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Table of Contents
1.0 Executive Summary.............................................................................................................................1
Chart: Highlights ......................................................................................................................2
1.1 Objectives ...................................................................................................................................2
1.2 Mission........................................................................................................................................2
1.3 Keys to Success ........................................................................................................................2
2.0 Company Summary.............................................................................................................................2
2.1 Company Ownership .................................................................................................................3
2.2 Start-up Summary ......................................................................................................................3
Table: Start-up Funding ..........................................................................................................4
Chart: Start-up .........................................................................................................................5
Table: Start-up .........................................................................................................................5
3.0 Market Analysis Summary..................................................................................................................5
3.1 Market Segmentation ................................................................................................................6
Table: Market Analysis ...........................................................................................................6
Chart: Market Analysis (Pie) ..................................................................................................7
3.2 Target Market Segment Strategy.............................................................................................7
3.3 Industry Analysis .........................................................................................................................7
3.3.1 Competition and Buying Patterns................................................................................8
3.4 Products ......................................................................................................................................8
4.0 Strategy and Implementation Summary ............................................................................................9
4.1 Competitive Edge....................................................................................................................10
4.2 Marketing Strategy ..................................................................................................................10
4.3 Sales Strategy..........................................................................................................................10
4.3.1 Sales Forecast ............................................................................................................11
Table: Sales Forecast.................................................................................................11
Chart: Sales Monthly ...................................................................................................12
Chart: Sales by Year ...................................................................................................12
4.4 Milestones ................................................................................................................................12
Table: Milestones..................................................................................................................13
Chart: Milestones ..................................................................................................................13
5.0 Web Plan Summary ..........................................................................................................................13
5.1 Website Marketing Strategy...................................................................................................14
5.2 Development Requirements ...................................................................................................14
6.0 Management Summary ....................................................................................................................14
6.1 Personnel Plan.........................................................................................................................14
Table: Personnel ...................................................................................................................15
7.0 Financial Plan ....................................................................................................................................15
7.1 Important Assumptions............................................................................................................15
Table: General Assumptions ...............................................................................................15
7.2 Break-even Analysis................................................................................................................15
Chart: Break-even Analysis .................................................................................................16
Table: Break-even Analysis .................................................................................................16
7.3 Projected Cash Flow...............................................................................................................16
Chart: Cash ...........................................................................................................................17
Table: Cash Flow..................................................................................................................18
7.4 Projected Profit and Loss .......................................................................................................19
Chart: Profit Monthly .............................................................................................................19
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Table of Contents
Chart: Profit Yearly................................................................................................................19
Chart: Gross Margin Monthly ...............................................................................................20
Chart: Gross Margin Yearly..................................................................................................20
Table: Profit and Loss ..........................................................................................................21
7.5 Business Ratios .......................................................................................................................22
Table: Ratios .........................................................................................................................23
7.6 Projected Balance Sheet ........................................................................................................24
Table: Balance Sheet ...........................................................................................................24
Table: Sales Forecast ...............................................................................................................................1
Table: Personnel ........................................................................................................................................2
Table: General Assumptions ....................................................................................................................3
Table: Profit and Loss ...............................................................................................................................4
Table: Cash Flow .......................................................................................................................................5
Table: Balance Sheet ................................................................................................................................6

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Safe Current
1.0 Executive Summary
Safe Current is small business unit of The Cleveland Illuminating Company (TCIC), and electric
utility. Safe Current was formed and will be lead by Brian Henderson.
Safe Current has identified three key fac tors that will be instrumental to its sustainability:
1.
2.
3.

Ensure 100% customer satisfac tion: Repeat customers and customer referrals are
valuable.
Design and sell meaningful and valuable power protection products.
Design and implement strict financial controls. This is very important bec ause although
Safe Current is a small business unit of TCIC, they must be a stand alone entity
financially and and yet they have financial and ac counting responsibilities to the
shareholders of TCIC.

Products
Safe Current will offer two main products, surge arrestors and surge protectors. These
products are made by a contrac t manufacturer and sold under the Safe Current brand name:

Surge Arrestors: This is a piece of equipment that is mounted on the outside of a house
or business near the meter that offers protection from external electrical surges.
Surge Protectors: This is a piece of equipment that protects individual or groups of
appliances against internal electrical spikes. All of Safe Currents protectors are of
industrial grade.

Management
Brian has an MBA from Case Western Reserve University and has experience working for the large
telecom ATT as an assistant project manager, and Allegheny Power working in the value added
services department. Safe Current has been forecasted to ac hieve impressive sales for years
two and three, with c orrespondingly respec table net profit.

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Safe Current

1.1 Objectives

To develop a profitable product for TCIC that is unregulated from the core power
generation business services.
To bec ome profitable within one year.
To use this business as a successful model for future ventures.

1.2 Mission
To develop a family of surge protectors and arrestors for consumers that offer safety and
value. Safe Current will leverage the strength of The Cleveland Illuminating Company to help
build brand recognition. All customer's expec tations will be exceeded with their innovative, useful
products and complete customer satisfac tion is guaranteed.

1.3 Keys to Success

Offer every customer 100% satisfac tion.

Design and sell meaningful, valuable, power protection products.
Design and employ strict financial controls.

2.0 Company Summary

Safe Current is an unregulated subsidiary of The Cleveland Illuminating Company that sells
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Safe Current
direct to businesses and consumers. It will be operated as a stand alone business leveraging
the existing resources and goodwill of TCIC.
Safe Current will be loc ated on site at TCIC, using an office within the complex and also
sharing TCIC's computer network connection and phone connections. Safe Current will operate
their own c ustomer service call department. Safe Current will use TCIC's existing call center for
sales calls and TCIC's existing billing system as well as their order fulfillment and shipping
departments. Safe Current will pay a flat rate (10%) for these services.
The Cleveland Illuminating Company has chosen to create Safe Current as a means of
increasing the rate of return to shareholders outside the government regulated rates available to
electric utilities.

2.1 Company Ownership

Safe Current is a wholly owned subsidiary of TCIC.

2.2 Start-up Summary

Safe Current will leverage the existing resources of TCIC and pay a set overhead fee for the
resources used. Equipment that will be needed as follows:

Five computer stations, one laser printer; Microsoft Office, Ac cess, and proprietary
software used by TCIC; network connection to TCIC.
Five office furniture setups.
A five extension phone system.

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Safe Current
Table: Start-up Funding
Start-up Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required

$15,600
$39,400
$55,000

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

$17,500
$21,900
$0
$21,900

Total Assets

$39,400

Liabilities and Capital

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

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

Capital
Planned Investment
TCIC
Other
Additional Investment Requirement

$5,000
$0
$0

Total Planned Investment

$5,000

Loss at Start-up (Start-up Expenses)

($15,600)

Total Capital

($10,600)

Total Capital and Liabilities

$39,400

Total Funding

$55,000

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Safe Current

Table: Start-up
Start-up
Requirements
Start-up Expenses
Stationery etc.
Brochures
Website development
Furniture
Expensed Equipment
Total Start-up Expenses

$100
$2,000
$5,000
$1,500
$7,000
$15,600

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

$21,900
$0
$3,000
$14,500
$39,400

Total Requirements

$55,000

3.0 Market Analysis Summary

Safe Current has identified three distinct market segments that they will target. The first
segment is family home owners, typically with c hildren, and the second is single home owners.
These two segments have been c hosen because families with c hildren typically have a large
number of electronic devices and the upper income single home owners often adopt
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Safe Current
technology using lots of gadgets in their home.
The third segment is commercial businesses that have equipment they want protected.
Competition is very limited for surge arrestors as they require electric utility installation. There
is some competition with the surge protectors, however the competitive products are of a
consumer level of quality and protection, different from Safe Current's products which offer
industrial levels of protection.

3.1 Market Segmentation

Safe Current has segmented the market into three distinct groups.
Family home owners
This segment generally has electronic equipment and lives in middle- to high-end homes.

69% have at least one child.

The median household income is $77,000.
Eat out 2.3 times a week.
58% of the families have two incomes.
63% have cable TV.
49% have a broadband Internet connection.

Single home owners

This segment is a single person who owns their own home. They are generally professionals
who often use a lot of electronic technology.

Ages 25-40.
71% are professionals.
The median household income is $62,000.
Eat out 2.7 times a week.
72% have cable TV.
71% have a broadband Internet connection.

Commercial sales
This segment is small to mid-size businesses that have expensive electronic equipment that they
need protected. Commercial sales are not industry specific. All businesses, regardless of type,
have pieces of equipment that can be protected.

Table: Market Analysis

Market Analysis
Potential Customers
Family homeowners
Single home owners
Commercial sales
Total

Growth
8%
8%
6%
7.71%

Year 1

Year 2

Year 3

Year 4

Year 5

143,545
165,987
11,254
320,786

154,311
179,266
11,929
345,506

165,884
193,607
12,645
372,136

178,325
209,096
13,404
400,825

191,699
225,824
14,208
431,731

CAGR
7.50%
8.00%
6.00%
7.71%

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Safe Current

3.2 Target Market Segment Strategy

Safe Current is targeting these groups since all tend to have many pieces of electronic
equipment all of which are vulnerable to power surges.
While most home owners insurance offers some level of compensation for damage, deductibles
are typically high enough that most people do not make claims. Both segments are already
customers and aware of TCIC's reputation for safety, reliability and operational excellence,
making it easy to solicit their business.

3.3 Industry Analysis

Safe Current operates selling two similar service devices, surge arrestors and surge
protectors. While these products are similar, they have serve different purposes.
The surge arrestors are a product that can only be offered by a utility so it is typically only
sold and installed as a pac kage by the utility.
The surge protectors operate within the more general consumer product segment as evidenced
by the fac t that surge protectors can be found by a wide range of retailers such as hardware
stores, do-it-yourself type stores, and computer and electronic retailers.
It should be noted that Safe Current's parent company, The Cleveland Illuminating Company is
an electric utility and is therefore operating within a regulated industry. Current regulation by the
public utility commission (PUC) dictates that the rate of return is capped at 10.5% for utility
ac tivities.
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Safe Current
Safe Current however provides a product that operates within the unregulated area of the utility
and therefore does not have rate of return c aps. This is quite advantageous to Safe Current
bec ause it allows them to leverage the assets of the utility without being held to the same
restrictions as the rest of the utility.

3.3.1 Competition and Buying Patterns

Surge arrestors
Safe Current does not fac e any real competition for the arrestors due to the installation
requirement of the electric utility.
While there are four current vendors that sell the ac tual arrestor equipment, it is far more
expensive to buy the equipment and then pay the utility for installation than buying the pac kage
(product and installation) directly from the utility.
Surge protectors
Safe Current fac es general competition from several sources. This is qualified as general
competition since the products typically sold (90% of the time) are of consumer quality versus
the industrial quality that Safe Current offers.
Due to TCIC's direct contac ts with electrical component manufacturers and their sheer buying
sc ale/power, Safe Current is able to offer high-quality industrial grade products for prices that
are similar to the consumer units. Competitors in this segment include:

Hardware stores
Mass merchants
Do-it-yourself stores
Computer retailers
Electronic retailers

3.4 Products
Safe Current will offer a family of surge arrestors and surge protectors for consumers. A surge
protector protects appliances plugged into it against spikes in voltage.
A surge arrestor or "whole house surge protector" protects all circuits of a house from a surge
in c urrent emanating from outside the building. These products will protect consumers and their
sensitive electric and electronic appliances from power surges or transient voltage.
A power surge is an increase in voltage significantly above the designated level of flow of
electricity. If a surge or spike is high enough it will inflict serious damage, just like applying to
much water pressure through a hose. Too much will case the hose to burst. The same thing
happens when there is too much electrical pressure through a wire, the wire "bursts."
Surge protectors work by diverting the extra electricity into the outlet's grounding wire. A
surge arrestor offers the same protection, however, the protection oc curs before the current
comes into the home. There are several sources of surges.
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Safe Current
The most familiar source is lightning. When lightning strikes near a power line, the electrical
energy creates a boost of electrical pressure. A surge arrestor is the best form of protection
against lightning as a lightning surge will overpower most surge protectors.
A more common source is the operation of high power electrical devices such as refrigerators
and air conditioning units. These appliances cause spikes when their compressors or motors are
turned on and off, creating sudden, brief demands for power and upsetting the flow of the
electrical voltage.
These types of surges can be protected only by surge protectors bec ause the spike oc curs
within the home and not from the electrical grid.
The last main source of surges come from the utility company's equipment. The complex
system of equipment that brings electrical power from the grid into the home may have points of
failure that can cause uneven power transmissions.
A combination of a surge arrestor and surge protectors on major or expensive electric/
electronic components can significantly dec rease the possibility of surge/spike damage.
Safe Current will offer two main products, surge arrestors and surge protectors. These
products are made by a contrac t manufacturer and sold under the Safe Current brand name:

Surge Arrestors (whole house surge arrestors): This is a piece of equipment that is
mounted on the outside of a house or business near the meter that offers protection from
surges eminating from outside of the house. This product costs $235 including
installation.
Only the electrical utility can install a surge arrestor bec ause the unit is connected
directly to the outside meter and the electrical grid. A surge arrestor is the ONLY
protection against spikes that come in through the outside electrical lines.
Surge Protectors: This is a piece of equipment that protects individual or groups of
appliances against internal sources of spikes. A protector offers a bit of protection
against outside surges, however, most outside sources of spikes are of high enough
voltage to overpower most protectors.
While most hardware stores, electronic stores, and mass merchants sell some sort of
surge protector, the products offered by Safe Current are differentiated by their
industrial grade offer and, a far higher level of protection than most other surge
protectors. These units are $50 eac h and offer the best protection when used in
conjunction with a surge arrestor. Any type of electric or electronic appliance of value
should be protected such as furnaces, refrigerators, stoves, TVs, stereos, computers,
modems, phones, etc.

Safe Current has chosen to outsource production bec ause 1) it has numerous relationships
with c ontrac t manufacturers that can make the products for far less than they can, 2)
production would create significant capital costs which are truly unnec essary. The beauty of this
business model is the usage of contrac t manufacturers and the leveraging of TCIC resources.

4.0 Strategy and Implementation Summary

Safe Current has developed a targeted strategy that allows them to leverage their competitive
edge and quickly gain market penetration. Safe Current's competitive edge is its ability to use
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Safe Current
The Cleveland Illuminating Company's utility status for the sale of house surge arrestors and
protectors.
The marketing strategy will concentrate on the ability to offer supreme, inexpensive protection
for an entire family's stable of electric and electronic appliances. This campaign will be
communicated through various methods and will foc us on the product offerings coming from
the safe, established TCIC, an icon of Cleveland for over 50 years. Please review the following
sections for a more detailed analysis.

4.1 Competitive Edge

Safe Current's competitive edge is their ability to leverage the huge advantage of being
aligned with The Cleveland Illuminating Company, an electric utility serving the Cleveland
market for over 50 years. TCIC has spent a long time developing brand equity and Safe
Current will be able to tap into this equity immediately.
Safe Current will also be able to use TCIC's extensive vendor connections and buying power. The
last component of their competitive edge is Safe Current's exclusive ability to install house
arrestors. This last edge is a sustainable edge since no other company will ever be able to
make arrestor installations, a function of the regulated power industry.

4.2 Marketing Strategy

Safe Current's marketing strategy will seek to communicate the idea that the products that they
offer are in effect cheap insurance against large electric and electronic appliance damage or
losses.
By proactively purchasing Safe Current's products, customers are able to protect against loss
and damage of all of their expensive appliances. While many homeowners probably have some
sort of insurance, deductibles are often prohibitively high, making a claim for damage to one or
a couple appliances not worth the money. Safe Current will use several forms of communication
for this marketing campaign:

Inserts in Bills: Colorful inserts will be added into the bills of TCIC customers.
Currently, the customers are receiving a monthly bill from TCIC and inserts are an
inexpensive, yet powerful way of reac hing the customers.
Website: Safe Current will have a website which will be comprehensive in desc ribing
the different product offerings as well as allowing the customer to order directly from
the site.
Direct Mail: Another advantage of the relationship Safe Current has with TCIC is the
ability to use their customer database. This allows Safe Current to generate a targeted
list of customers that they can send product information to.

4.3 Sales Strategy

Safe Current's sales campaign will emphasize the fac t that Safe Current is a subsidiary of
TCIC. This will be effective bec ause TCIC is a well known, stable electric utility known for its
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Safe Current
safe and reliable operation.
This idea is evidenced by the fac t that almost every time that a consumer reac hes for a light
switch the light goes on. Sure there are interruptions, often weather related, that interrupt
the electrical service, but those interruptions are reconnected quite fast.
The utility is stable and safe and is always working to serve the customer. These electricity
related products will clearly leverage the brand equity developed by TCIC over the last five
dec ades.

4.3.1 Sales Forecast

The sales forecast has been developed as a forecast and trac king tool to provide the
company with realistic sales goals as well as a way to verify progress. The forecast has been
developed as a conservative estimate, not an aggressive sales promise.
By adopting a conservative forecast, Safe Current increases the likelihood of reac hing
sustainable sales growth. The following table and charts provide more detailed information
about the sales cycle, both from a temporal viewpoint and a product perspective.

Table: Sales Forecast

Sales Forecast
Year 1

Year 2

Year 3

$56,841
$37,515
$37,515
$131,871

$83,434
$55,066
$55,066
$193,567

$95,454
$63,000
$63,000
$221,453

Direct Cost of Sales

Surge Arrestors

Year 1
$15,915

Year 2
$23,362

Year 3
$26,727

Surge Protectors
Commercial sales
Subtotal Direct Cost of Sales

$14,256
$12,380
$42,551

$20,925
$18,172
$62,459

$23,940
$20,790
$71,457

Sales
Surge Arrestors
Surge Protectors
Commercial sales
Total Sales

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Safe Current

4.4 Milestones
Safe Current has identified several quantifiable, reac hable milestones that will serve as goals
that the entire organization will work toward in order to make Safe Current a sustainable
business.

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Safe Current
The following table details the spec ific milestones as well provides a temporal timetable for
expec ted completion dates. Following the table is a chart for a graphical representation of the
information.

Table: Milestones
Milestones
Milestone
Business plan completion

Start Date
1/1/2003

End Date
1/15/2003

Budget
$0

Manager
Brian

First products shipped

1/1/2003

2/15/2003

$0

Brian

Department
Startegic
development
Operations

$50K in sales
12 months of strong sales,
proving concept
Totals

1/1/2003
1/1/2003

8/15/2003
8/30/2004

$0
$0

Brian
Brian

Sales
Operations

$0

5.0 Web Plan Summary

Safe Current's website will be used as both a marketing and sales tool. It will take on marketing
responsibilities as one of the communication methods used to raise awareness regarding Safe
Current's product families. Extensive product information will be included on the site in an easy
to use format.
The site will also be used as a sales tool, allowing customers to purchase the products as well as
set up installation appointments for the surge arrestors. Allowing the website to offer sales
support will provide consumers with a convenient way to purchase the products as well as
provide Safe Current with a low-cost sales program that does not require a live sales support
agent. The site will periodically be updated to encourage customers to make repeat visits.
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Safe Current
5.1 Website Marketing Strategy
Safe Current will market their website in two primary ways:

Search engine submission: As search engines bec ome more and more powerful, a
large number of Internet users use them to find relevant information on the Internet. Safe
Current will submit their site to many popular engines ensuring that their site comes up
high on the list of hits.
URL reference in all printer material: The Web address, www.safecurrent.com, will
be printed on all material that Safe Current uses encouraging consumers to chec k out the
site.

5.2 Development Requirements

The website will be developed by TCIC's internal Web development team for the price of $5,000.

6.0 Management Summary

Brian Henderson received a Bac helors of Sc ience in business and marketing from the University of
Pittsburgh and an MBA from Case Western Reserve University. Upon graduation from the MBA
program, Brian went to work for ATT for three years. At ATT Brian was an assistant project
manager, selling telephone ac cessories using direct marketing techniques. After his ATT
experience, Brian worked for Allegheny Power, a Pennsylvania- based electric utility. At Allegheny
Power Brian was again an assistant project manager in c harge of selling commercial businesses
value added services. Brian spent three years at Allegheny before joining The Cleveland
Illuminating Company as a Project Manager.

6.1 Personnel Plan

As a side business unit of TCIC, Safe Current will have only a few employees. Billing, sales, and
order fulfillment will be ac complished using TCIC's existing organization, paying a 10% fee for
these services. The employees/positions that Safe Current will use include:

Project Manager: Brian will take on a wide range of functions including business
development, product proc urement, management, and sales.
Customer Service Agents (4): These positions will assist customers calling
about Safe Current's products. Additionally, at times the employees may help Brian with
other ac tivities.

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Safe Current
Table: Personnel
Personnel Plan
Project Manager
Customer service agent

Year 1
$50,400
$9,400

Year 2
$51,000
$10,800

Year 3
$53,000
$10,800

Customer service agent

Customer service agent
Customer service agent
Total People

$9,400
$9,000
$7,200
5

$10,800
$900
$900
5

$900
$900
$900
5

$85,400

$74,400

$66,500

Total Payroll

7.0 Financial Plan

The following sections outline important financial information.

7.1 Important Assumptions

The following table details important financial assumptions.

Table: General Assumptions

General Assumptions
Plan Month
Current Interest Rate

Year 1
1
10.00%

Year 2
2
10.00%

Year 3
3
10.00%

Long-term Interest Rate

Tax Rate
Other

10.00%
30.00%
0

10.00%
30.00%
0

10.00%
30.00%
0

7.2 Break-even Analysis

The Break-even Analysis indicates what will be needed in monthly revenue to reac h the break
even point.

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Safe Current

Table: Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even
Assumptions:
Average Percent Variable Cost
Estimated Monthly Fixed Cost

$13,732

32%
$9,301

7.3 Projected Cash Flow

The following chart and table displays projected cash flow.

Page 16

Safe Current

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Safe Current
Table: Cash Flow
Pro Forma Cash Flow
Year 1

Year 2

Year 3

$131,871
$131,871

$193,567
$193,567

$221,453
$221,453

$0

$0

$0

$0
$0
$0
$0
$0
$15,000
$146,871

$0
$0
$0
$0
$0
$0
$193,567

$0
$0
$0
$0
$0
$0
$221,453

Year 1

Year 2

Year 3

$85,400
$69,962
$155,362

$74,400
$100,518
$174,918

$66,500
$114,275
$180,775

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing

$0
$0

$0
$0

$0
$0

Other Liabilities Principal Repayment

Long-term Liabilities Principal Repayment
Purchase Other Current Assets

$0
$7,200
$0

$0
$7,813
$0

$0
$7,878
$0

Purchase Long-term Assets

Dividends
Subtotal Cash Spent

$0
$0
$162,562

$0
$0
$182,731

$0
$0
$188,653

Net Cash Flow

Cash Balance

($15,691)
$6,209

$10,836
$17,046

$32,800
$49,846

Cash Received
Cash from Operations
Cash Sales
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

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Safe Current
7.4 Projected Profit and Loss
The following table presents projected profit and loss.

Page 19

Safe Current

Page 20

Safe Current
Table: Profit and Loss
Pro Forma Profit and Loss
Year 1
$131,871
$42,551
$0
$42,551

Year 2
$193,567
$62,459
$0
$62,459

Year 3
$221,453
$71,457
$0
$71,457

Gross Margin
Gross Margin %

$89,320
67.73%

$131,108
67.73%

$149,996
67.73%

Expenses
Payroll
Sales and Marketing and Other Expenses
Depreciation
Rent
Utilities
Insurance
Payroll Taxes

$85,400
$6,000
$1,404
$6,000
$0
$0
$12,810

$74,400
$8,000
$1,404
$6,000
$0
$0
$9,675

$66,500
$10,000
$1,404
$6,000
$0
$0
$9,975

$0

$0

$0

Total Operating Expenses

$111,614

$99,479

$93,879

Profit Before Interest and Taxes

EBITDA

($22,294)
($20,890)

$31,629
$33,033

$56,117
$57,521

$4,610
$0

$3,889
$8,322

$3,105
$15,904

($26,904)
-20.40%

$19,418
10.03%

$37,109
16.76%

Sales
Direct Cost of Sales
Other Costs of Goods
Total Cost of Sales

Other

Interest Expense
Taxes Incurred
Net Profit
Net Profit/Sales

Page 21

Safe Current
7.5 Business Ratios
The following business ratios detail both ratios specific to Safe Current as well as ratios
specific to the general industry. Variances in Safe Current's ratios relative to the industry's can
be explained by the fac t that Safe Current is able to leverage the valuable assets of TCIC, an
electric utility, to ac hieve above market margins. As a small business unit of an electrical utility
it is normal for business ratios to be different from the competition.

Page 22

Safe Current
Table: Ratios
Ratio Analysis
Year 1
n.a.

Year 2
46.78%

Year 3
14.41%

Industry Profile
8.79%

Percent of Total Assets

Inventory
Other Current Assets
Total Current Assets
Long-term Assets
Total Assets

22.53%
10.42%
54.52%
45.48%
100.00%

20.94%
7.47%
70.87%
29.13%
100.00%

10.61%
4.25%
85.43%
14.57%
100.00%

17.86%
43.53%
77.93%
22.07%
100.00%

Current Liabilities
Long-term Liabilities
Total Liabilities
Net Worth

29.51%
148.65%
178.16%
-78.16%

20.53%
87.16%
107.69%
-7.69%

13.44%
38.38%
51.83%
48.17%

31.98%
20.70%
52.68%
47.32%

Percent of Sales
Sales
Gross Margin

100.00%
67.73%

100.00%
67.73%

100.00%
67.73%

100.00%
20.85%

Selling, General & Administrative Expenses

Advertising Expenses
Profit Before Interest and Taxes

88.10%
0.00%
-16.91%

54.09%
0.00%
16.34%

50.95%
0.00%
25.34%

6.60%
0.49%
1.44%

1.85

3.45

6.35

1.96

1.08
178.16%
119.55%
-93.44%

2.43
107.69%
-898.84%
69.10%

5.57
51.83%
155.82%
75.06%

1.15
57.62%
3.71%
8.76%

Sales Growth

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

-20.40%
0.00%

10.03%
0.00%

16.76%
109.07%

n.a
n.a

10.91
9.23
27
4.58

8.39
12.17
30
4.82

8.99
12.17
28
3.14

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

0.00
0.17

0.00
0.19

1.08
0.26

n.a
n.a

$7,200
-4.84

$20,209
8.13

$50,844
18.07

n.a
n.a

0.22
30%
1.08
0.00
0.00

0.21
21%
2.43
0.00
0.00

0.32
13%
5.57
6.51
0.00

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

Activity Ratios
Inventory Turnover
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
Dividend Payout

Page 23

Safe Current
7.6 Projected Balance Sheet
The following table details the projected balance sheet.

Table: Balance Sheet

Pro Forma Balance Sheet
Year 1

Year 2

Year 3

Current Assets
Cash
Inventory
Other Current Assets
Total Current Assets

$6,209
$6,487
$3,000
$15,697

$17,046
$8,404
$3,000
$28,450

$49,846
$7,494
$3,000
$60,340

Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets

$14,500
$1,404
$13,096
$28,793

$14,500
$2,808
$11,692
$40,142

$14,500
$4,212
$10,288
$70,628

Year 1

Year 2

Year 3

Accounts Payable
Current Borrowing
Other Current Liabilities

$8,497
$0
$0

$8,241
$0
$0

$9,496
$0
$0

Subtotal Current Liabilities

$8,497

$8,241

$9,496

$42,800
$51,297

$34,987
$43,228

$27,109
$36,605

Assets

Liabilities and Capital

Current Liabilities

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

$20,000

$20,000

$20,000

($15,600)
($26,904)
($22,504)

($42,504)
$19,418
($3,086)

($23,086)
$37,109
$34,023

$28,793

$40,142

$70,628

($22,504)

($3,086)

$34,023

Page 24

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

$2,000

$2,435

$3,232

$4,090

$4,645

$5,232

$6,121

$6,653

$7,121

$7,434

$7,878

0%

$0

$1,320

$1,607

$2,133

$2,699

$3,066

$3,453

$4,040

$4,391

$4,700

$4,906

$5,199

0%

$0
$0

$1,320
$4,640

$1,607
$5,649

$2,133
$7,498

$2,699
$9,489

$3,066
$10,776

$3,453
$12,138

$4,040
$14,201

$4,391
$15,435

$4,700
$16,521

$4,906
$17,247

$5,199
$18,277

Month 1
$0

Month 2
$560

Month 3
$682

Month 4
$905

Month 5
$1,145

Month 6
$1,301

Month 7
$1,465

Month 8
$1,714

Month 9
$1,863

Month 10
$1,994

Month 11
$2,082

Month 12
$2,206

Surge Protectors
Commercial sales

$0
$0

$502
$436

$611
$530

$811
$704

$1,026
$891

$1,165
$1,012

$1,312
$1,140

$1,535
$1,333

$1,669
$1,449

$1,786
$1,551

$1,864
$1,619

$1,976
$1,716

Subtotal Direct Cost of Sales

$0

$1,497

$1,823

$2,419

$3,062

$3,477

$3,917

$4,582

$4,980

$5,331

$5,565

$5,897

Sales
Surge Arrestors
Surge Protectors
Commercial sales
Total Sales
Direct Cost of Sales
Surge Arrestors

Page 1

Appendix
Table: Personnel
Personnel Plan
Project Manager
Customer service agent

0%
0%

Month 1
$4,200
$0

Month 2
$4,200
$400

Month 3
$4,200
$900

Month 4
$4,200
$900

Month 5
$4,200
$900

Month 6
$4,200
$900

Month 7
$4,200
$900

Month 8
$4,200
$900

Month 9
$4,200
$900

Month 10
$4,200
$900

Month 11
$4,200
$900

Month 12
$4,200
$900

Customer service agent

0%

$0

$400

$900

$900

$900

$900

$900

$900

$900

$900

$900

$900

Customer service agent

Customer service agent

0%
0%

$0
$0

$0
$0

$900
$0

$900
$0

$900
$900

$900
$900

$900
$900

$900
$900

$900
$900

$900
$900

$900
$900

$900
$900

Total People

Total Payroll

$4,200

$5,000

$6,900

$6,900

$7,800

$7,800

$7,800

$7,800

$7,800

$7,800

$7,800

$7,800

Page 2

Appendix
Table: General Assumptions
General Assumptions
Plan Month
Current Interest Rate

Month 1
1
10.00%

Month 2
2
10.00%

Month 3
3
10.00%

Month 4
4
10.00%

Month 5
5
10.00%

Month 6
6
10.00%

Month 7
7
10.00%

Month 8
8
10.00%

Month 9
9
10.00%

Month 10
10
10.00%

Month 11
11
10.00%

Month 12
12
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
Other

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

30.00%
0

Page 3

Appendix
Table: Profit and Loss
Pro Forma Profit and Loss
Month 1
$0
$0

Month 2
$4,640
$1,497

Month 3
$5,649
$1,823

Month 4
$7,498
$2,419

Month 5
$9,489
$3,062

Month 6
$10,776
$3,477

Month 7
$12,138
$3,917

Month 8
$14,201
$4,582

Month 9
$15,435
$4,980

Month 10
$16,521
$5,331

Month 11
$17,247
$5,565

Month 12
$18,277
$5,897

$0
$0

$0
$1,497

$0
$1,823

$0
$2,419

$0
$3,062

$0
$3,477

$0
$3,917

$0
$4,582

$0
$4,980

$0
$5,331

$0
$5,565

$0
$5,897

Gross Margin
Gross Margin %

$0
0.00%

$3,143
67.73%

$3,826
67.73%

$5,079
67.73%

$6,427
67.73%

$7,299
67.73%

$8,222
67.73%

$9,619
67.73%

$10,455
67.73%

$11,190
67.73%

$11,682
67.73%

$12,379
67.73%

Expenses
Payroll

Sales
Direct Cost of Sales
Other Costs of Goods
Total Cost of Sales

$4,200

$5,000

$6,900

$6,900

$7,800

$7,800

$7,800

$7,800

$7,800

$7,800

$7,800

$7,800

Sales and Marketing and Other

Expenses
Depreciation

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$117

$117

$117

$117

$117

$117

$117

$117

$117

$117

$117

$117

Rent

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

Utilities
Insurance
Payroll Taxes

$0
$0
$630

$0
$0
$750

$0
$0
$1,035

$0
$0
$1,035

$0
$0
$1,170

$0
$0
$1,170

$0
$0
$1,170

$0
$0
$1,170

$0
$0
$1,170

$0
$0
$1,170

$0
$0
$1,170

$0
$0
$1,170

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$5,947

$6,867

$9,052

$9,052

$10,087

$10,087

$10,087

$10,087

$10,087

$10,087

$10,087

$10,087

($5,947)
($5,830)

($3,724)
($3,607)

($5,226)
($5,109)

($3,973)
($3,856)

($3,660)
($3,543)

($2,788)
($2,671)

($1,865)
($1,748)

($468)
($351)

$368
$485

$1,103
$1,220

$1,595
$1,712

$2,292
$2,409

$412

$407

$402

$397

$392

$387

$382

$377

$372

$367

$362

$357

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

($6,359)

($4,131)

($5,627)

($4,370)

($4,052)

($3,175)

($2,247)

($845)

($4)

$736

$1,233

$1,936

0.00%

-89.03%

-99.61%

-58.28%

-42.70%

-29.46%

-18.51%

-5.95%

-0.03%

4.46%

7.15%

10.59%

Other
Total Operating Expenses
Profit Before Interest and Taxes
EBITDA
Interest Expense
Taxes Incurred
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

$0
$0

$4,640
$4,640

$5,649
$5,649

$7,498
$7,498

$9,489
$9,489

$10,776
$10,776

$12,138
$12,138

$14,201
$14,201

$15,435
$15,435

$16,521
$16,521

$17,247
$17,247

$18,277
$18,277

Cash Received
Cash from Operations
Cash Sales
Subtotal 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

New Other Liabilities (interest-free)

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$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

Sales of Long-term Assets
New Investment Received

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$15,000

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

$0
$0
$0

Subtotal Cash Received

$0

$4,640

$5,649

$22,498

$9,489

$10,776

$12,138

$14,201

$15,435

$16,521

$17,247

$18,277

Expenditures

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Expenditures from Operations

Cash Spending

$4,200

$5,000

$6,900

$6,900

$7,800

$7,800

$7,800

$7,800

$7,800

$7,800

$7,800

$7,800

Bill Payments
Subtotal Spent on Operations

$68
$4,268

$2,150
$7,150

$5,278
$12,178

$4,647
$11,547

$5,535
$13,335

$6,335
$14,135

$6,506
$14,306

$6,982
$14,782

$7,864
$15,664

$7,970
$15,770

$8,256
$16,056

$8,369
$16,169

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Principal Repayment of Current Borrowing

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Other Liabilities Principal Repayment

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$600
$0

$600
$0

$600
$0

$600
$0

$600
$0

$600
$0

$600
$0

$600
$0

$600
$0

$600
$0

$600
$0

$600
$0

Purchase Long-term Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Dividends

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$4,868

$7,750

$12,778

$12,147

$13,935

$14,735

$14,906

$15,382

$16,264

$16,370

$16,656

$16,769

Net Cash Flow

($4,868)

($3,110)

($7,129)

$10,351

($4,446)

($3,959)

($2,768)

($1,181)

($829)

$151

$591

$1,508

Cash Balance

$17,032

$13,922

$6,793

$17,144

$12,698

$8,739

$5,971

$4,789

$3,960

$4,111

$4,702

$6,209

Long-term Liabilities Principal Repayment

Purchase Other Current Assets

Subtotal Cash Spent

0.00%

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

Starting Balances

Current Assets
Cash
Inventory

$21,900
$0

$17,032
$0

$13,922
$1,647

$6,793
$2,005

$17,144
$2,661

$12,698
$3,368

$8,739
$3,825

$5,971
$4,308

$4,789
$5,040

$3,960
$5,478

$4,111
$5,864

$4,702
$6,122

$6,209
$6,487

Other Current Assets

Total Current Assets

$3,000
$24,900

$3,000
$20,032

$3,000
$18,569

$3,000
$11,798

$3,000
$22,805

$3,000
$19,066

$3,000
$15,564

$3,000
$13,279

$3,000
$12,830

$3,000
$12,439

$3,000
$12,975

$3,000
$13,823

$3,000
$15,697

Long-term Assets
Long-term Assets

$14,500

$14,500

$14,500

$14,500

$14,500

$14,500

$14,500

$14,500

$14,500

$14,500

$14,500

$14,500

$14,500

$0

$117

$234

$351

$468

$585

$702

$819

$936

$1,053

$1,170

$1,287

$1,404

$14,500
$39,400

$14,383
$34,415

$14,266
$32,835

$14,149
$25,947

$14,032
$36,837

$13,915
$32,981

$13,798
$29,362

$13,681
$26,960

$13,564
$26,394

$13,447
$25,886

$13,330
$26,305

$13,213
$27,036

$13,096
$28,793

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Accumulated Depreciation
Total Long-term Assets
Total Assets
Liabilities and Capital
Current Liabilities
Accounts Payable

$0

$1,974

$5,124

$4,464

$5,324

$6,119

$6,275

$6,720

$7,599

$7,695

$7,978

$8,076

$8,497

Current Borrowing
Other Current Liabilities

$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

Subtotal Current Liabilities

$0

$1,974

$5,124

$4,464

$5,324

$6,119

$6,275

$6,720

$7,599

$7,695

$7,978

$8,076

$8,497

Long-term Liabilities

$50,000

$49,400

$48,800

$48,200

$47,600

$47,000

$46,400

$45,800

$45,200

$44,600

$44,000

$43,400

$42,800

Total Liabilities

$50,000

$51,374

$53,924

$52,664

$52,924

$53,119

$52,675

$52,520

$52,799

$52,295

$51,978

$51,476

$51,297

Paid-in Capital

$5,000

$5,000

$5,000

$5,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

Retained Earnings

($15,600)

($15,600)

($15,600)

($15,600)

($15,600)

($15,600)

($15,600)

($15,600)

($15,600)

($15,600)

($15,600)

($15,600)

($15,600)

Earnings
Total Capital

$0
($10,600)

($6,359)
($16,959)

($10,490)
($21,090)

($16,117)
($26,717)

($20,487)
($16,087)

($24,538)
($20,138)

($27,713)
($23,313)

($29,960)
($25,560)

($30,805)
($26,405)

($30,809)
($26,409)

($30,073)
($25,673)

($28,840)
($24,440)

($26,904)
($22,504)

$39,400

$34,415

$32,835

$25,947

$36,837

$32,981

$29,362

$26,960

$26,394

$25,886

$26,305

$27,036

$28,793

($10,600)

($16,959)

($21,090)

($26,717)

($16,087)

($20,138)

($23,313)

($25,560)

($26,405)

($26,409)

($25,673)

($24,440)

($22,504)

Total Liabilities and Capital

Net Worth

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