Written Business Plan for PhotoSynthesis - Duke Nguyen

1. PhotoSynthesis
Business Plan
PhotoSynthesis 10000 Millionaire Dr. Westerville, OH 43081 T 740-803-0952 F 740-816-2620 info@photosynthesis.com

2. PhotoSynthesis
Table of Contents
Executive Summary 4
Vision and Mission Statement 4
Industry Profile and Overview 4
Business Strategy 5
Company Goals and Objectives 5
SWOT Analysis 5
Company Products and Services 6
Core Products/Services Description 6
Value Added Products/Services 7
Marketing Strategy 9
Problem to be solved 9
Segmentation 9
Market Description 10
Marketing Plan 10
Pricing 11
Location and Layout 11
Location 12
Layout 12
Competitor Analysis 12
Description of Management Team 13
Financial Forecasts 14
Budget Plan 14
Summary of Cost 15
Income Statements 16
Balance Sheets 17
Cash Flow Statements 19
Loan and Investment Proposal 20
Budget and Requested Funds 20
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Exit Strategy and Cash Out 21
Appendices 22
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Executive Summary
Digital photography has significantly changed the way people interact with their personal photos. The way
people manage their photographic memories now is a more streamlined and empowering experience to the average
consumer. This change has eliminated the need for boxes and folders of physical pictures, but many people still have
many old print photographs collecting dust. Time consuming to organize and tedious to display, physical photos usually
end up stacked away somewhere. Putting these pictures into elegant and beautiful displays such as scrapbooks is costly
both in time and money. To solve this problem we will use the advantages of digital photography software and scanning
technology. By digitizing physical photographs, they can be preserved forever and easily compiled into pleasing
presentations that are easily distributed to family and friends around the world. By providing the technical equipment and
expertise in these areas we eliminate the problem for the customer. By using our services the customer will save valuable
time, avoid great frustration, and come away with a finished product that allows them to remember some of life's
happiest moments forever.
Vision and Mission Statement
PhotoSynthesis LLC. is in the business of helping people protect and enhance their photographic memories in
a personal and respectful way. We understand the importance of each and every photograph. We support each
customers efforts to preserve and organize these memories. Through our technology, experience, and commitment we
will enable customers to take charge of their photo collections and enjoy them more thoroughly. We hope to spread this
personal service as far as we can by engaging other business owners and individuals in what we do and allowing them
to provide such services on their own. Our local retail presence will serve to anchor our business in the community and
allow positive personal interaction and collaboration. PhotoSynthesis is in a business that preserves, a business that
empowers, and a business that enriches our future.
Industry Profile and Overview
Industry - Photo Finishing Laboratories (except One-Hour) - US
NAICS Code - 812921
This industry comprises establishments, known as commercial and professional photo finishing laboratories,
primarily engaged in developing film and making photographic slides, prints, and enlargements, on a large-scale basis,
typically for commercial clients, and providing specialty services not normally available from one-hour photo finishing
laboratories.
The photofinishing industry includes about 8,000 locations with combined annual revenue of $7 billion. The
industry is concentrated: the 50 largest companies hold more than 60 percent of the market. A typical store has five
employees and about $500,000 in annual revenue.
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Industry demand depends on consumer income. Profitability of individual companies is linked to marketing,
and, for photofinishers, efficiency of operations. Large companies can have economies of scale in purchasing and
operations. Small companies can compete successfully by offering superior service. The industry is fairly labor-intensive:
annual revenue per employee is about $100,000.
Business Strategy
PhotoSynthesis will position itself within the market as a reasonably priced, high quality, excellent service firm.
We will be an approachable company for older clients and a complete solution for younger customers. Our image should
be focused around our locations. Unlike the big online scanning firms, a customer can come into the store and talk with
us about their photos. This interaction and proximity to the customer will allow us to provide a higher level of service and
also gain more of the trust of the customers.
Company Goals and Objectives
1. Operational
•
All orders should be completed within 5 business days of receiving the pictures.
•
All customer inquiries will be answered within 24 hours of receipt.
•
Make four new very personal customer contacts a day and add them to data base
•
Call one former customer a day to make sure they are satisfied with our work and remind them of
upcoming promotions and new product releases.
•
Post an operate a functional and stylish website
2. Financial Goals
•
Generate positive cash flow in the 2nd year
•
Be free of original debt by end of third year
•
Make payroll
•
Reach break even after the first year
3. Other Goals
•
Sponsor and run one charity fundraiser a year held in and around our store.
SWOT Analysis
1. Strengths
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•
Local physical presence and ownership
•
Personal contact between customer and company
•
Ease of use for our service
•
Complete solution to problem
2. Weaknesses
•
Initial production capacity might be low
•
Unknown brand in the local market
•
Need to educate many customers about the service we provide
•
Efficiencies lower than online competitors
3. Opportunities
•
High growth through networking with local organizations (sports teams, churches)
•
Contractual arrangements with organizations to scan their photos and maybe documents in future
•
Being the first mover in the Columbus Market.
4. Threats
•
Customers failing to take action on intentions to bring in pictures due to lack of motivation or
competitors actions.
•
Improvement of consumer scanning technology
•
Decreasing usage of film
•
Passing on of the older generation
•
Competitors value propositions
Company Products and Services
Core Products/Services Description
PhotoSynthesis' core business revolves around three major product offerings:
1. Photo Scanning
PhotoSynthesis will scan print photos into digital format. Print photos of various sizes and print media will be
accepted. The digitized photos will be saved in industrial and consumer image formats. Customers will have the option of
choosing standard quality (JPEG) to high quality (TIFF) formats. Scanning of photos will be automated and bulk
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processed with an imaging system from Kodak. By default, photos will be delivered on CDs and DVDs. Photos will be
accepted through PhotoSynthesis' store front and through mail.
2. Negative Scanning
Alongside print photo scanning, PhotoSynthesis will also digitize negatives. A separate automated negative
scanner will be used, but the customer provided with the same digital output options as the photo scanning service. By
default, photos will be delivered on CDs and DVDs. Negatives will be accepted through PhotoSynthesis' store front and
through mail.
3. VHS Digitization
PhotoSynthesis will also convert analog VHS videos into digital format. Various output options will be made
available, from compressed (AVI) to lossless (DVD) and high definition video formats. VHS tapes will be accepted through
PhotoSynthesis' store front and through mail.
At its core, PhotoSynthesis offers photo and video digitization services. By offering photo, negative, and VHS
digitization, PhotoSynthesis can offer a complete suite of products to customers. Since customers prefer to have all
related tasks completed conveniently at one location with the least hassle, PhotoSynthesis is positioned to take
advantage of this need. Moreover, this suite of services allows PhotoSynthesis to cross sell to customers. For instance, a
customer buying photo scanning services can be sold VHS digitization services. In addition to these core services,
customers will also be offered a host of value added services that are built atop these core offerings.
From a business perspective, these three related services will leverage and maximize the use of PhotoSynthesis
equipment and infrastructure. Although different scanners are required for the different services, the output, storage, and
retrieval interfaces are identical. Also, the skill set required for these services are similar. This strategy enables
PhotoSynthesis to spread its fixed costs over a larger base, keeping costs low. Additionally, with this clear core definition,
PhotoSynthesis will be able to focus its efforts to become the best in its class and achieve a competitive advantage in
photo, negative and VHS digitization.
Value Added Products/Services
1. Digital photo album creation
As a way to increase the overall total value of each customer interaction we will offer a custom digital photo
album creation service. This service will be offered to all of our customers and will allow them to use their newly digitized
photos to create professional grade albums. Working with a professional photo management specialist, customers will
have a strong creative influence and the final word on how the album turns out. After specifying what pictures they want
in the album, the general theme, and any messages they may want to include, our specialist will work to create a
polished digital photo album that meets those desires. Through consultations via email and face-to-face meetings, the
customer and the photo specialist will together create a great piece that can be shared with family and friends across the
globe.
2. Retouching
To save on labor costs we will be using automated retouching software to quickly improve the overall
appearance and quality of the photos we scan en mass. But there are limits to our automated software and some
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pictures may need special attention. To address this need we will offer a special retouching service on top of the standard
retouching. Customers will select specific photos that they would like to be retouched beyond the standard level. These
pictures would be worked on individually by a digital photo specialist. They will be able to eliminate scratches and
damages to the original photograph by "brushing" them out with advanced software like Adobe Photoshop. Other
improvements will include color enhancement, getting rid of yellow discoloration due to aging, and increasing picture
clarity. With the technology available today even the oldest and most damaged photographs can be returned to near new
condition in a digital format that can be reprinted.
3. Photo Printing
For any photos that we scan we will also offer to professionally reprint them. This feature will allow customers to
take very old and fragile photographs, have them retouched, and then re-printed on new paper. This will extend the life of
the photo and allow them to handle precious photographs without the worry of damaging them. The costs of owning/
operating a professional photo printing machine are very high so we will be outsourcing all printing activities to a photo
printing business. This will allow us to offer this great feature while not incurring the costs that such a venture would
involve.
4. Transfer of scanned images onto user storage device
The management and distribution of the images after scanning is an important issue for our customers. For a
fee, we will transfer all of their scanned photos onto their personal storage device. This could include an external hard
drive or a flash drive. This will allow customers to choose how they want to receive their data.
5. Flash Drives
In addition to our standard DVD transfer service we will also offer to put the scanned images on a flash drive for
a fee. This will give the customer good portability and ease of use.
6. Proprietary Software
Having an entire photo collection digitized can be a great way to organize and manage personal memories. But
working with all these photos on a computer can be overwhelming for some. Photo organization and management
software is extremely powerful but it can be very complicated to operate. Many of our customers do not have the time,
desire, or technical knowledge to take full advantage of these tools. To allow our customers to take full advantage of their
newly digitized photo collection we are going to create a new and innovative piece of photo organization software. The
extremely intuitive visual interface based of the software will make photo management much easier and allow many of
our target customers to enjoy their photos fully. Features will include :
•
Name tagging
•
Date tagging
•
Location tagging
•
Sorting options (Example: "show me all pictures of me and my brother")
•
Chronological ordering
•
Family tree via pictures
•
Grouping by event or trip
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•
Ability to attach notes to each picture
•
Easy uploading to photo sharing sites
Marketing Strategy
Problem to be solved
The focus of our business is to take print photographs and scan them into digital format so they can be
enhanced and compiled into professional slideshows, digital binders, and other storage and display options. By using
professional grade equipment we will ensure that our product/service is of the highest quality. After initially scanning the
photos we will be able to enhance the images by using photo editing software. After maximizing the potential of each
photo they can be compiled into several different display and storage formats. For display the customer can work closely
with one of our associates to create a personalized photo slideshow or digital scrapbook. These finished products can
be sent to family around the world as gifts. For storage the customer can choose to have the photos and presentations
placed on DVDs or USB drives. They may also choose to store their photos and creations on-line where they will be
accessible from anywhere.
Our physical storefront will serve as a place for customers to come in and drop off photos to be scanned. They
would also be able to work with us to create digital photo slideshows and albums. As we know that not all customers will
be able to make it into the store we will offer the option to send pictures to our facility to be scanned via FedEx or UPS
certified and insured boxes. Due to the digital nature of our work we could also work with customers from across the
country over the web while creating their slideshows and albums. The photos would be scanned and either returned to
the customer or saved off-site at a secure area with heavy fire prevention systems.
Segmentation
Our target segment is young families and older parents or individuals who wish to preserve all their childhood
pictures or pictures of their young children. This segment also includes those who have numerous print photos that need
digitizing. Another segment is the individuals or families that do not have the time and or expertise to digitize and edit
photos.
For the opening of the first PhotoSynthesis location, our team has created a survey to collect data that could
help us better understand the consumers' wants and needs. Below are the key findings from the survey answers:
•
Those that are most interested in purchasing our services are parents in their 50s with household
annual income of $80,000 and above.
•
44% of the selected group has paid for digital photo scanning services before.
•
53% answered yes when asked if they use any online photo sharing services.
•
92% say their printed photos are important to them and that they could not bear to lose them.
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•
55% say their photographs are not safely stored.
•
78% say they have some but not all of their printed photos duplicated.
•
88% of the selected group they would consider using a service that digitally preserves photos.
•
69% of the group are willing to pay up to $100 for our service, 25% are comfortable within the
$100-200 range and the rest is willing to pay even more than $200.
•
85% of the group have thought of organizing their photos or scanning them.
•
95% people have not scanned all their printed photos.
•
74% say they do not have time to digitize their photos
•
87% agree that having all their photos digitally scanned would bring them great value.
Market Description
Right now the market for full service photo scanning and digital album creation is limited. There are companies
that offer scanning services but non offer comprehensive and personalized album creation services as well. In addition
many of these companies target other businesses by scanning paper documents. A market that is closely related to our
purposed segment is photo editing software for consumer use. There are hundreds of programs out there that all claim
to be the best way to organize and present your digital memories. What they all have in common is the amount of time it
takes to learn how to use them. We know our software backwards and forwards and this allows the customer to focus
on helping to create the most meaningful presentation possible. We see older generations as a huge market niche that
we can serve like no other business. Parents and Grandparents trying to interact with their younger family members will
find our personalized and sensitive service appealing. We will help them to bridge the digital gap that often exists
between generations.
Marketing Plan
1. Interactive Marketing
We will be using Yahoo, Google, and other online search services to promote our business. In particular, every
time when people search for specific keywords such as "photo scanning", our business would show up first place in the
results page, giving us more of the brand exposure needed to make our business a popular choice among customers.
In addition, we will also be purchasing ad space on several websites that provide online photography services
such as Flickr or Photobucket. In so doing, we will be able to reach those photography-enthusiastic audience who have
a lot of potential to become our customers.
2. Traditional Marketing
Since the first PhotoSynthesis store will be located in central Ohio, we will be advertising our business on
several local newspapers and community newsletters such as The Columbus Dispatch or Delaware Gazette for at least a
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year to make PhotoSynthesis a popular local household name. In addition, we will also promote PhotoSynthesis on a
number of other photography, lifestyle and home magazines every quarter for a year to reach customers from other
areas.
Furthermore, we will be offering free trials for orders of 25 photos and fewer in the first three months of
operation to create more incentives for people to try our services. We will also be visiting places such as school,
retirement homes and churches to deliver presentation and demonstration on our products and services to encourage
word-of-mouth communication.
Last but not least, during the first month of operation our company will send out 1000 postcards to potential
business partners and customers in Ohio to introduce our business and services, and also to generate publicity.
Pricing
General Pricing
0-500 Pictures 501-1000 Pictures 1001-2000 Pictures 2001 Pictures and Above
12.5 cents/picture 11 cents/picture 10 cents/picture Ask about pricing
Pricing of Add-On Features
Digital Photo Retouching Photo Printing Data Transfer Flash Drive Software
Album Creation to Customer’s
Device
$150 for a single $50 dollars/ Prices to be $9.99 $14.99/flash $29.99
completely photo, Heavy determined by drive
custom album restoration firm we
that is 50 photos outsource to
$25 dollars/
or less. Includes
photo, medium
1 hard copy and
restoration
DVD. Additional
hard copies and $15 dollars/
DVD editions can photo, light
be purchased as restoration
well
Location and Layout
Location
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The first location of PhotoSynthesis will be opened in Westerville, Ohio. There are a number of reasons as to
why we chose this area to open our business. In particular, while Westerville is a well-established community of
professionals with steady income that could support our business, the city is also populated by elder residents who
usually have a lot of photos and potential to become our customers. Therefore, this town would provide a perfect test-
market for us to test our business strategies and tactics. Moreover, the rental rates for a business office in Westerville is
approximately $500/month. which is affordable for a start-up business like PhotoSynthesis.
Layout
Our office will be a 800 square feet room on the ground floor of a townhouse, which complies with the
Americans with Disabilities Act. The office space will be divided into two sections: one section is for studio works/
customer interactions while the other one will be used for storage and other logistics.
Competitor Analysis
Scan My Photos International
http://www.scanmyphotos.com/
This is one of the largest companies in the market. They have been featured in such publications as The New
York Times, The Wall Street Journal, The Chicago Sun-Times, USA Today, and CBS. They use the finest and most
advanced scanning technology in the industry to achieve extremely high levels of efficiency. They use a Kodak scanner
that cost 26k-29k dollars and can produce high quality scans of 750 photos in 5 minutes. They offer a range of services
from VHS digitization to photo restoration. They were started in 1990 and have grown very strong in the market. They
have one retail location, which is also their headquarters, in Irvine, California. The majority of their business is done
through mail-in boxes. Customers purchase a box online and it is sent to their residence. They then fill the box with
photos and mail it to scanmyphotos.com. This process has allowed them to keep overhead cost down and have access
to customers all over the country and even the world. Their pricing for regualr photo scanning is almost unbeatalbe at
about 4 cents a scan. This is of coarse not where they are making their money. The value-added services and products
that come into play after the photos have been scanned are where the profit is found.
Larsen Digital Services
http://www.slidescanning.com/
Based in Utah, this is a smaller company than scanmyphotos.com that was started in 1995. They pride
themselves for not outsourcing any work over seas. Everything they do is done in house and in the States. They offer
nearly all of the features and services as larger companies and are focused on providing great customer service. Their
prices are higher than scanmyphotos.com but they also are able to give a more personal experience. They have recently
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added and on-line organization tool that will allow customers to sort and name all the photos before they are burned onto
DVDs. By accessing their photos online the customer can easily manage and organize them before they get them back
from Larsen. This is a strong feature offered by Larsen. They have no retail space at this time.
Foto Bridge
http://www.fotobridge.com/
Smaller private company that focuses on offering "all inclusive" pricing. They believe that customers value
knowing exactly how much they are going to be paying at the end so they price their products and services in a
reasonable way. They do many of the same things as bigger companies in terms of offering photos on DVDs and flash
drives. In our opinion there is no clear point of differentiation for Fotobridge.
Dig My Pics
http://www.digmypics.com/
This company was started in 2002 by a couple who had got the idea after preserving their own family photos. In
2007 it had become a multi-million dollar company and had over 40 employees. They offer a completely unique feature in
conjunction with their photo scanning service. It is called "Real Time Scanning" and it allows a customer to see their
photos as they are being scanned as well as look at where their pictures are in the queue. This feature is unique in the
industry and gives the customer greater comfort. Their pricing is wide ranging, but they offer different levels of resolution
to scan at and this causes a lot of the variation.
Description of Management Team
Key managers and employees
Duke, Nathaniel and David are three juniors from Ohio Wesleyan University. We would be the major
stakeholders and operators of the business. We would leverage our complementary skills and experience to create a
competitive advantage for the business. Duke and Nathaniel would undertake sales, marketing, and operational
responsibilities while David will be responsible for the technical and IT aspects of the business. Since digital
photography, editing, and composition are beyond our core competencies, we would need to hire an artistic team. This
team would include Ohio Wesleyan Junior and Photography major Taylor McCleneghan. Her knowledge of
photography and training in photo editing software such as Adobe Photoshop will allow us to train others in these same
areas and avoid having to pay for experience up-front.
Adviser
Rusty McClure - an Angel investor who has had a lot of experience in helping a start-up business
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Financial Forecasts
Below are our financial forecasts for PhotoSynthesis in the first three years of operation, which includes a
budget plan, income statements, balance sheets and cash flow statements. We have also created three scenarios in
which our business will be underperforming, performing normally and outperforming respectively.
Budget Plan
Budget Plan
PhotoSynthesis
6/12/12
1. Equipment
Computers
iMac (x2) $ 3,598
PC (x1) 700
Storage & Backup
PowerVault DP500 2TB 3,000
Networking
Dell Powerconnect 5424 Gigabit Switch 834
Wiring facility, conduits, labor 500
Uninterrupted Power Supply
UPS/Generator 2,000
Scanning Device
Kodak s1220 Photo Scanning System x 2 3,600
Nikon Super CoolScan 5000 ED 1,200
Printing Device
HP Designjet 130nr Printer 1,500
Total Equipment Cost $ 16,932
2. Software
Adobe
Creative Suite 4 Design Premium $ 1,800
Photoshop Lightroom 2 300
Total Software Cost $ 2,100
3. Facility Remodelling & Security Deposit
Labor & Materials $ 15,000
Security Deposit ($1000 x 6 mo.) $6,000
Total Renovation Cost $ 21,000
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4. Overhead Expenses
Rent
Store Rental $ 1,000
Utilities
Electricity 500
Water 50
Office Supplies
Paper, Ink, Staples, etc… (first month only) 200
Labor
Computer Imaging Contractor (x1) 2,000
Total Overhead Expense $ 3,750
5. Marketing Expense (per quarter)
Interactive Marketing
Online Ads (Google, Yahoo, Social Webs) $ 500
Traditional Marketing
Columbus Dispatch ($246/column inch) 2,952
Delaware Gazette ($12/column inch) 48
Photography Mag. ($990 every 1/6 page ad) 1,980
Lifestyle Mag. (~$1000 every 1/6 page ad) 2,000
Home Mag. (~$1000 every 1/6 page ad) 2,000
Newsletter & Community Postings 1,000
Direct Mailing
Stamps (27cents x1000) 270
Printing Cost (x1000 bundle) 120
Total Marketing Expense $ 10,870
6. Miscellaneous Expense
Externalities Cost (5% of all operations) $ 2,732.60
Total Miscellaneous Expense $ 2,732.60
PROPOSED START-UP BUDGET $ 57,385
Summary of Cost
One Time Costs
Equipment $ 16,932
Software $ 2,100
Facility Remodeling & Deposit $ 21,000
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Total $ 40,032
Monthly Overheads
Rent $ 1,000
Utilities $ 550
Supplies $ 200
Labor $ 2,000
Marketing $ 3,623
Miscellaneous $ 2,733
Total $ 10,106
Income Statements
PhotoSynthesis Income Statement [Underperform]
Year 1 Year 2 Year 3
Core Revenue $ 69,343 $ 143,314.26 $ 236,242.40
Value Added Revenue $ 7,513 $ 15,973.51 $ 32,300.91
Total Revenue $ 76,856 $ 159,288 $ 268,543
COGS & SGA $ 121,271 $ 133,398 $ 146,738
Depreciation $ 8,006 $ 10,006 $ 14,006
Interest Expense $ 1,500 $ 1,500 $ 0
Total Operating Expense $ 130,778 $ 144,905 $ 160,745
Operating Income $ (53,922) $ 14,383 $ 107,799
EBT $ (53,922) $ 14,383 $ 107,799
Tax $ (18,873) $ 5,034 $ 37,730
Net Income $ (53,922) $ 9,349 $ 70,069
* Marginal Tax Rate 35%
* Depreciation 5 year straight line
PhotoSynthesis Income Statement [Normal]
Year 1 Year 2 Year 3
Core Revenue $ 73,303 $ 184,715.34 $ 344,049.10
Value Added Revenue $ 8,435 $ 23,470.51 $ 55,937.39
Total Revenue $ 81,738 $ 208,186 $ 399,986
COGS & SGA $ 121,271 $ 133,398 $ 146,738
Depreciation $ 8,006 $ 10,006 $ 14,006
Interest Expense $ 1,500 $ 1,500 $ 0
Total Operating Expense $ 130,778 $ 144,905 $ 160,745
Operating Income $ (49,040) $ 63,281 $ 239,242
EBT $ (49,040) $ 63,281 $ 239,242
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Tax $ (17,164) $ 22,148 $ 83,735
Net Income $ (49,040) $ 41,133 $ 155,507
* Marginal Tax Rate 35%
* Depreciation 5 year straight line
PhotoSynthesis Income Statement [Outperform]
Year 1 Year 2 Year 3
Core Revenue $ 78,442 $ 254,094.50 $ 546,753.18
Value Added Revenue $ 9,050 $ 33,347.19 $ 96,401.69
Total Revenue $ 87,492 $ 287,442 $ 643,155
COGS & SGA $ 121,271 $ 133,398 $ 146,738
Depreciation $ 8,006 $ 10,006 $ 14,006
Interest Expense $ 1,500 $ 1,500 $ 0
Total Operating Expense $ 130,778 $ 144,905 $ 160,745
Operating Income $ (43,285) $ 142,537 $ 482,410
EBT $ (43,285) $ 142,537 $ 482,410
Tax $ (15,150) $ 49,888 $ 168,844
Net Income $ (43,285) $ 92,649 $ 313,567
* Marginal Tax Rate 35%
* Depreciation 5 year straight line
Balance Sheets
PhotoSynthesis Balance Sheet [Underperform]
Year 0 Year 1 Year 2 Year 3
Assets
Current Assets
Cash $ 49,968 $ 4,053 $ 13,408 $ 62,484
Accounts Receivable $ 0 $ 0 $ 0 $ 0
Inventory $ 0 $ 0 $ 0 $ 0
Total Current Assets $ 49,968 $ 4,053 $ 13,408 $ 62,484
Fixed Assets
Property, Plant & Equipment $ 40,032 $ 40,032 $ 50,032 $ 70,032
Accumulated Depreciation $ 0 $ 8,006 $ 18,013 $ 32,019
Total Fixed Assets $ 40,032 $ 32,026 $ 32,019 $ 38,013
Total Assets $ 90,000 $ 36,078 $ 45,427 $ 100,496
Liabilities
Current Liabilities
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Accounts Payable $ 0 $ 0 $ 0 $ 0
Accruals $ 0 $ 0 $ 0 $ 0
Short Term Debt $ 15,000 $ 15,000 $ 15,000 $ 0
Long Term Liabilities
Long Term Debt $ 0 $ 0 $ 0 $ 0
Total Liabilities $ 15,000 $ 15,000 $ 15,000 $ 0
Stock $ 75,000 $ 75,000 $ 75,000 $ 75,000
Retained Earnings $ 0 $ (53,922) $ (44,573) $ 25,496
Total Equity $ 75,000 $ 21,078 $ 30,427 $ 100,496
Total Liabilities and Equity $ 90,000 $ 36,078 $ 45,427 $ 100,496
PhotoSynthesis Balance Sheet [Normal]
Year 0 Year 1 Year 2 Year 3
Assets
Current Assets
Cash $ 49,968 $ 8,935 $ 50,074 $ 184,587
Accounts Receivable $ 0 $ 0 $ 0 $ 0
Inventory $ 0 $ 0 $ 0 $ 0
Total Current Assets $ 49,968 $ 8,935 $ 50,074 $ 184,587
Fixed Assets
Property, Plant & Equipment $ 40,032 $ 40,032 $ 50,032 $ 70,032
Accumulated Depreciation $ 0 $ 8,006 $ 18,013 $ 32,019
Total Fixed Assets $ 40,032 $ 32,026 $ 32,019 $ 38,013
Total Assets $ 90,000 $ 40,960 $ 82,093 $ 222,600
Liabilities
Current Liabilities
Accounts Payable $ 0 $ 0 $ 0 $ 0
Accruals $ 0 $ 0 $ 0 $ 0
Short Term Debt $ 15,000 $ 15,000 $ 15,000 $ 0
Long Term Liabilities
Long Term Debt $ 0 $ 0 $ 0 $ 0
Total Liabilities $ 15,000 $ 15,000 $ 15,000 $ 0
Stock $ 75,000 $ 75,000 $ 75,000 $ 75,000
Retained Earnings $ 0 $ (49,040) $ (7,907) $ 147,600
Total Equity $ 75,000 $ 25,960 $ 67,093 $ 222,600
Total Liabilities and Equity $ 90,000 $ 40,960 $ 82,093 $ 222,600
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19. PhotoSynthesis
PhotoSynthesis Balance Sheet [Outperform]
Year 0 Year 1 Year 2 Year 3
Assets
Current Assets
Cash $ 49,968 $ 14,689 $ 107,344 $ 399,918
Accounts Receivable $ 0 $ 0 $ 0 $ 0
Inventory $ 0 $ 0 $ 0 $ 0
Total Current Assets $ 49,968 $ 14,689 $ 107,344 $ 399,918
Fixed Assets
Property, Plant & Equipment $ 40,032 $ 40,032 $ 50,032 $ 70,032
Accumulated Depreciation $ 0 $ 8,006 $ 18,013 $ 32,019
Total Fixed Assets $ 40,032 $ 32,026 $ 32,019 $ 38,013
Total Assets $ 90,000 $ 46,715 $ 139,364 $ 437,930
Liabilities
Current Liabilities
Accounts Payable $ 0 $ 0 $ 0 $ 0
Accruals $ 0 $ 0 $ 0 $ 0
Short Term Debt $ 15,000 $ 15,000 $ 15,000 $ 0
Long Term Liabilities
Long Term Debt $ 0 $ 0 $ 0 $ 0
Total Liabilities $ 15,000 $ 15,000 $ 15,000 $ 0
Stock $ 75,000 $ 75,000 $ 75,000 $ 75,000
Retained Earnings $ 0 $ (43,285) $ 49,364 $ 362,930
Total Equity $ 75,000 $ 31,715 $ 124,364 $ 437,930
Total Liabilities and Equity $ 90,000 $ 46,715 $ 139,364 $ 437,930
Cash Flow Statements
PhotoSynthesis Cash Flow Statement [Underperform]
Year 0 Year 1 Year 2 Year 3
Cash from Operating Activities:
Net Income $ 0 $ (53,922) $ 9,349 $ 70,069
Depreciation $ 0 $ 8,006 $ 10,006 $ 14,006
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20. PhotoSynthesis
Changes in Working Capital $ 0 $ 0 $ 0 $ 0
Total Cash from Operating Activities $ 0 $ (45,915) $ 19,355 $ 84,076
Cash from Investing Activities:
Capital Expenditures $ 0 $ 0 $ (10,000) $ (20,000)
Total Cash from Investing Activities $ 0 $ 0 $ (10,000) $ (20,000)
Cash from Financing Activities:
Debt $ 15,000 $ 0 $ 0 $ (15,000)
Sale of Stock $ 75,000 $ 0 $ 0 $ 0
Dividends $ 0 $ 0 $ 0 $ 0
Total Cash from Financing Activities $ 90,000 $ 0 $ 0 $ (15,000)
Net Cash Flow $ 90,000 $ (45,915) $ 9,355 $ 49,076
PhotoSynthesis Cash Flow Statement [Normal]
Year 0 Year 1 Year 2 Year 3
Cash from Operating Activities:
Net Income $ 0 $ (49,040) $ 41,133 $ 155,507
Depreciation $ 0 $ 8,006 $ 10,006 $ 14,006
Changes in Working Capital $ 0 $ 0 $ 0 $ 0
Total Cash from Operating Activities $ 0 $ (41,033) $ 51,139 $ 169,514
Cash from Investing Activities:
Capital Expenditures $ 0 $ 0 $ (10,000) $ (20,000)
Total Cash from Investing Activities $ 0 $ 0 $ (10,000) $ (20,000)
Cash from Financing Activities:
Debt $ 15,000 $ 0 $ 0 $ (15,000)
Sale of Stock $ 75,000 $ 0 $ 0 $ 0
Dividends $ 0 $ 0 $ 0 $ 0
Total Cash from Financing Activities $ 90,000 $ 0 $ 0 $ (15,000)
Net Cash Flow $ 90,000 $ (41,033) $ 41,139 $ 134,514
Loan and Investment Proposal
Budget and Requested Funds
Detailed budget analysis (Appendix) puts PhotoSynthesis' startup costs at $57,385. To give a cash cushion and
to cover costs that were not budgeted, PhotoSynthesis will raise $90,000 for its initial cash infusion. The cash will come
from the following sources:
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21. PhotoSynthesis
1. Personal Investments
As founding members of the business, Nathaniel Cook, David Khoo, and Thang Nguyen will each invest
$10,000 in personal funds into the business for a total of $30,000. Each member will source the money from personal
savings, families, friends, and credit cards.
2. Secured Bank Loans
PhotoSynthesis will borrow $15,000 from banks, secured by the equipment bought with the borrowed funds.
Given that PhotoSynthesis is a startup with no business history, rates would be high (around 10%). Hence,
PhotoSynthesis will seek to structure this $15,000 in borrowing as a short term loan (around 3 years) with the option for
early repayment.
3. Outside Investors
PhotoSynthesis will seek the remaining $45,000 in startup capital from outside investors. For their investment,
outside investors will be given an equity stake in the company. Each $3,000 investment will purchase a 1% stake in
PhotoSynthesis LLC, for a total of 15% offered for sale to investors. For use of these funds, investors will be repaid
according to the following schedule:
Funds used for 2 years: Payback 2 x initial investment
Funds used for 3 years: Payback 3 x initial investment
Funds used for 4 years: Payback 4 x initial investment
Funds used for 5 years: Payback 5 x initial investment
Exit Strategy and Cash Out
PhotoSynthesis scales easily and quickly. As revenue grows, costs will be spread over a growing revenue base,
which significantly increases profitability. From the financial analysis, PhotoSynthesis will make a small profit in the second
year of its business in the under performing scenario. Moreover, by the third year, PhotoSynthesis will have built a
substantial cash position to pay off investors in cash, or through a combination of cash and debt in the under performing
scenario.
Although PhotoSynthesis is confident in its ability to pay investors back, investors can obtain a lucrative cash
out through the following scenarios:
1. Growth through Franchising
To further expand the business, PhotoSynthesis will franchise the business model. Managing many stores at widespread
locations is beyond the capability of management. Moreover, expanding would entail significant capital commitments.
Franchising will allow PhotoSynthesis to increase profit and reach without taking on much risk. PhotoSynthesis will
license the business concept, business practices, infrastructure expertise, marketing campaigns, training, and software
to independent print shops. Since these print shops are facing increasing competition from "all in one" consumer office
products, PhotoSynthesis' concept will give these prints shops a new revenue source. Another possibility is franchising
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22. PhotoSynthesis
or partnering with a large chain such as FedEx Kinkos to expand the business. Whichever possibility PhotoSynthesis
pursues, investors will stand to gain significantly as PhotoSynthesis' value grows through this strategic plan.
2. Buyout
As PhotoSynthesis' increases in value through an established franchise network, it will become an attractive buyout
target. Given a reasonable buyout valuation, PhotoSynthesis would sell itself to buyer. In this scenario, investors would
profit handsomely from the stakes they hold in PhotoSynthesis.
Appendices
On the next page is the summary of our survey
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