,
product categories, and specific return conditions ("no-questions-asked" or prior authorizations
required, etc.). The company will also collect payments in a form of a fixed percentage charge
on all items claimed for return through its website.
Before getting into details about pricing, an important perception issue needs to be discussed.
Presently, only few online retailers offer free shipping with purchases. For the returned
merchandise, in most cases the retailers reimburse shipping costs only if an incorrect or
defective item was delivered. (Sephora, a retailer of beauty products, offers free returns on all
online purchases regardless.) In many instances shipping and handling costs represent a large
percentage of the selling price. Most retailers therefore may not see free shipping of returned
merchandise economically possible. However, it is financially feasible to offer free returned
merchandise shipping to consumers at a nominal cost to retailers. The following table displays
four sample companies in different product categories that differentiate in average price per
unit sold and average shipping cost.

Book/CD/Video

Toy/Game

Electronic

Computer

Page 22

NoHassleReturn.com

Total Sales

$10 million

$10 million

$10 million

$10 million

Avg Price/Item

$12

$35

$180

$1,000

Items Sold

833,333

285,714

55,556

10,000

Returned Item Rate

9%

9%

9%

9%

Items Returned

75,000

25,714

5,000

900

Avg Shipping Cost

$4.50

$6.00

$15.00

$60.00

Total Shipping Cost*

$337,500

$154,286

$75,000

$54,000

TSC as % of Sales

3.38%

1.54%

.75%

.54%

Markup Per Item

$.40

$.54

$1.35

$5.40

*Total Shipping Cost (TSC)


The amount of total sales is set at $10 million for each company and any change in the amount
would not influence the important percentage and absolute figures. The average price per unit
is based on general observations and is a simple representation of various prices in an
increasing order. The average shipping cost is the actual UPS ground rate for the corresponding
product category on average.
According to the previous table, for online retailers that sell books, CDs and videos to cover
shipping costs of all returned merchandise will only cost 3.38% of their total sales. For a toy
company, the cost will only be 1.54%. Companies such as Beyond.com and eToys were recently
spending over 80% of total revenues on sales and marketing programs alone. Even if most of
the marketing budget is dedicated to customer acquisition, a customer satisfaction and
retention program can still be easily allocated for. Even if an online toy merchant decides not to
allocate any of the marketing budget money to this program, to fully cover the shipping costs it
will only have to raise the average price of an item by 54 cents. An online computer retailer
with an average unit price of $1,000 will only have to add $5.40 to the list price. Or it only has
to allocate an equivalent of 0.54% of total sales to cover the total shipping costs. In the
majority of cases the retailers will have to reimburse the shipping costs to consumers anyway.
According to a study conducted by PC Data Online, 30% of all returns were due to the item
being broken, 28% because of an incorrect item was shipped, and only 22% because the
customer did not want the item.

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NoHassleReturn.com

8.1 Pricing
The following table presents the proposed allocations to cover the shipping costs so that
consumers could enjoy free returned merchandise shipping.
Books/CD/Video Toys/Games Electronics Computers
Average Price Per Item (API)

$12

$35

$180

$1,000

Average Shipping Cost (ASC)

$4.50

$6

$15

$60

Merchant's Share of ASC, 65%

$2.93

$3.90

$9.75

$39

Shipping Company's Share of ASC, 20%

$.90

$1.20

$3

$12

Credit Card Company's Share of ASC, 5%

$.23

$.30

$.75

$3

Total Shares of ASC, 90%

$4.05

$5.04

$13.50

$54

NoHassleReturn.com Rebate, 4% of API

$.48

$1.40

$7.20

$40

Total Allocations

$4.53

$6.80

$20.70

$94

ASC Coverage Ratio

101%

113%

138%

157%

NoHassleReturn.com will strive to eliminate the shipping costs to consumers by means of


strategic agreements with online merchants, shipping companies, and credit card companies.
As stated in the last quote, 58% of all product returns were due to merchants' faults, hence
merchants will have to reimburse shipping costs to consumers in those cases.
NoHassleReturn.com therefore proposes that 65% of a given shipping cost should be allocated
to corresponding merchants. Due to demand aggregation, the company will be able to negotiate
a shipping rate discount with companies such as UPS or FedEx. Hence 20% of shipping costs
should be allocated to shipping companies in a form of a discount. Credit card issuers such as
Chase and BancOne currently offer a 5% rebate to consumers on purchases with selected
online merchants. It is therefore feasible to arrange an agreement with credit card companies
and/or issuers to include a 5% shipping cost rebate on all returned merchandise. Since product
returns are only 9% of all purchases, it will not represent a large cost to credit card companies
to add this differentiating feature to their products. These allocations in total will cover 90% of
the shipping cost. The remaining 10% will be absorbed by NoHassleReturn.com via a special
"instant rebate."
NoHassleReturn.com will charge merchants a program fee that will average only 0.5% of a
given merchant's total sales. Also, the company will charge a low per-claim fee of 12% of each
item's listed price (each item that has been claimed through the company's website). However,
of the 12% charged per item, up to 4% will be instantly given back to merchants to cover the
remaining portion of the shipping cost. The previous table indicates that the 4% rebate is
sufficient to cover the remainder of the shipping cost in the first product category. It is actually
far more than sufficient in other product categories (refer to ASC Coverage Ratio).
NoHassleReturn.com can then decide whether to offer merchants a reimbursement of the
remaining portion of shipping costs only or a flat 4% "instant rebate" regardless of shipping
costs. For the purpose of this business plan and financial projections, a flat 4% "instant rebate"
was used thus reducing the per-claim fee from 12% to 8% across the board.
As it was stated in a prior chapter, retailers should see an average sales increase of at least
15% due to the service offered by the company. On the other hand, based on the proposed

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NoHassleReturn.com

pricing structure the service should not cost merchants more than 1.5% of their total revenues.
The cost-benefit ratio of 10 will be a strong promotional point for NoHassleReturn.com.
While it is a possibility to charge merchants commissions on all sales made through the
company's website (when consumers claim their returns), it would not capture all sales
stimulated by the company. The program will increase consumer satisfaction and loyalty.
However, when consumers start buying more due to the program's effect but dealing directly
with the merchant, the company will not receive any commissions and will in effect be giving its
services away for free. Hence both fees charged should fully reflect the benefits of the easyreturn procedure, early information on all returning items, restored customer satisfaction,
selling opportunities created during the claim process, and all repeat sales thereafter.
The company also plans to draw revenues from advertising on its website, but for the purpose
of this business plan advertising revenues will be considered negligible. A fee/rebate agreement
may be arranged with such companies as UPS and Mail Boxes Etc. for bringing customers to
them for shipping needs. Other revenue generating activities such as affiliate programs with
VISA, American Express, or Citibank can be arranged to promote certain credit cards as a
preferred method of payment online. Those revenues will also be omitted in the financial
projections. Once the company has generated a sufficient customer database, it may also
market information to retailers and other organizations for a fee. Any fees and payments
NoHassleReturn.com could generate from consulting activities in the field of product returns will
not be included in the financial projections either.
8.2 Sales Forecast
The table and chart below outline the company's projected sales volume in FY2000-2002.

1st Program Revenues: represent the flat program fee assessed on annual or quarterly
basis. The average fee charged by the company is 0.5% of a given merchant's total sales.
The program is estimated to increase merchandise sales by at least 15% for a given
merchant. The dollar figure in this line is based on the conservative estimates of total online
sales provided by National Retail Federation (one third of the most optimistic current
estimates provided by Shop.org) and the market share gained by the company. From 2002
to 2004, the growth of total online merchandise sales is estimated at 145% annually, which
is in line with the growth figure for 1999.
2nd Program Revenues: represent the per-claim charges of 8% (net of 12% charged less
the 4% "instant rebate") of each item's listed price (each item claimed by consumers
through the company's website).

The company plans to make its services available just prior to Thanksgiving 2000. The
programs will be offered to the online merchants for free for the remainder of 2000, therefore,
we will not generate any revenue from sales for the year 2000.

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NoHassleReturn.com

Table: Sales Forecast

Sales Forecast
Year 1

Year 2

Year 3

$0
$0
$0

$7,800,000
$11,232,000
$19,032,000

$24,360,000
$35,078,400
$59,438,400

Year 1
$0
$0
$0

Year 2
$0
$0
$0

Year 3
$0
$0
$0

Sales
1st Program Revenues
2nd Program Revenues
Total Sales
Direct Cost of Sales
1st Program Revenues
2nd Program Revenues
Subtotal Direct Cost of Sales

9.0 Business Model and Structure


The company plans to locate its headquarters in a metropolitan area that can provide access to
a large pool of high-tech labor force, current e-commerce intelligence, and sources of financial
capital. The location should ensure the best logistics when reaching existing and potential
clientele, as well as strategic partners. Operations in which the company cannot develop core
competencies should be outsourced. A close proximity to outsourcing companies should be
maintained. The headquarters will initially host the entire executive team, sales force, and staff.
As company progresses through its growth stages, sales regions will be assigned for various
parts of the U.S. and either in-field sales representatives be placed or distributors assigned.
Presently, NoHassleReturn.com is headquartered in Bala Cynwyd, Pennsylvania.
The company will initially be a privately-held corporation. The state of incorporation will mainly
depend on the location of corporate headquarters. The company plans to raise two rounds of
venture capital financing before going public.
9.1 Organizational Structure
Those activities that are not crucial to the corporate success (i.e. payroll) will be outsourced or
subcontracted. Below are brief summaries of major responsibilities for corporate officers.

Board of Directors: oversees the overall strategic direction and progress of the company.
Specific areas include operational soundness, financial stability, and long-term well-being of
the corporation.
President: responsibilities include strategic guidance of the enterprise, exploration of
expansion opportunities, and strategic alliance facilitation and management.
Chief Executive Officer: the main responsibility is to maintain a strategic fit between the
corporate resources and external factors. Responsibilities include running of the overall dayto-day operations, technological and operational soundness, and financial stability.
Director of Finance and Operations: responsibilities include financial oversight,
safeguarding of assets, and human resources management.
Director of Information Technology: responsibilities include overall technological
efficiency, software development, and information control.
Director of Sales and Marketing: responsibilities include sales generation, marketing
programs development, and public relations.

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NoHassleReturn.com

Table: Personnel

Personnel Plan
Year 1

Year 2

Year 3

All Departments
Other
Total People

$200,000
$0
5

$1,960,000
$0
40

$4,105,000
$0
80

Total Payroll

$200,000

$1,960,000

$4,105,000

10.0 Financial Plan


The statements incorporate two rounds of venture capital investments of $2.6 million total, plus
access to additional $1.4 million for cash flow purposes. The statements do not include any
funds raised during the proposed IPO. Any revenues from advertising, affinity, consulting, and
partnership programs were omitted. Year-end is December 31.
10.1 Projected Cash Flow
The following chart shows monthly cash balance and cash flow. The table shows the expected
cash flow for the first twelve months of operation, with yearly estimates thereafter. Capital
expenditures include computer equipment and technology & software investment:

Computer Equipment: represents 20% of the current fixed corporate costs. In 2000, it
represents $80,000 from the fixed corporate costs.
Technology & Software Investment: represents 50% of the current fixed technology costs.
In 2000, it represents the $1.3 million of the fixed technology costs.

Chart: Cash

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NoHassleReturn.com

Table: Cash Flow

Pro Forma Cash Flow


Year 1

Year 2

Year 3

$0
$0
$0

$4,758,000
$14,274,000
$19,032,000

$14,859,600
$44,578,800
$59,438,400

$0
$0
$0
$0
$0
$0
$4,110,000
$4,110,000

$0
$0
$0
$0
$0
$0
$0
$19,032,000

$0
$0
$0
$0
$0
$0
$0
$59,438,400

Year 1

Year 2

Year 3

$200,000
$2,149,150
$2,349,150

$1,960,000
$11,445,858
$13,405,858

$4,105,000
$26,737,688
$30,842,688

$0
$0
$0
$0
$0
$1,380,000
$0
$3,729,150

$0
$0
$0
$0
$0
$323,544
$0
$13,729,402

$0
$0
$0
$0
$0
$653,822
$0
$31,496,510

$380,850
$427,850

$5,302,598
$5,730,448

$27,941,890
$33,672,338

Cash Received

Cash from Operations


Cash Sales
Cash from Receivables
Subtotal Cash from Operations
Additional Cash Received
Sales Tax, VAT, HST/GST Received
New Current Borrowing
New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of Other Current Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received
Expenditures
Expenditures from Operations
Cash Spending
Bill Payments
Subtotal Spent on Operations
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing
Other Liabilities Principal Repayment
Long-term Liabilities Principal Repayment
Purchase Other Current Assets
Purchase Long-term Assets
Dividends
Subtotal Cash Spent
Net Cash Flow
Cash Balance

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NoHassleReturn.com

10.2 Break-even Analysis


The following table shows our estimated monthly break-even point to be approximately
$222,000

Chart: Break-even Analysis

Table: Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even

$222,417

Assumptions:
Average Percent Variable Cost
Estimated Monthly Fixed Cost

0%
$222,417

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NoHassleReturn.com

10.3 Important Assumptions


The table below contains assumptions important to the financial success of the company.
Table: General Assumptions

General Assumptions
Plan Month
Current Interest Rate
Long-term Interest Rate
Tax Rate
Other

Year 1

Year 2

Year 3

1
10.00%
10.00%
25.42%
0

2
10.00%
10.00%
25.00%
0

3
10.00%
10.00%
25.42%
0

10.4 Projected Profit and Loss


The table below shows the profit and loss statement for NoHassleReturn.com. The itemized
costs for fixed technology, corporate and advertising are reflected in the sales and marketing
row in the table:

Fixed Technology Costs: represents a percentage of revenues allocation for all fixed
computer and Internet-related developments and charges. In 2000, $800,000 is allocated
for the proprietary software development, $300,000 for the website design, and $200,000
for systems integration.
Fixed Corporate Costs: represent a percentage of revenues allocation for all fixed
corporate cost associated with office related charges. In 2000, $200,000 is allocated for
initial sales force hire, $50,000 is allocated for hiring and training expenses, and another
$150,000 is allocated for the office setup and purchase/lease of necessary computer
equipment and infrastructure.
Advertising: represents a percentage of revenues allocation for advertising in all media. In
2000, $250,000 is allocated for the industrial marketing campaign. In the subsequent years,
the much larger budgets include allocations for TV advertising.
Sales & Marketing: represents a percentage of revenues allocation for marketing and
selling activities, including commissions paid on sales. In 2000, $200,000 is allocated for the
initial sales and marketing related activities.
Research and Development: represents a percentage of revenues allocation for R&D
activities. In 2000, $200,000 is allocated for testing and fine-tuning of the computer
systems and programs.
General & Administrative: represents a percentage of revenues allocation for expenses
associated with running a corporation. In 2000, $20,000 is expensed against the initial setup, legal and accounting fees, etc.
Depreciation: represents a depreciation on all capital investment; straight-line depreciation
over 20 years.

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NoHassleReturn.com

Table: Profit and Loss

Pro Forma Profit and Loss


Year 1

Year 2

Year 3

$0
$0
$0
$0

$19,032,000
$0
$0
$0

$59,438,400
$0
$0
$0

$0
0.00%

$19,032,000
100.00%

$59,438,400
100.00%

Payroll
Sales and Marketing and Other Expenses
Depreciation
Research & Development
Payroll Taxes
Other

$200,000
$2,170,000
$69,000
$200,000
$30,000
$0

$1,960,000
$9,355,520
$85,177
$951,600
$294,000
$0

$4,105,000
$16,379,882
$117,868
$1,783,152
$615,750
$0

Total Operating Expenses

$2,669,000

$12,646,297

$23,001,652

Profit Before Interest and Taxes


EBITDA
Interest Expense
Taxes Incurred

($2,669,000)
($2,600,000)
$0
$0

$6,385,703
$6,470,880
$0
$1,596,426

$36,436,748
$36,554,616
$0
$9,261,007

Net Profit
Net Profit/Sales

($2,669,000)
0.00%

$4,789,277
25.16%

$27,175,741
45.72%

Sales
Direct Cost of Sales
Other
Total Cost of Sales
Gross Margin
Gross Margin %

Expenses

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NoHassleReturn.com

10.5 Projected Balance Sheet


The Balance Sheet shows solid growth in both sales and net worth.
Table: Balance Sheet

Pro Forma Balance Sheet


Year 1

Year 2

Year 3

$427,850
$0
$0
$427,850

$5,730,448
$0
$0
$5,730,448

$33,672,338
$0
$0
$33,672,338

$1,380,000
$69,000
$1,311,000
$1,738,850

$1,703,544
$154,177
$1,549,367
$7,279,815

$2,357,366
$272,045
$2,085,321
$35,757,659

Year 1

Year 2

Year 3

Accounts Payable
Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities

$250,850
$0
$0
$250,850

$1,002,538
$0
$0
$1,002,538

$2,304,640
$0
$0
$2,304,640

Long-term Liabilities
Total Liabilities

$0
$250,850

$0
$1,002,538

$0
$2,304,640

$4,160,000
($3,000)
($2,669,000)
$1,488,000
$1,738,850

$4,160,000
($2,672,000)
$4,789,277
$6,277,277
$7,279,815

$4,160,000
$2,117,277
$27,175,741
$33,453,018
$35,757,659

$1,488,000

$6,277,277

$33,453,018

Assets

Current Assets
Cash
Accounts Receivable
Other Current Assets
Total Current Assets
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital
Current Liabilities

Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital
Net Worth

10.6 Business Ratios


The following table presents important business ratios for the business services industry, as
determined by the Standard Industry Classification (SIC) Index code 7389, Business Services,
nec (not elsewhere classified).

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NoHassleReturn.com

Table: Ratios
Ratio Analysis
Year 1

Year 2

Year 3

Industry Profile

n.a.

n.a.

212.31%

8.79%

Accounts Receivable
Other Current Assets
Total Current Assets
Long-term Assets
Total Assets

0.00%
0.00%
24.61%
75.39%
100.00%

0.00%
0.00%
78.72%
21.28%
100.00%

0.00%
0.00%
94.17%
5.83%
100.00%

28.12%
44.18%
76.27%
23.73%
100.00%

Current Liabilities
Long-term Liabilities
Total Liabilities
Net Worth

14.43%
0.00%
14.43%
85.57%

13.77%
0.00%
13.77%
86.23%

6.45%
0.00%
6.45%
93.55%

38.61%
13.60%
52.21%
47.79%

100.00%
0.00%
0.00%
0.00%
0.00%

100.00%
100.00%
74.84%
1.00%
33.55%

100.00%
100.00%
54.02%
0.50%
61.30%

100.00%
100.00%
82.68%
1.66%
1.37%

1.71
1.71
14.43%
-179.37%
-153.49%

5.72
5.72
13.77%
101.73%
87.72%

14.61
14.61
6.45%
108.92%
101.90%

1.59
1.22
60.22%
3.09%
7.76%

Sales Growth
Percent of Total Assets

Percent of Sales
Sales
Gross Margin
Selling, General & Administrative Expenses
Advertising Expenses
Profit Before Interest and Taxes
Main Ratios
Current
Quick
Total Debt to Total Assets
Pre-tax Return on Net Worth
Pre-tax Return on Assets
Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin


Return on Equity

0.00%
-179.37%

25.16%
76.30%

45.72%
81.24%

n.a
n.a

0.00
0
9.57
27
0.00

0.00
0
12.17
19
2.61

0.00
0
12.17
22
1.66

n.a
n.a
n.a
n.a
n.a

0.17
1.00

0.16
1.00

0.07
1.00

n.a
n.a

$177,000
0.00

$4,727,910
0.00

$31,367,697
0.00

n.a
n.a

n.a.
14%
1.71
0.00

0.38
14%
5.72
3.03

0.60
6%
14.61
1.78

n.a
n.a
n.a
n.a

Activity Ratios
Accounts Receivable Turnover
Collection Days
Accounts Payable Turnover
Payment Days
Total Asset Turnover
Debt Ratios
Debt to Net Worth
Current Liab. to Liab.
Liquidity Ratios
Net Working Capital
Interest Coverage
Additional Ratios
Assets to Sales
Current Debt/Total Assets
Acid Test
Sales/Net Worth

Page 33

NoHassleReturn.com

Dividend Payout

0.00

0.00

0.00

n.a

Page 34

Appendix
Table: Personnel

Personnel Plan

All Departments
Other
Total People

Total Payroll

0%
0%

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$16,666
$0

$16,666
$0

$16,666
$0

$16,666
$0

$16,667
$0

$16,667
$0

$16,667
$0

$16,667
$0

$16,667
$0

$16,667
$0

$16,667
$0

$16,667
$0

$16,666

$16,666

$16,666

$16,666

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

Page 1

Appendix
Table: Sales Forecast

Sales Forecast
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Sales
1st Program Revenues
2nd Program Revenues
Total Sales

Direct Cost of Sales

0%
0%

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

1st Program Revenues

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

2nd Program Revenues

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Subtotal Direct Cost of Sales

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Page 2

Appendix
Table: General Assumptions

General Assumptions
Month 1
Plan Month

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

10

11

12

Current Interest Rate

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

Long-term Interest Rate

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

10.00%

Tax Rate

30.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

25.00%

Other

Page 3

Appendix
Table: Profit and Loss

Pro Forma Profit and Loss


Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Sales

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Direct Cost of Sales

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Other

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Total Cost of Sales

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Gross Margin

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

Payroll

$16,666

$16,666

$16,666

$16,666

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

Sales and Marketing and Other


Expenses

$20,500

$46,000

$86,000

$121,500

$237,000

$237,000

$237,000

$237,000

$237,000

$237,000

$237,000

$237,000

Gross Margin %

Expenses

Depreciation

$500

$1,500

$3,000

$4,000

$7,500

$7,500

$7,500

$7,500

$7,500

$7,500

$7,500

$7,500

$5,000

$10,000

$10,000

$15,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$2,500

$2,500

$2,500

$2,500

$2,500

$2,500

$2,500

$2,500

$2,500

$2,500

$2,500

$2,500

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$45,166

$76,666

$118,166

$159,666

$283,667

$283,667

$283,667

$283,667

$283,667

$283,667

$283,667

$283,667

Profit Before Interest and Taxes

($45,166)

($76,666)

($118,166)

($159,666)

($283,667)

($283,667)

($283,667)

($283,667)

($283,667)

($283,667)

($283,667)

($283,667)

EBITDA

($44,666)

($75,166)

($115,166)

($155,666)

($276,167)

($276,167)

($276,167)

($276,167)

($276,167)

($276,167)

($276,167)

($276,167)

Interest Expense

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Taxes Incurred

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

($45,166)

($76,666)

($118,166)

($159,666)

($283,667)

($283,667)

($283,667)

($283,667)

($283,667)

($283,667)

($283,667)

($283,667)

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

Research & Development


Payroll Taxes
Other

Total Operating Expenses

Net Profit
Net Profit/Sales

15%

Page 4

Appendix
Table: Cash Flow
Pro Forma Cash Flow
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Cash Sales

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Cash from Receivables

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Subtotal Cash from Operations

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Cash Received
Cash from Operations

Additional Cash Received


Sales Tax, VAT, HST/GST Received

$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 Current 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

New Investment Received

$0

$600,000

$0

$0

$110,000

$2,000,000

$0

$0

$0

$1,400,000

$0

$0

Subtotal Cash Received

$0

$600,000

$0

$0

$110,000

$2,000,000

$0

$0

$0

$1,400,000

$0

$0

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$16,666

$16,666

$16,666

$16,666

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

$16,667

$933

$29,017

$59,833

$99,850

$143,017

$259,500

$259,500

$259,500

$259,500

$259,500

$259,500

$259,500

$17,599

$45,683

$76,499

$116,516

$159,684

$276,167

$276,167

$276,167

$276,167

$276,167

$276,167

$276,167

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 Current Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$3,000

$10,000

$17,000

$150,000

$150,000

$150,000

$150,000

$150,000

$150,000

$150,000

$150,000

$150,000

Expenditures

0.00%

Expenditures from Operations


Cash Spending
Bill Payments
Subtotal Spent on Operations
Additional Cash Spent

Purchase Long-term Assets


Dividends

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$20,599

$55,683

$93,499

$266,516

$309,684

$426,167

$426,167

$426,167

$426,167

$426,167

$426,167

$426,167

Net Cash Flow

($20,599)

$544,317

($93,499)

($266,516)

($199,684)

$1,573,833

($426,167)

($426,167)

($426,167)

$973,833

($426,167)

($426,167)

Cash Balance

$26,401

$570,718

$477,219

$210,703

$11,019

$1,584,852

$1,158,685

$732,518

$306,351

$1,280,184

$854,017

$427,850

Subtotal Cash Spent

Page 5

Appendix
Table: Balance Sheet

Pro Forma Balance Sheet

Assets

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

$47,000
$0
$0
$47,000

$26,401
$0
$0
$26,401

$570,718
$0
$0
$570,718

$477,219
$0
$0
$477,219

$210,703
$0
$0
$210,703

$11,019
$0
$0
$11,019

$1,584,852
$0
$0
$1,584,852

$1,158,685
$0
$0
$1,158,685

$732,518
$0
$0
$732,518

$306,351
$0
$0
$306,351

$1,280,184
$0
$0
$1,280,184

$854,017
$0
$0
$854,017

$427,850
$0
$0
$427,850

$0
$0
$0
$47,000

$3,000
$500
$2,500
$28,901

$13,000
$2,000
$11,000
$581,718

$30,000
$5,000
$25,000
$502,219

$180,000
$9,000
$171,000
$381,703

$330,000
$16,500
$313,500
$324,519

$480,000
$24,000
$456,000
$2,040,852

$630,000
$31,500
$598,500
$1,757,185

$780,000
$39,000
$741,000
$1,473,518

$930,000
$46,500
$883,500
$1,189,851

$1,080,000
$54,000
$1,026,000
$2,306,184

$1,230,000
$61,500
$1,168,500
$2,022,517

$1,380,000
$69,000
$1,311,000
$1,738,850

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Starting Balances

Current Assets
Cash
Accounts Receivable
Other Current Assets
Total Current Assets
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital

Current Liabilities
Accounts Payable
Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities

$0
$0
$0
$0

$27,067
$0
$0
$27,067

$56,550
$0
$0
$56,550

$95,217
$0
$0
$95,217

$134,367
$0
$0
$134,367

$250,850
$0
$0
$250,850

$250,850
$0
$0
$250,850

$250,850
$0
$0
$250,850

$250,850
$0
$0
$250,850

$250,850
$0
$0
$250,850

$250,850
$0
$0
$250,850

$250,850
$0
$0
$250,850

$250,850
$0
$0
$250,850

Long-term Liabilities
Total Liabilities

$0
$0

$0
$27,067

$0
$56,550

$0
$95,217

$0
$134,367

$0
$250,850

$0
$250,850

$0
$250,850

$0
$250,850

$0
$250,850

$0
$250,850

$0
$250,850

$0
$250,850

Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital

$50,000
($3,000)
$0
$47,000
$47,000

$50,000
($3,000)
($45,166)
$1,834
$28,901

$650,000
($3,000)
($121,832)
$525,168
$581,718

$650,000
($3,000)
($239,998)
$407,002
$502,219

$650,000
($3,000)
($399,664)
$247,336
$381,703

$760,000
($3,000)
($683,331)
$73,669
$324,519

$2,760,000
($3,000)
($966,998)
$1,790,002
$2,040,852

$2,760,000
($3,000)
($1,250,665)
$1,506,335
$1,757,185

$2,760,000
($3,000)
($1,534,332)
$1,222,668
$1,473,518

$2,760,000
($3,000)
($1,817,999)
$939,001
$1,189,851

$4,160,000
($3,000)
($2,101,666)
$2,055,334
$2,306,184

$4,160,000
($3,000)
($2,385,333)
$1,771,667
$2,022,517

$4,160,000
($3,000)
($2,669,000)
$1,488,000
$1,738,850

Net Worth

$47,000

$1,834

$525,168

$407,002

$247,336

$73,669

$1,790,002

$1,506,335

$1,222,668

$939,001

$2,055,334

$1,771,667

$1,488,000

Page 6