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Business Plan: Machining Consulting Services

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					BUSINESS PLAN

Machining Consulting Services
                                                        Machining
Machining Consulting Services
                                                        Consulting
                                                        Services
                                                        BUSINESS PLAN
                                                        May 15, 2012


                                                        Michael Gugger
                                                        President/Owner




SNAPSHOT

Manufacturing in America is at a crossroads. After decades of decline and the belief that
many manufacturing jobs were gone for good, the industry is experiencing a revival.

A strong and vital manufacturing sector is essential to thriving local, regional and
national economies. However, increased demand coupled with tight time constraints,
sophisticated quality demands and relentless price pressures mean many third and
fourth tier manufacturers continue to struggle.

Machining Consulting Services (MCS) can help these same small to mid-sized
manufacturers improve quality, efficiency and profitability to remain competitive.

This plan, therefore, describes the MCS business strategy, structure and services. It
highlights the business intent and actions that are underway or on the horizon. Finally, it
demonstrates how the central MCS value proposition – increasing capacity without
capital investment – can help both MCS and its clients succeed.
CONTENTS


EXECUTIVE SUMMARY ............................................................................................................. 1

BUSINESS DESCRIPTION ........................................................................................................... 3

PRODUCTS & SERVICES ............................................................................................................ 7

MARKET ANALYSIS ................................................................................................................. 10

FINANCIAL EVALUATION ........................................................................................................ 17

BOTTOM LINE ........................................................................................................................ 17


Note: The Financial Evaluation and appendices have been extracted from this version.
                              MACHINING CONSULTING SERVICES




EXECUTIVE SUMMARY

Challenge

The decline of manufacturing in the United States is well documented. US manufacturing
as a share of GDP dropped from 27% in 1950 to 11% in 2009. Between 2000 and 2010,
the US lost 5.7 million manufacturing jobs.

The manufacturing landscape changed radically, and surviving manufacturers have
experienced extraordinary pressure. To survive, they must compete in a turbulent global
market, meet stringent quality standards, comply with changing regulations, and produce
more in shorter timeframes with fewer people and resources. Many small to mid-sized
manufacturers in particular are overwhelmed and struggling.


Opportunity

The US remains the world’s largest manufacturing economy. Manufacturing employs
about 12 million Americans, representing 9% of the workforce. If US manufacturing were
a country, it would be the ninth largest economy in the world.

This is important, because a robust manufacturing base contributes to vibrant local,
regional and national economies. According to the US Bureau of Economic Analysis,
manufacturing has the greatest multiplier effect of any sector. Every dollar in
manufactured product sales creates $1.35 in ouput in other sectors. Every manufacturing
job generates up to 5 jobs in other sectors as well. The best way to add wealth to an
economy is to add value and the best way to add value is to manufacture.

These factors represent significant opportunities. In New England, there are more than
20,000 manufacturers, approximately 80% of which fall into the small to mid-sized
classification. In Connecticut, roughly 5000 manufacturers generate more than $23 billion
in output, produce 10.5% of the gross state product and employ more than 166,000
people. Nearly 90% (4500) are small to mid-sized manufacturers.


Solution

Machining Consulting Services (MCS) will provide targeted, hands-on consulting to help
small to mid-sized manufacturers become more competitive. MCS will show




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                               MACHINING CONSULTING SERVICES




manufacturers how to gain capacity without capital investment to drive costs out of
production.

This plan details the MCS plan of action, including its business mission, strategy, structure,
services and five-year financial projections.




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                               MACHINING CONSULTING SERVICES




BUSINESS DESCRIPTION

Business Need

After decades of decline, US manufacturing is experiencing a revival. However, many
manufacturers have been damaged by the recession, the sluggish recovery and years of
cutbacks.

Through layoffs and forced retirements, critical day-to-day skills and troubleshooting
abilities disappeared from the shop floor before they could be transferred to the next
generation. Overall capacity was reduced or constrained. New technologies and capital
investments were postponed wherever possible.

The push to return manufacturing jobs to the US, the re-shoring movement, is a mixed
blessing. The influx of work and opportunities is creating new pressures on an over-
burdened pipeline. Manufacturers are struggling to regain their footing and fend off
competition. They’re focused on tackling the job in hand and landing the next one. Many
are losing time and money, and they know it.


Strategic Focus

Machining Consulting Services (MCS) is a hands-on, shoulder-to-shoulder shop floor
machining and manufacturing consulting company.

It provides advanced machining and manufacturing know-how and optimization
strategies tailored to the small to mid-sized manufacturer (SMM) struggling to compete in
a complex manufacturing market place.

The MCS strategic focus is as follows:
       •   Vision – Help US manufacturers improve profitability by increasing capacity
           without capital investment.
       •   Mission – Implement process and technology improvements that increase
           efficiency, cut costs and can be replicated across production processes.
       •   Goals & Methods – Find realistic, practical ways to drive out costs by working
           directly with management, engineering and shop personnel to:
             1. Analyze existing processes and identify pivotal improvement points.
             2. Design and implement process optimization opportunities.




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             3. Select and implement useful technologies where appropriate.
             4. Develop hands-on skills and abilities of shop floor personnel.
             5. Define and document improvements to ensure replicability and
                sustainability.
             6. Create a multiplier effect by implementing a “teach to fish” strategy.

In combination, the vision, mission, goals and methods capture the essence of MCS and
define its central value proposition.


Business Structure

MCS was launched in March 2012. The parent company, the MG Corporation, is
registered as a corporation in the State of Connecticut (Filing Number 004535721).

Both MG Corporation and MCS are owned and operated by Michael D. Gugger, BSME,
MBA.


Business Management

MCS is a new company, but the owner, Mike Gugger, brings more than 30 years
experience to this endeavor.

With a master’s degree in business administration, Mike has the formal credentials to
support success. More important is his wide-ranging practical experience and proven
track record in manufacturing organizations and his hands-on management know-how.

Mike understands the essential business management challenge. He has worked on the
shop floor and in the boardroom in a variety of manufacturing and machining
environments.

Throughout his career, Mike has had primary responsibility for developing and managing
project and business unit budgets, some in excess of $17 million. Owning and operating a
small business is a new challenge. His extensive experience will be invaluable as he works
to launch MCS and position it for success. (For additional career details, see his resume in
Appendix I.)




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Consulting Expertise

Mike is an experienced consultant and trainer, and he has provided these services to a
wide range of manufacturers, including the SMM companies MCS has identified as its
primary target.

His manufacturing career started on the shop floor, where he spent 10 years gaining
machining skills on a variety of machine tools. He returned to school and in 1989 earned a
Mechanical Engineering degree from the University of Lowell (now UMass-Lowell).

As a manufacturing engineer, he’s had the opportunity to analyze, justify, purchase and
install capital equipment. He’s developed and delivered skills training for shop floor
personnel and manufacturing engineers. He helped build a Part Cost Reduction business
unit focused on identifying and implementing cost reductions throughout the machined
component life cycle.

Mike has a demonstrable reputation for producing results. To share just one example, he
helped an aerospace manufacturer reduce overall production time, cut production costs,
expand the pipeline to handle greater demand, and train personnel to implement new
tooling and future process improvements. These efforts reduced production time and
saved roughly $175,000 in production costs within the first six months.

Mike has the skill, ability and experience to produce similar outcomes for small to mid-
sized manufacturers. He is already building on his reputation and providing services to a
small but growing client base.


Advisory Committee

To ensure MCS starts on a firm footing, Mike has established an Advisory Committee. The
committee is designed to provide business counsel and serve as a general manufacturing
resource. It is not a board of directors, although it has the potential to evolve into that
role as MCS grows.

Two of the eventual three committee members have already been confirmed:
       •   Thomas McClure, Laboratory Manager, Acculube, is an experienced business
           executive and manufacturing and chemical engineer.
       •   Daniel Gugger is a highly experienced machinist and shop floor supervisor with
           GE’s Technology Infrastructure division.




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Both are strong advocates for Mike and MCS. They understand the vision, mission and
goals of MCS and the value it will deliver. Both are trusted men of integrity, willing and
able to give honest feedback and sound advice on business management and
manufacturing issues. (See resumes in Appendix I.)




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PRODUCTS & SERVICES
Machining Consulting Services provides two types of services to help small to midsized
manufacturers. These services are:
       •   Production Optimization Consulting
       •   Training & Reinforcement

These services have been carefully chosen to help clients achieve capacity improvements
without capital investments. The ideal engagement would involve a client who is willing
and financially able to commit to an ongoing, comprehensive improvement effort that
involves both direct consulting supplemented with relevant training and reinforcement
programs.

It is far more likely, however, that most clients will choose to contract for select services.
For this reason, MCS services are structured as independent components, which can be
configured in flexible combinations to suit each client’s needs and budget.


Production Optimization Consulting

Production optimization consulting services occur on the shop floor. MCS will work onsite
with management and shop floor personnel to assess production processes, pinpoint
opportunities, and design and implement solutions. MCS services include but are not
limited to:
       •   Lean Machining Diagnostic – This is a diagnostic tool completed in conjunction
           with the client to evaluate the organization’s machining capabilities and
           identify problem areas. This question-and-answer evaluation helps determine
           issues and their relative importance to the organization’s success. This
           baseline evaluation allows MCS to find and focus efforts on the areas that
           drive overall competitiveness.
       •   Lean Machining Implementation – Lean Machining encompasses a range of
           techniques, including Waste Elimination and Continuous Improvement
           processes. It utilizes a team-based, Lean Tools approach to implement cost
           reduction and process improvement strategies specific to the shop.
       •   Continuous Improvement – This process improvement component can be
           implemented as part of an overall Lean strategy or as an initial step toward
           building the skills, tools and culture that lead to Lean production approaches.




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       •   Product Testing & Evaluation – This process uses Design of Experiment
           techniques to evaluate products and determine optimal performance
           parameters. This involves analyzing tooling, coatings, materials, coolants and
           methods used in specific machining situations. MCS uses this approach to
           identify and recommend specific performance improvements.
       •   New Technology Introduction & Implementation – To improve shop results
           and profitability, a variety of new products and technologies might be needed.
           In addition to determining the appropriate technology for the situation, these
           projects will include Project Management and Project Implementation
           strategies, tools and training to insure new technologies become the standard
           operating procedure.
       •   Production Planning Process (3P) – The 3P process applies Lean and latest
           technology approaches to new product production. Typically, this involves
           analyzing the new product and providing training, guidance and
           implementation for new production processes. The goal is to build leading-
           edge skills, identify efficient production methods and institutionalize them as
           fundamental abilities.

The core MCS consulting services can be provided as independent components or
bundled into a cohesive, comprehensive optimization effort.


Training & Reinforcement

Training is an essential part of process and profitability improvement efforts and as a
means for providing reinforcement to shop floor practices. MCS training offerings include
but are not limited to:
       •   Basic Shop Math – Provides a review of and examples using the basic math
           skills needed in production environments and improvement processes.
       •   Basic Blue Print Reading – Provides practical training in how to read and
           interpret information contained on part blue prints and schematics.
       •   Introduction to Gauge Handling – Provides an introduction to the use of basic
           measuring equipment, a critical aspect of installing and sustaining process
           improvements.
       •   Introduction to Geometric Dimensioning & Tolerancing (GD&T) –
           Supplements and reinforces production process changes being made on the
           shop floor.




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       •   Advanced Manufacturing Practices (AMP) – Provides an overview of
           machining practices that can be used to improve production efficiencies and
           outcomes.
       •   Tooling Options – Explains cutting tool and coating options and their effects,
           to help production personnel make informed and effective tooling decisions,
           evaluate process parameters and understand how to manipulate combinations
           to increase tool life and reduce tool costs.
       •   Metal Working Fluids (MWF) – Explains the impact of metal working fluids on
           production processes and costs. It addresses the full range of MWF issues,
           including how to select, use, handle, recycle and dispose of coolants/fluids.
       •   High Speed Machining (HSM) – Builds a basic understanding of high-speed
           machining techniques that can, when used appropriately, significantly
           outperform current processes. It includes discussion of HSM physics, process
           changes and the basic knowledge and skill sets required for success.

Training content can be delivered in a variety of combinations and tailored to a client’s
particular needs. MCS can and will develop custom process improvement and metal
removal courses upon request.




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MARKET ANALYSIS

Target Market

The target market for Machining Consulting Services is the small to mid-sized
manufacturer (SMM) in the United States.

SMMs are typically third or fourth tier producers making parts that are combined into
sub-assemblies and shipped to Original Equipment Manufacturers (OEMs). Most OEMs
employ internal experts dedicated to improving processes, cutting costs and increasing
efficiencies to boost profitability. Most SMMs lack this in-house expertise.

A typical client company, for example, is likely to be juggling multiple priorities in a fast-
paced environment that includes stiff competition both here and abroad. While the
current part is in production, the next part is in development, and future parts are in
negotiation. When one part run is finished, the shop turns to the next challenge.

To lock in extended contracts, many SMMs make time and pricing concessions that in the
long run damage their bottom line. Rising material and transportation costs and the loss
of personnel and expertise due to the extended downturn add to these pressures.

SMMs want and need to find ways to protect profitability, maintain quality, meet
deadlines, leverage existing tools and equipment, identify improvements, and cut
material, tool, operating and personnel costs.

MCS can help SMMs achieve these goals. The initial focus is on US manufacturers located
in the New England area, but there are no geographic limitations to the services offered.


Target Market Size

In New England, there are more than 20,000 manufacturers, approximately 80% of which
fall into the small to mid-sized classification. In Connecticut, nearly 90% of the state’s
roughly 5000 manufacturers are categorized as small to mid-sized manufacturers. The
SMM market is large and varied, as the list of State of Connecticut NIACS Code
Registrations demonstrates. (See Appendix II).

Not all SMMs are viable MCS clients. One indicator is the number of machine centers
purchased in recent years. More than 3,000 companies in the New England region have
purchased 10,000 machine centers. These companies have made a substantial capital




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investment, which they must leverage into profitability. MCS can provide the consulting
and training services that optimize their investment and accomplish that goal.


TARGET MARKET INDICATORS

SOURCE: Equipment Data Associates November 7, 2011 Report
SOURCE: 2008 Industrial Markets Report from the Industrial Supply Association
                                                                                                              CNC
                                                                                                   CNC      Machining
                                                                                                Machining    Center
                                                   Machine Tool    Manufacturing Manufacturing Centers sold  Unique
                               Cutting Tools       Accessories     Employment     Companies     since 2004   Buyers
Connecticut                                                              185,259         5,037         1315        454
 Hartford MSA              $      47,922,000   $      13,453,000
 Bridgeport MSA            $      26,804,000   $       9,019,000
Maine                                                                      60,995        1,850        1652        540
 Portland MSA              $       5,919,000   $       1,702,000
 Bangor MSA                $       1,929,000   $         662,000
Massachusetts                                                             285,916        7,915        5241       1494
 Worcester MSA             $      11,607,000   $       3,081,000
 Boston MSA                $      50,043,000   $      18,035,000
New Hampshire                                                              75,837        2,155        1386        360
 Manchester MSA            $       6,259,000   $       2,616,000
Rhode Island                                                               58,738        1,956         355        128
 Providence MSA            $      15,809,000   $       4,778,000
Vermont                                                                    37,170        1,126         202         66
 Burlington MSA            $       2,038,000   $         702,000

Totals                     $     168,330,000   $      54,048,000         703,915        20,039     10,151       3,042




                                               Output Per Job
Total Output               $ 5,611,000,000     $        7,971
Milling Portion (40%)      $ 2,244,400,000
30% Improvement            $ 673,320,000       $     208,729,200
Potential Job Impact                84,470     $           5,218
Manufacturing Spinoffs                4.15
Total Job Impact                   350,550


 A significant MCS selling advantage is its ability to demonstrate that improvements made
on one machine or process can be transferred to other machine tools, shop teams and
production processes. If the typical client has an average of three new machine tools,
process improvements applied to one machine create an instant multiplier, tripling the
impact and results as similar refinements are applied to additional machining centers.

Core process improvements are not necessarily part-specific. As a result, a $100,000
savings on one machine center could produce a first-year savings of $300,000 shop wide.
Often, these savings apply year after year. In three years, the average shop could save
nearly $1M in production costs, savings that drop straight to the bottom line.




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To help clients measure and value these outcomes, MCS uses a variety of recognized
profitability and efficiency metrics, such as output per job, time saved, material cost
reductions, etc. These are evaluated and documented for every engagement.


Competition

Competition comes from four sources: the National Labs (such as Los Alamos, Oak Ridge
and Sandia; www.nsf.gov/statistics/nsf05306); colleges and universities; state-based
NIST-MEP centers (www.nist.gov); and independent manufacturing consultants.
       •   The National Labs – Engage in next generation technology development. The
           Labs primarily work with large national or military production organizations.
           SMMs are not the target market.
       •   Colleges and Universities – Provide research and testing services. Individual
           professors, who have established reputations in a specialized aspect of
           production, may provide select consulting. Services are limited and often
           consist of a report or analysis with little to no implementation assistance.
           SMMs are not their primary target market.
       •   NIST-MEP Centers – Use shop-based solutions and strategies to assist SMMs in
           their efforts to compete. At present, TechSolve is the one MEP Center
           positioned to directly compete with MCS. TechSolve, located in southwest
           Ohio, offers machining lab testing and evaluation, along with hands-on
           consulting. New England is not a primary market.
       •   Independent Consultants – Provide machining and manufacturing consulting
           services. Spread throughout the country, many have particular and sometimes
           very narrow areas of specialty. SMMs are a target market for some but not all
           of them. In head-to-head competition, MCS can demonstrate both value and
           results. In many instances, independent consultants actually represent
           potential partnering opportunities and a way to access expertise that
           enhances MCS services and skills.


Market Share & Growth

MCS is a single person entity in the earliest stages of start up. It doesn’t need to dominate
the market or capture a specific market share to be successful.




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The most pressing challenge is to promote MCS, identify viable prospects, successfully sell
and complete projects, and gradually grow a base of satisfied clients who are willing to
share the results MCS produces.


Strengths & Weaknesses

MCS has significant strengths. Mike’s skills and experience along with his reputation in
the market provide a sound base on which to build this company. (See Appendix IV for
letters of recommendation.) Clients trust him and his work, and they’re willing to share
success story details along with recommendations and referrals.

In contrast to many manufacturing consulting services that provide little more than an
analysis and report, MCS maintains a shop floor focus where implementation is integral to
the effort. MCS works to insure in-house personnel develop the ability to utilize new
technologies and techniques, which can then be applied to other operations to leverage
the client’s investment throughout the shop.

MCS is essentially product independent. The company delivers tailored solutions
appropriate to each individual client’s needs, rather than selling a prepackaged product.
This independence is a differentiator and will be fiercely defended by MCS. (There is one
exception, which is discussed in the Partnerships section.)

MCS has several weaknesses. The one-person shop limits the volume of work and number
of projects that can be handled. If demand becomes so great it exceeds capacity, then
MCS will likely contract with individuals or small companies to provide select services for
specific projects.

Some large machining consulting firms have independent facilities for machine testing
and evaluation. MCS does not have this capacity, so it must conduct tests, gather data
and develop the required solution(s) using the client’s equipment.

This approach interrupts production on the targeted process, but it often provides more
practical insights and results. It also offers an opportunity to engage pivotal personnel in
problem identification and analysis, instilling greater understanding and stronger
ownership when solutions are implemented.

Pricing Strategy

Large consulting organizations that provide similar services bill at an hourly rate of $225
or more.



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MCS has neither the overhead or expense load of a large organization, so it has more
latitude in setting rates that are competitive and fair, yet reflect the quality of services
provided.

The initial fee structure is:
        •    $XXX for direct manufacturing consulting (shop floor services)
        •    $XXX for training design and delivery

These rates are comparable to those charged by other small and independent
manufacturing consultants. Ultimately, the market will provide feedback regarding this
structure, and MCS will re-evaluate and adjust fees accordingly.


Marketing Strategy

Marketing and sales processes are crucial to the success of every small business. Mike is
trained in and experienced with the recognized Sandler Sales System, but during startup,
the initial focus is on marketing.

The MCS marketing strategy is simple, direct and underway. It emphasizes tried-and-true
elements, such as word of mouth, direct referrals, printed media and an informative
website. These factors, coupled with involvement at professional events and trade shows,
will help MCS build brand recognition and market presence.

   Word of Mouth & Direct Referrals

   Mike has a strong national reputation and a proven track record. He is using phone,
   email and face-to-face meetings to connect with past clients and colleagues to make
   sure they know about MCS and its services. In addition, he is using these discussions
   to acquire additional endorsements and testimonials, obtain success story examples,
   and elicit leads and referrals. In the machining world, direct referrals can be one of
   the most effective means for identifying potential clients.

   Website

   MCS has an active, detailed website. It highlights key facets of the owner and the
   company, and includes service descriptions, biographical information, success stories,
   testimonials, and more. Contact information and direct email are readily available
   through the site, and MCS is already following up on several promising inquiries.

   The website is a central marketing and communication resource, and it will be refined
   and updated with new tools and success stories to keep it fresh and useful.



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To increase interaction, the MCS site will soon be expanded to include a quick self-
paced assessment tool for manufacturers, to allow SMMs to benchmark their
company against the top 10% of like organizations. The tool aligns with the Industry
Week yearly survey, and it helps potential clients spotlight competitive differences
and areas for improvement.

Printed Media

Some basic print materials have been created and are in use. These include a:
   •   Company logo, as seen on the front of this document
   •   Product Optimization Services summary
   •   Training & Reinforcement Services summary
   •   Simple business card

MCS wants to develop a more comprehensive marketing package to use as a leave-
behind after client meetings and promotional piece for professional events, trade
shows, etc. The purpose is to highlight the MCS vision for capacity without capital
investment, and include polished, professional inserts spotlighting products, services,
success stories, recent articles and references.

However, professionally developed, well-executed print materials are expensive, so
this package has not yet been created.

Associations, Events & Trade Shows

Industry associations, events and trade shows offer an opportunity to connect with
existing clients and targeted prospects. The basic MCS event strategy is to build
recognition and reputation by acting as a presenter, host or sponsor whenever
possible.

MCS is already leveraging opportunities to promote the company. For example:
   •   May 2012 – MFG 4 (Society of Manufacturing Engineers)
       MCS is hosting one of the Learning Centers, which includes the opportunity to
       introduce presenters, exhibit signage and interact with key target groups.
   •   Sep 2012 – International Manufacturing Trade Show (IMTS)
       IMTS, held in Chicago, is the largest manufacturing trade show in the world
       and it attracts large numbers of SMMs. Mike plans to attend and is exploring
       opportunities to present a program, establish a booth exhibit, sponsor a
       learning event, etc.



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   •   Ongoing – Aerospace Component Manufacturers
       MCS is in discussions regarding a retainer arrangement with this association to
       offer an ongoing series of troubleshooting programs and services to member
       companies.

Events such as EASTEC 2013 (Springfield, MA), and target industry groups such as the
Small Manufacturers Association, Society of Manufacturing Engineers, New Haven
Manufacturers Association, and Aerospace Component Manufacturers offer similar
marketing and promotion opportunities.

Partnerships

MCS is product independent, with one exception. Blue Swarf (www.blueswarf.com) is
the top developer of technology assessment tools that drive high speed machining
processes. The company partners with strong consultants and technology
organizations to help deliver its tools and services.

Blue Swarf offers materials, training, equipment and co-marketing. Blue Swarf
offerings are a natural complement to the MCS core services, so Mike has agreed to
be the New England Region representative.

As a result, MCS gains access to respected technologies, entre to targeted
manufacturers, and expanded opportunities to provide MCS consulting and training
solutions in addition to Blue Swarf products. Additional partnership details are
available, if desired.




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FINANCIAL EVALUATION
This section captures the revenue and expense profile for the MCS start up. It provides a
breakdown of the kind of effort needed to reach the company’s initial financial goals. (See
Appendix III for additional details.)

The following analysis represents a reasonable, mid-range projection for 2012 through
2016, the first five years. Annual outcomes are for Earnings Before Income Taxes (EBIT).

(As noted, revenue and expense analyses and projections have been omitted to protect privacy.)




BOTTOM LINE
Every startup faces significant challenges. Machining Consulting Services is no different.

This document has been developed to demonstrate that MCS has a clear vision, defined
strategy, compelling value proposition and the talent to execute the plan. These are key
elements for success.

The potential is clear. The market demands are evident. The skills, tools and passion are
in place. More importantly, the business case has been made.

MCS is a viable endeavor that not only fills a need, it is one that can and will be a
profitable business venture.




                               BUSINESS PLAN | MAY 15, 2012 | PAGE 17
Crossbridge Communications, LLC
Barbara Spencer Hawk, President
Email | hawk@crossbridge1.com
 Web | www.crossbridge1.com
     Voice | 937.299.6489

				
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Description: Highlights a targeted business plan for a machining consulting start-up business
Barbara Spencer Hawk Barbara Spencer Hawk President www.crossbridge1.com
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