EXHIBIT 10.2
------------
XXXX OF SALE
Each of Xxxxxxx X. Xxxx, III, M. Xxxxxxx Xxxxxxxx and Xxxxxx X. Xxxxxxxxx, in
consideration of the payment to it by Project IV, Inc., a Nevada corporation, of
$1.00 and other good and valuable consideration, the receipt of which is hereby
acknowledged, has transferred and hereby convey(s) to Project IV, Inc. the
following asset, to have and to hold the same unto Project IV, Inc., its
successors and assigns forever: all existing rights to the Crowfly business
plan, as more fully described in that Asset Purchase Agreement by and among
Project IV, Inc., Xxxxxxx X. Xxxx, III, M. Xxxxxxx Xxxxxxxx and Xxxxxx X.
Xxxxxxxxx dated November _/s/15__, 2002.
Each of Xxxxxxx X. Xxxx, III, M. Xxxxxxx Xxxxxxxx and Xxxxxx X. Xxxxxxxxx hereby
warrants and agrees to defend the title to such assets, for the benefit of
Project IV, Inc., its successors and assigns, against all persons.
IN WITNESS WHEREOF, each of Project IV, Inc., Xxxxxxx X. Xxxx, III, M. Xxxxxxx
Xxxxxxxx and Xxxxxx X. Xxxxxxxxx have signed this Xxxx of Sale on November _/s/
15_, 2002, to be effective as of the date hereof.
Project IV, Inc.
By: /s/ Xxxx Xxxxx
------------------------------------
Name: Xxxx Xxxxx
----------------------------------
Its: President
-----------------------------------
/s/ Xxxxxxx X. Xxxx
-----------------------------------
Xxxxxxx X. Xxxx, III
/s/ M. Xxxxxxx Xxxxxxxx
-----------------------
M. Xxxxxxx Xxxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx
ATTACHMENT TO EXHIBIT 10.2
CROWFLY INC.
(e-Commerce Models for B2B)
Business Plan
July, 2002
CONTACT INFORMATION
-------------------
Xxxx Xxxx
000-000-0000
Xxxx Xxxxxxxx
000-000-0000
CONFIDENTIALITY STATEMENT
-------------------------
This business plan contains information which is confidential
and proprietary and is not to be disseminated directly or
indirectly in any form to any person or entity without the
prior written consent of Crowfly Inc.
TABLE OF CONTENTS
-----------------
Introduction 3
Company/Mission 4
Concept 5
Market Niche 7
Marketing 8
Management/Philosophy 16
Management Team 17
Vision/Mandate 19
Critical Path 20
Financial Projections - Summary 21
Appendix 22
Pro Forma Key - terms defined
Pro Forma - Year 1
Pro Forma - Year 2
Pro Forma - Year 3
Pro Forma - Year 4
NOTICE
------
Receipt of this document should not be considered an offer or solicitation to
buy any securities of the company. Any representation to the contrary is a
criminal offense and should be reported directly to the company or one of its
representatives.
This business plan contains certain forward looking information about the
company, its business and its anticipated future performance. The information
contained herein is based on various assumptions made by the principals of the
company and may not prove to be correct. Assumptions are inherently subject to
uncertainties and contingencies, many of which are beyond the control of the
company. Accordingly, there can be no assurance that actual results will meet
expectations or will not be materially lower than the results contemplated in
this business plan.
2
INTRODUCTION
This plan was developed to introduce and explain the Crowfly concept.
Additionally, it is intended to provide a basis for obtaining funding.
The estimated capital requirement to take the business from concept to a
positive cash flow will be $1,743,820. The pro forma suggests the company will
reach this point in the fifteenth month of operation.
Over time, the company will install e-Commerce models in numerous industry
spaces. Management has plans to enter the first expansion industry within
eighteen months of initial funding.
Thus, the company seeks total funding in the amount of $3,000,000. At this level
of funding, Crowfly will be able to develop the expansion model in concert with
the primary effort; and be prepared to install it on a preemptive basis.
The company's plan is hereby submitted for your consideration.
COMPANY/MISSION
Crowfly Inc. will incorporate in the state of South Carolina. It will be
headquartered in Charleston.
Its mission is to bring manufacturers and retailers together in a real time
electronic marketplace; one that drives distribution efficiencies for the
manufacturer and procurement efficiencies for the retailer.
Crowfly is driven to become a market leader. Successful companies find a unique
value that they alone can deliver to a chosen market. Market leaders
relentlessly drive themselves to deliver extraordinary levels of distinctive
value to carefully selected customer groups.
Crowfly will deliver more usable value to more customers and clients, more
often, than any of its competitors.
CONCEPT
The company will install, own and manage electronic distribution centers which
operate in business to business (b2b) environments.
The Crowfly e-Commerce tool connects the retailer directly (as the "crow flies")
to the manufacturers from which it purchases merchandise.
The Crowfly model bypasses the traditional wholesale distributor, and in doing
so, it leverages enhanced efficiencies and increased margins throughout the
supply chain.
The model is generally suitable for installation in b2b environments where the
wholesale distributor is fundamental to the supply chain. Some examples:
o Hardware
o Office supplies
o Sporting goods
o Computer software
o Cameras and photo supplies
o Music and videos
o Pet supplies
o Health care supplies
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o Kitchenware
o Craft supplies
o Convenience store supplies
When a new business space is selected for the installation of a Crowfly
e-Commerce model; the company will (under an industry specific structure) seek
out a partner company or individual that is intimate with that industry to
participate in the development and ongoing management of that business.
The concept will initially be implemented in the hardware industry. The focus
will be on independent hardware, paint, home center and lumber yard retail
operators. Currently, annual retail volumes in the U. S. for these segments
combine to approximately $200 billion.
By definition, Crowfly is an online hardware distribution company that is driven
by a selfservice e-Commerce tool which connects the retailer to the manufacturer
in real time. To date the principals are not aware of this having been done in
an open market configuration.
Crowfly e-Commerce will give retailers an opportunity to buy better and earn
more than they are currently able to do. This is possible because the Crowfly
model will capture upwards of 40% of the non-product portion of the traditional
bricks and mortar hardware distribution model. This translates to a margin
enhancement of 15 points.
The model is designed to benefit the manufacturer as well as the retailer.
Essentially, it will give manufacturers a direct link to thousands of new retail
customers ...customers it will be able to sell and serve more efficiently, more
profitably, than it is currently able to do.
Retailers and manufacturers will experience margin enhancements of 8% -10% and
3% - 5% respectively. The financial model suggests this is possible while at the
same time delivering a 10% - 15% annual pre-tax profit for the Crowfly
enterprise.
Via a PC, the retailer will plan, price and place merchandise orders directly
with the manufacturer through the Crowfly e-Commerce link. Once the order has
been processed by the manufacturer, delivery will take place via a preferred
outsource shipping company. Crowfly will then forward all shipping information
to the retailer including carrier, tracking numbers and expected arrival times.
All accounting functions are processed by Crowfly giving both the retailer and
the manufacturer a single point of contact for payments, billing, credits and
communications. This is all done in a "paperless" fashion via the computer.
MARKET NICHE
Hardware Industry trends, as well as those of the consuming public, have created
an environment that becomes more receptive each day for the type of e-Commerce
business model described herein. Some the indicators supporting this belief are
listed below.
BIG CHAINS PRESSURING MANUFACTURERS. Manufacturers, as well as retailers, have
been and continue to be squeezed by "big box" retailers like Home Depot,
Wal-Mart and Lowe's. They are pressured to provide smaller orders, more often,
and with price concessions based on volume. These concessions are not passed on
to the smaller independent retailers. Thus, the retailer struggles to be
competitive in the face of already high product costs, labor costs and intense
price competition from the big box stores.
POWER SHIFTING FROM THE SELLER TO THE BUYER. It has made it easier for business
people to find and do business with competitive vendors and suppliers; and thus,
they have begun to go "online" to find alternative supply companies. One reason
for the shift is that "switching cost", (the cost associated with changing
vendors) has been dramatically reduced. Computer technology and the internet
have made it possible for procurement people to search out and acquire new
product lines with out ever having a face to face meeting with the new vendor's
sales representative.
4
Buyers are demanding on-line self service because it is so much more convenient
and efficient. The growing trend is that more and more the corporate world is
responding with various forms of on-line service.
SUPPLY CHANNEL LOADED WITH INEFFICIENCIES. While manufactures have been diligent
in trying to take cost out the supply chain, the distributor link has not.
Upwards of 40% of the "cost of goods to the retailer" is attached to the
distributor link. Because the traditional distribution model is people and real
estate intensive, it is difficult to make the kind of cost cuts necessary to
substantially enhance the retailers' position. An IT distribution model that
requires literally no real estate, no paper, and only a very few people can
affect the margin enhancing cuts today's retailers are struggling to find.
MASS COMMUNICATION IS GIVING WAY TO MASS CUSTOMIZATION. Internet technology has
made "one to one" marketing an absolute reality. Users can view merchandise and
place orders the way they want, when they want, with better prices than ever
before.
E-COMMERCE BUSINESSES RECEIVING SIGNIFICANT BEFITS FROM ONLINE SERVICE. The
Aberdeen Research Group reports the following:
o An average online "order" costs $30.00....average manual orders cost
$107.00
o Internet "answers" cost 10-20 cents ...telephone answers cost
$10.00-$20.00.
o B2B product returns are reduced 40%-80%.
o "Annual total" orders online are 20% higher than manual annual total
orders.
o Cross merchandising and up-sells are more effective online than phone,
fax or in person.
The bottom line, according to the Aberdeen Group, is that b2b customers are
beginning to shift away from companies that do NOT offer self-service systems.
MARKETING
VALUE PROPOSITION
Because Crowfly is driven to maximize efficiency through IT leverage and
operational excellence, it will deliver hard-lines merchandise with the best
"total price" in the business. Best "total price" has two components, (1) the
best deliverable price, and (2) additional service benefits. This value promise
is deliverable at both retail manufacturer levels.
REVENUE MODEL
Crowfly revenues will be the result of the efficiencies it delivers over the
traditional distribution model. The strategy is to leverage IT efficiencies to
transform wholesaler operating expense into revenues. The following identifies
the projected sources of revenue. Totals represent 100% of cost to retailer.
In the traditional model, line items processing/paper, sales administration,
freight, warehousing and profit margin represent and estimated 37% of the total
cost to the retailer.
5
--------------------- -------------------
Traditional Crowfly
Distribution e - Commerce
--------------------- -------------------
Cost from mfgr. 63% 63%
----- -----
Processing/paper 4% | 1% |
Sales admin. 7% | 2% |
Freight cost 6% | -37% 4% | -22%
Warehousing cost 11% | % |
Profit margin 9% | 15% |
--- ----- --- -----
85%
Captured margin --------------------------------- > 15%
---
100% 100%
They represent 22% of total to retailer in the e-Commerce model. The Crowfly
model captures 15 cost points from the traditional model. It is able to achieve
this and deliver an additional six points of profit margin.
PRODUCT STRATEGY
Initially, Crowfly will provide an online catalog of merchandise and associated
benefits available 24/7 at prices rivaling those here-to-for available only to
big box stores.
The online solution will replace expensive, and error prone, orders sheets and
replicate existing purchasing software products used by retailers.
It will provide customized part numbers and pricing, simple personal order
templates and a defined order entering method. It will deliver real time product
availability and order status.
The site will be simple, intuitive to users, and require minimum training.
The Crowfly front-end and back-end will be fully integrated in real time
providing inventory data, financial data, and order tracking data to all
retailers. It was reported in a white paper prepared by Cambar Software Inc.,
(April of 2001) that less than 10% of all e-Commerce sites today are fully
integrated.
The bottom line; when doing business with Crowfly the retailer will be able to
"buy better and earn more" than by dealing with any traditional distribution
company.
Initially, the Crowfly site will be scaled to accommodate the following:
o Order functionality for 5,000 customers ...average wholesaler has
3,800 customers.
o Catalog inventory of 70,000 SKUs (stock keeping unit) ...average
wholesaler offers 58,000 SKUs.
o Vendor capacity will be commensurate with the delivery of 70,000 SKUs.
FUNCTIONALITY
Site functionality will be developed in carefully measured steps. What follows
here is the "function outline" initially planned for the site. It will undergo
continual modification as the concept is moved through the "open for business"
phase and into the first year of operation. The objective with regard to
"functionality" is to eliminate buyer pain and enhance intuitive usability.
6
A. Overview - The Crowfly e-Commerce site will serve three types of users:
1. Retailers
2. Suppliers
3. Administrators
B. Browser - To include the following:
1. General description or overview of site (home page)
2. Information about the company (about us)
3. Easy access to Crowfly employee or administrator (contact us)
C. Retailer will:
1. Log in as per a user name with a password
2. Go to his personal order desk and find:
a. Message information about pending order and past order formatting
b. Quick links showing how to:
o get started (initial sign up detail)
o change passwords -view order template alternatives
c. View announcement inputs from the company
d. Search for information about manufacturer members
e. View products currently featured as special offerings
f. View context-sensitive help on each page
3. Interact with catalog:
a. Browse inventory
b. Search by UPC, manufacturer, or product category
c. Obtain and compare inter-brand pricing detail
d. Calculate estimated savings vs. traditional distribution model
4. Order entry
a. Add products to order
b. Place order
c. Obtain shipping detail
d. Enter purchase order number
e. Select, and or change billing address
f. Edit any of above: product selection, payment detail, billing
address, quantity
g. Submit order
h. View order and potential savings earned
i. Add product from order template
j. Approve final order
k. Print hard copy of order
5. Personal order file allows retailer to:
a. Conduct search orders previously made (by P.O. number)
b. Conduct search of orders by Crowfly order number
c. Conduct search of orders by part number
d. Get order detail
e. Request return
6. Company profile - (Not available to all customer employees)
a. Address management (address data for all customer locations)
b. User management (detail regarding all customers approved to place
orders)
7. User profile - (Available to all customer users) allows individuals to
make changes to their personal data package
D. Supplier will:
1. Log in or out with supplier ID
a. View all quick links
b. View all announcements
2. Interact with product management function (product status)
a. Add product
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b. Change product status (in, out of stock, special offers, etc.)
c. Delete SKUs from offering
3. View personal order files
a. Did ship
b. Did not fully ship
c. Returns
d. Search by P.O., order number or part number
4. Company profile - same as retailer except profile information
5. User profile - same as retailer without order templates
Administrator will:
1. Log in or out with user ID
2. Add announcements
3. View and edit all user information
4. Catalog management
a. Add product
b. Delete product
c. Edit existing content by
SOFTWARE DEVELOPMENT PROCESS
The principles believe that construction of the Crowfly e-Commerce site can, for
the most part, be accomplished by stitching together pieces of existing software
which will operate in a seamless fashion.
A "to be determined" amount of vendor time will have to be spent writing and
inserting product refinements that have not yet been identified. As these are
identified, they will be validated, constructed and implemented.
The principals estimate it will take as little as four to six months to develop
software for the Crowfly site ...once funding is in place and the vendor has
begun. There are two reasons for this estimate. First, much of the code needed
for the Crowfly model currently exists. Second, the software development process
requires less time today than it did even a year ago. The speed with which the
e-Commerce industry is growing has driven vendors to become more efficient, more
timely. ImagoQA, an e-Business software testing and consulting firm, reported
recently that the average software development cycle has been compressed from 18
months to 18 weeks.
Crowfly is currently talking with Cambar Software Inc., of Charleston, regarding
the development of the required code and hosting accommodations. They are
experienced in the design development and implementation of b2b software
products for supply chain management. They own the intellectual rights to a
model which can be modified with a reasonable amount of time and effort to
satisfy the specific needs and deliverables of Crowfly. They are the lead
candidate for the package development for several reasons:
o Extensive experience in b2b software systems
o An interest in developing product for business spaces such as this
o Located nearby for easy access - Willing to host and manage the site
on a long term basis o Offer a development structure that seems to be
reasonably priced and timely
The phases of software development are as follows:
1. Requirements Gathering
a. Define total e-Commerce business model for the Hardware Industry
b. Execute usability study with customers (50-100 retailers): likes,
dislikes, concerns
c. Execute usability study with manufacturers (10-20): likes, dislikes,
concerns
d. Target list of software vendor candidates
8
2. Development
a. Design and develop retail web application
b. Design and develop supplier web application
c. Design and develop administrator web application
d. Design and develop back office application
3. Testing
4. Implementation
a. Load data (suppliers, customers, users)
b. Create "help documentation"
c. Conduct training for Crowfly employees
TARGETING STRATEGY
Crowfly Inc. has three primary targets. Isolating and obtaining the first target
is fundamental to the efficient acquisition of targets two and three. In order
of importance these are:
A. DISTRIBUTOR PARTNER - The company will identify and seek the alliance of an
existing distributor of hardware products. An alliance of this sort will provide
the most efficient path to the marketplace. There are four reasons for this
belief.
1. Knows the business - A distributor's base of knowledge will be
invaluable in keeping the Crowfly concept on track and sharply focused.
2. Has most to lose - As the business begins to shift from the traditional
to the e-Commerce model, the distributor stands most vulnerable ...has the most
to lose. Conversely, the distributor stands to gain the most if willing to
embrace the new model and get in front of the power curve.
3. Knows manufacturers, knows retailers - The distributor base of business
is an existing set of manufacturers and retailers, which is the perfect
environment for incubating the Crowfly business model.
4. Instant sales staff - The distributor's current sales force represents a
jumpstart opportunity for selling Crowfly to retailers. These people are in the
field every day and are hungry for "good news" to take to the trade.
The best candidate for this role is likely a successful regional distributor who
wants continued growth; is somewhat limited by geography and is hesitant to
commit the resources necessary to compete on the national level.
B. MANUFACTURERS WITH MERCHANDISE TO SELL - Manufacturers of quality hard-line
merchandise. The company will attract manufacturers to the Crowfly concept buy
demonstrating the benefits of such a relationship. Initially they are:
o Incremental sales
o Improved margins
o Lower cost of sales
o Enhanced order accuracy
o Enhanced product exposure
o Fewer returns
o Catalog maintenance and support
o Better communications with retailer
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o Less big box dependence
o Paperless business
o Improved market knowledge
C. INDEPENDENT RETAILERS TO BUY - Retailers currently operating hardware stores,
home centers, paint stores and lumber yards. The company will attract retailers
by demonstrating the benefits they can expect as a result of doing business with
Crowfly:
o Better pricing
o Easy ordering
o Order 24/7 for increased convenience
o More accurate orders
o Enhanced product selection
o Single order point
o Paperless business
o Built in freight
o Personalized order format
o Online community
There are 65,000-70,000 independent hardware stores in the country today. The
pro forma projects that the company will reach its year four financial objective
($17,216,000 EBITA) if it is able to acquire 3,283 retailers who average $1,000
per week with Crowfly. This number (3,283) represents approximately 5% of total
hardware retailer universe
BRAND POSITION
Crowfly is the best buying source for independent retailers who want to enhance
competitiveness and operational efficiency.
BRAND NAME AND THEME LINE
The brand name and theme line will be as follows: "Crowfly, Buy Better. Earn
More." Crowfly is the working brand name for the hardware package. The required
trademark work will be completed when the concept is funded.
It is our intent that the umbrella company will always be Crowfly. However, as
the model moves from industry to industry, it will likely be given industry
specific brand names. Names that can be attached to the corporate entity set up
specifically for a particular industry. For example, the furniture model brand
may end up being something like MakersMart.
PRICING STRATEGY
Research conducted in July of 2001 by NewMarket Research Associates among 500
retailers revealed that over 60% of the respondents would seriously consider
"switching" to an online supply company for a cost savings of between 1 % and
15(degree)/a. Forty percent said they would be "very interested" in a supply
company that allowed them to price more closely with the big chains and just
over 50% said they would prefer to work directly with the manufacturer.
The Crowfly pricing strategy will work to exploit these attitudes. A portion of
the captured margin (15% vs. traditional model), likely 5%-8% will be used to
enhance the retailer margin.
The principals are prepared to assign 2%-4% of the captured margin to the
manufacturer. The intent is to insure the notion that the manufacturer will be
able increase its customer base without the promulgation of "big box" price
concessions.
10
Another reason to incentivise the manufacturer is that they will be asked to
pack and ship smaller orders, more often. A margin allowance in the early stages
will offset some of that cost.
ADVERTISING/PROMOTION STRATEGY
There will be three parts to the initial advertising strategy. The objectives of
each are described as follows: Attract a distributor, Sell and sign
manufacturers, Sell and sign retailers.
A. ATTRACT A DISTRIBUTOR - The company will use "one on one" tactics to attract
and form an alliance with the appropriate distributor. Industry contacts and
internet research will provide the information needed to identify the best
candidates. Meetings will then be set to present and sell the alliance
opportunity.
B. SELL AND SIGN MANUFACTURERS - An awareness campaign for the concept and brand
will be created and packaged for use in attracting manufacturers. The "factory
campaign" will position the brand, as well as to instruct and inform
manufacturers regarding all operational aspects of doing business via this new
e-Commerce model.
The factory campaign will be implemented via direct mail, e-mail and an
"e-sign-up center" website. Distributor partner's procurement people will be
incentivised then utilized to present, pitch and sign-up manufacturers to the
Crowfly concept. The company will develop a "sell-in process" for use by
distributor personnel. Once materials are produced, the distributor personnel
will be trained to sell and sign manufacturers.
C. SELL AND SIGN RETAILERS - Public relations, traditional trade advertising,
e-mail and the e-sign-up website will be utilized to attract retailers to
Crowfly. The "retailer campaign" will position the brand as well as to inform
how each can participate in Crowfly. Interested retailers will be directed to
the e-sign-up site where they can obtain the necessary information or request
contact from a Crowfly sales person.
Distributor sales people will be incentivised to "pitch and sign" retailers as
part of their normal calling-on-the-trade process. A "sales process" will be
developed specifically for these employees. This program will be created and
implemented by the Crowfly principals
RESEARCH AND DEVELOPMENT STRATEGY
The company will keep in constant contact with retailers, manufacturers and out
source partners in an effort to continually refine the product. Management will
relentlessly strive to deliver more usable value to its customers than any of
its competition.
Crowfly's ultimate success is based upon its ability to replicate and implement
the fundamental Crowfly e-Commerce model in other industries. An immediate
objective will be to develop the process by which these industry selection
decisions are made.
There are numerous spin-off products, services, even businesses that will fall
out of the original concept. Ongoingly, the recognition and analysis of likely
potential levels for each will be a critical part of the R &D effort.
MANAGEMENT PHILOSOPHY
The principals are uniquely qualified to manage this opportunity, and will seek
the advice of an outside board of directors to assist in management decisions
requiring specialized competence.
The company believes that next to its suppliers and customers, information is
its most valuable asset. Hence, information gathering will be a priority of the
management team.
The principals believe that an information hungry mind set; and an overall
concern for delivering extraordinary value will result in the following
benefits:
o Highly interested and enthused partners and customers
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o Maximum productivity and cost efficiency
o Product quality that continually surprises and delights partners and
customers
o Maximum profitability for the enterprise, its investors and partners
MANAGEMENT TEAM
PRESIDENT/CEO - XXXXXXX X. "XXXX" XXXX III
Xxxx Xxxx is uniquely qualified to lead the Crowfly organization. He built
Employee Resource Management, an employee leasing company in Charleston, SC,
from $5,000,000 in sales to $53,000,000 and successfully completed the sale of
the company. He was the 1994 recipient of Ernst and Young's Entrepreneur of the
Year Award for Emerging Companies.
Gene is experienced in areas of operations, marketing, finance, sales process,
training, equity packaging, human resources and motivation. He lives by the
ideal that, "failure is never an option". He is a natural leader with a special
ability to manage, and then focus, diverse talents against a common goal.
Gene was born and raised in Batesburg, SC. He attended the Citadel for two years
before having to leave as result of an eye disorder. His first job was working
in the casket industry with a company headquartered in Boston. He was given a
sales territory in the state of Georgia. Within three months he was the top
sales person in the company. He has continued to lead in all his entrepreneurial
ventures.
Gene is married to his wife of twelve years, Xxxxx, and has an eleven year old
daughter named Xxxxxx. He enjoys family, friends, boating, and singing.
CHIEF FINANCIAL/OPERATING OFFICER - XXX XXXXXXXXX
Xxx spent twenty-five years with Westinghouse before becoming a Vice President
of Business Development with Intellisource which is an outsourcing company that
specializes in managing back offices for companies. For the last eight years Xxx
has been an independent management consultant. As such he has worked for clients
like Pricewaterhouse Coopers, Shell Oil Company, Mile High Properties and
Xxxxxx-Xxxxx. Xxx bring experience in operations, IT, finance, human resource
and marketing.
Xxx was initially trained at Slippery Rock University where he received a B.S
degree in Mathematics. He continued his education sponsored by Westinghouse with
graduate level work at the University of Pittsburgh and the University of West
Virginia. He attended the Young Executive Management Business School Program at
Penn State in preparation for management assignments within Westinghouse. While
there he was named to lead an internal consulting team charged with the
enhancement of productivity and profitability of business units within the
Westinghouse universe.
Xxx is married with two grown children. He's a family man who loves basketball.
He played on a high school team in Indiana that made the state championship run.
He went on to play at the college level. He is an accomplished pianist and
organist and he gets to exercise these talents weekly as the organist at his
church
CHIEF OFFICER OF BUSINESS DEVELOPMENT - XXXX XXXXXXXX
Phil spent twenty-five years in the marketing communications business. Prior to
coming to South Carolina he was a senior partner at Xxxxxxxxxx Xxxxx, and
advertising agency in Minneapolis, MN. When he began his time at the agency, it
had about 30 people and annual xxxxxxxx of about $15,000,000. When he sold his
stake in the agency, it had in excess of 200 people and xxxxxxxx approaching
$220,000,000. In 2001 Xxxxxxxxxx Xxxxx was named by Graphis, and international
trade magazine, as one of the Ten Best Advertising Agencies in the World.
At the agency, Phil helped build brands for Schwinn (bicycles), Avia (athletic
shoes), Mercruiser (sterndrives), Polaris (snowmobiles), Rollerblade, Xxxx
Trucks, Gateway Computers, National Car Rental, Zebco (fishing tackle) and
Harley-Davidson. In his role as senior partner he was responsible for corporate
strategy development and business development. The experience Phil brings to
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Crowfly is in the areas of advertising, public relations, marketing, strategy
development and business development.
Phil was raised in a farming community in Northwest Iowa. He played football at
a small college in South Dakota for one year then transferred to Iowa State
University where he majored in business and marketing. There he met his wife
Xxxxxxx, to whom he has been married for thirty-three years. They have one son,
Xxxxx, who lives and works in Charleston, SC.
VISION
The principals envision turning the Crowfly business model into one that is
replicated in numerous b2b spaces. Operational excellence will allow this to
happen. We want to become known as an innovative group of people whose interest
in helping businesses do business better ...gave rise to an operating model that
helped many other businesses, in many other industries, do business better.
MANDATE
The management plans to be ready to implement the Crowfly model in a second
industry within 18 months of funding. This will be accomplished by relentlessly
pursuing the company's mandate which is as follows:
Create an operationally excellent company and e-Commerce model that continually
delight users and partners with the exceptional amounts of distinctive value
they deliver.
CRITICAL PATH
Below is a partial list of the tasks required to take the Crowfly concept from
the current to being "open for business". Target dates for completion (or start
times) are included. Also listed are the names of the officer that will be
responsible for each task.
Task Timing Responsible
---- ------ -----------
Funding complete Pre-startup King
Present to distributor partner candidates Month 1 Xxxxxxxx
Software vendor candidate list Month 1 Gillgrist, B
Retailer/Manufacturer software research Month 1 Gillgrist, B
Marketing/Operations plans approved Month 1 Xxxxxxxx/Gillgrist, B.
Sales materials produced (mfgr. /retailer) Month 1 Xxxxxxxx
Financial ops. plan approved Month 1 Gillgrist, T.
Legal complete Month 1 Gillgrist, T.
Software vendor begins Month 2 Gillgrist, B.
Info/signup sites up Month 2 Gillgrist, B.
Operational alliances set Month 3 King/Gillgrist, B. & T.
Selling manufacturers/retailers (by team) Month 1-3 King/Xxxxxxxx
Code completed Month 3 Gillgrist, B. & T.
Distributor partner signed Month 3 King/Gillgrist, T.
Software tested Month 4 Gillgrist, B.
Distributor personnel training Month 5 King/Xxxxxxxx
Field sales campaign running Month 5 Xxxxxxxx/King
Basic site up and manned Month 6 Gillgrist, B.
Beta test complete Month 6 Gillgrist, B
Vendors in (first 50-75) Month 6 King/Xxxxxxxx
eStore open for business Month 8 King
The partners view this list is a reasonable beginning. It is likely to double,
even triple, in size as start up work begins and momentum builds.
13
FINANCIAL PROJECTIONS - SUMMARY
Based on the projections summarized below, the principals are confident that,
the Crowfly business model will achieve positive cash flow after fifteen months
of operation. This assumes an initial funding investment of $1,743,820.
Year 1 Year 2 Year 3 Year 4
------------- ------------ ------------ -------------
Total Sales $ 1,380,000 $ 17,970,000 $ 70,425,000 $ 136,800,000
Cost of Good Sold 1,173,000 15,274,500 59,861,250 116.280,000
------------- ------------ ------------ -------------
Gross Margin 207,000 2,695,500 10,563,750 20,520,000
Total Expense 1,837,780 1,896,220 2,846,550 3,304,800
------------- ------------ ------------ -------------
EBITA $ (1,630,780) $ 799,280 $ 7,717,200 $ 17,215,200
EBITA (% of sales) 118% 4% 11% 13%
Funding Required $ 1,630,780 $ 113,040 0 0
Positive cash flow will be achieved prior to the end of year two. EBITA of
$7,717,200 at 11 % of annual sales is projected in year three. This will grow to
$17,215,200 in year four. It will represent approximately 13% of gross sales.
The year four objective is accomplished having less than 1 % penetration of the
Hardware category which has annual retail sales of approximately $200 billion.
14
APPENDIX
PRO FORMA KEY - DETAILED EXPLANATION
------------------------------------
Below is an explanation key for the Pro Forma diagrams that follow. It is
intended to provide the definitions needed to clearly understand the charts.
--------------------------------------------------------------------------------
Hardware Stores Sales from Hardware Stores
--------------------------------------------------------------------------------
Home Centers Sales from Home Centers
--------------------------------------------------------------------------------
Lumberyards Sales from Lumberyards
--------------------------------------------------------------------------------
Paint & Sundries Dealers Sales from Paint & Sundries Dealers
--------------------------------------------------------------------------------
Cost of Goods Includes total cost of goods purchased by
the company projected @ 85% of total
sales
--------------------------------------------------------------------------------
Gross Margin Total Sales minus the Cost of Goods sold
--------------------------------------------------------------------------------
Infrastructure The Infrastructure cost will be outsourced
and consists of the following:
o Office Space
o Furniture, phones, internet, copy
machines, fax & computers
o Helpdesk support
o Dedicated application server
o Network monitoring & management
services
o Appropriate bandwidth
--------------------------------------------------------------------------------
Marketing / Sales Materials Includes marketing & sales collateral
materials including design and distribution
--------------------------------------------------------------------------------
Advertising Includes design, development &
implementation of advertising/promotion
campaign
--------------------------------------------------------------------------------
Data Acquisition Includes design, development &
implementation of product digital images
including product specifications
--------------------------------------------------------------------------------
Legal Includes all legal documentation including
contracts, agreements & corporate
requirements
--------------------------------------------------------------------------------
Travel Includes all company travel
--------------------------------------------------------------------------------
Misc. Includes insurance requirements, bank
fees, licenses & equipment rentals
--------------------------------------------------------------------------------
Management Team Total salary costs including payroll taxes
& benefits
--------------------------------------------------------------------------------
Software Development & Includes the design, development & Beta
Maintenance testin of the e-commerce business model
--------------------------------------------------------------------------------
Software Support Includes ongoing additions, changes &
maintenance of the e-commerce business
model program and website
--------------------------------------------------------------------------------
Hardware Liaison Includes hardware additions, changes &
maintenance required for the e-commerce
business model program and website
15
--------------------------------------------------------------------------------
Technical Liaison Includes all technical support associated
with the e-commerce business model
program and website
--------------------------------------------------------------------------------
Special Startup Costs Includes initial one
time costs and cost over runs during
the 1st year of operations due to
startup related issues
--------------------------------------------------------------------------------
Bad Debt Costs Includes bad debt costs experienced from
our customers .5% of total sales
--------------------------------------------------------------------------------
EDI Costs Includes all electronic data transmitting
.1 % of total sales
--------------------------------------------------------------------------------
Reserves Includes costs not anticipated at this time
--------------------------------------------------------------------------------
Cumulative Cash Flow b Year Funding requirements b ear
--------------------------------------------------------------------------------
EBITA Earnings before interest & taxes
--------------------------------------------------------------------------------
16
