Sample Business Plan Stock Chicken

1.0 Executive Summary I. Type of Business: StockChicken.com: the new standard for online investment communities. We offer Chat, Advice, Education, Research, and FREE real time quotes. And we are the only community to offer SIG's (Special Interest Groups) : private, public, or pay per view chat areas'within our site that our Members set-up and control. I1. The Market: StockChicken.com will be focusing on three market segments who are online investors: A.) The Next Wave; B.) Online traders and aggressive investors; C.) Financial Newsletter writers and subscribers. A.) StockChicken.com is focusing on the next wave of the online investment community, which is the investor who wants Community, Advice, Education, and Research. This new wave of investors will be the more traditional investors as compared to the current bulk of online investors who are active traders. We call the new online investors "The Retirement by the Book" and "Portfolio Cruise Control". (From a Forrester Research Report: 19% of North American households with $750,000.00 in investable assets will trade online in 1999. As of 1999 there were 4-5 million online investment accounts. And 2.2 million households had traded online. By 2003, there will be 9.7 million households who will manage more than $3 trillion in assets-- nearly 19% of total retail assets--in 20.4 million accounts. Forrester also estimates that business at the mid-tier brokerages, like industry leaders Schwab, Fidelity,and Vanguard, will from 10-fold by 2003 from $106 billion to nearly $1.5 trillion in 2003.) B.) We also will be focusing on the active traders and aggressive investors who are already utilizing the Internet for trading and research. We will capture a share of this market due to our innovative use of SIG's, real time quotes, and real time chat. C.) Finally, we want to aggressively market to financial newsletter subscribers. There are 2,000 paid financial newsletters which generate $1.8 billion in revenue. By focusing on this market, specifically the writers themselves by offering them special services, we hope to capture a large percentage of these investors. Ill. Business Goal: To become the most popular online portal financial community for online investors and traders. We will do this by incorporating unique technology and strategic relationships to capture a large share of online investors, as well as Clients to whom we will provide unique marketing opportunities. IV. Summary: StockChicken.com plans on using unique technology to capture a large share of the next wave of online investors as well as online traders. We plan on doing this by focusing on becoming an all in one site for investing by incorporating Community, Advice, Education, and Research into a fun, reliable, and easy to use web site. By building strategic relationships with Clients (Experts, Advisors, Newsletter writers/publishers, investment content providers, and financial information sites) we can provide this user friendly experience to online investors for free. We plan on building those Client relationships by providing unique services such as SIG's (Special Interest Group's threads that are the "owner" controls), Pay Per View (PPV) SIG's, Portal Community arrangements_intense marketing and promotion of their services on our site, and other strategies to assist the Clients gain new customers as well as retaining their current customers. V. Investment Required: StockChicken.com, Inc. is currently seeking an investment of $3,500,000.00 for start-up expenses and working capital for one year. We plan an exit strategy of an IPO in two years. Business Plan Highlights sl_o.ooo.oc*_ -_'"_'" ................. Sso._oooo • .-" c S60,000 ,"O0- -/"_ , 1 _ • sa_ Gmis k4_ s4o.ooo._,a ---" szo.oao.,"oo• •- "m $o ...... __ , = FY20G1 FY2002 ........ FY2003 / -I 1.1 Objectives 1. Market Share Objective:To have 100,000 registered active Memberswithinthefirstyear. 2. SalesObjective:To have salesof $10,000,000.00. 3. ProfitObjective:To have a net profitof 20%. 4. Value Objective:To poll usersoncea monthto voteon changesand to make StockChicken.com true a community. 1.2 Mission StockChicken.com is in the business of providing the highest quality investment Community, Advice, Education, and Research on the Internet to online investor. StockChicken.com is built on the fact that online investors need an unbiased community where they can find Community, Advice, Education, and Research. These online investors do not have the time to find such quality information from the multitude of different financial sites. We will bring all of this needed information into a community setting where they can find all the information they need to invest profitably. StockChicken.com is also in the business of providing Clients (Financial Data Sites, PPV Clients, Newsletter Writers/Publishers, Advertisers) with a unique marketing experience to gain new customers as well as to retain current customers. StockChicken.com serves its Clients as a trusted ally-- dedicated to bringing the best investment information on the Internet to one comprehensive site. And Clients will be willing to pay a premium to be marketed in such a site. 1.3 Keysto Success The keys to success for StockChicken.com are: The Product needs to be unique, easy to use, reliable, and educational. The Marketing Plan needs to effectively draw new online users and established traders to the site. The Management has to be innovative, interactive, and responsive to its Members and Clients. 2.0 Company Summary StockChicken.com, Inc. developed, owns, and operates an online investment community that is designed to offer the best financial Community, Advice, Education, and Research on the Internet. StockChicken.com was founded in 1999. 2.1 Company Ownership Stockchicken.com is a registered Florida Corporation. Outstanding shares: 1. Common Stock: 50,000,000 2. Preferred Stock: 5,000,000 Ownership is as follows: David J. Pierce -- 2,250,000 shares Steven Mather -- 2,250,000 shares Timothy Watters -- 2,250,000 shares Karl Mueller -- 500,000 shares 2.2 Startup Summary Our start-up costs and operating expenses for one year comes to $3,500,000.00, which is for marketing & advertising, equipment, software, legal, salary, and expenses associated with opening the company. The start-up costs are to be financed by Investors. It is assumed, though definitely not expected, that there will be no income for one year. We need an investment of $3,500,000.00 for the following: * To purchase $300,000.00 in equipment. * To hire programmers and a webmaster to speed up production. * To initiate the Marketing Plan. * To cover direct costs of production. * To lease and furnish office space. * For Working Capital. The assumptions are shown in Table 1 and Illustration 2. Start-up Plan Start-up Expenses Legal Salaries & Payroll Hosting Costs Data Feeds Advertising & Marketing & Promotions Lease & Utilities Working Capital Expensed equipment $30,000 $1,628,958 $0 $55,000 $970,000 $15,600 $500,000 $300,000 i 7 Other Total Start-up Expense Start-up Assets Needed Cash Requirements Other Short-tenn Assets Total Short-term Assets Long-term Assets Total Assets Total Start-up Requirements: Left to finance: Start-up Funding Plan Investment Investors Other Other Total investment Short-term Liabilities Unpaid Expenses Short-term Loans Interest-free Short-term Loans Subtotal Short-term Liabilities Long-term Liabilities Total Liabilities $442 $3,500,000 $0 $0 $0 $0 $0 $3,500,000 $3,500,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Loss at Start-up Total Capital Total Capital and Liabilities Checkline Start-up Financing s37.,o0 ooo- _" $_.,aoc u0o---" $0 $0 $0 $0 b_,_us ^sso15 I_st,r_r_ L_'_ 2.3 Company Locations and Facilities Currently, we operate out of home offices in Sarasota and Tampa. But, once we hire more employees, has been found as of 3/1/00. we will need a 1,600 square foot office in Tampa, Florida. A location 3.0 Products and Services Services: StockChicken.com is a portal financial community web site that sells to online investors the service of providing the best all-in-one Investment Community site on the Net. Products: StockChicken.com is a financial community site that sells to online investors the following products: PayPer-View Services, Educational Products and Classes, and Financial Information. Additionally, StockChicken.com sells Targeted Advertising to financial service companies. Finally, StockChicken.com sells physical products such as Books, Software, Newsletters, and Newspapers to online investors. 3.1 Product and Service Description Free Services to online Investors Investment Information: Portfolios, quotes, news, charting, research for investments. Community: Friendships, ease of use, quality information. Education: Investor education. Research: Detailed research on investments. (See Appendix.) Advice: Advice from the Community as well as from Experts. Free Market Update Emails: The StockChicken.com Financial Times. (See Appendix.) Portfolios: Where investors can track investments and receive Email alerts (see Appendix). Services to Newsletter Writers and Advisors SpecialInterestGroups(SIG): A private or public member only area for the Writers and Advisors to chat with their subscribers. Hosted Home Pages: StockChicken.com will host the Writers and Advisors home page and/or newsletters for access by their subscribers. We will share advertising revenues with the Owner. Feed for Your Financial Health Store: StockChicken.com will sell Newsletters and Advisor Services via the "Feed for Your Financial Health Store". Advertising: Advertising and Marketing within the StockChicken.com site for their products as well as for our The StockChicken.com Financial Times Emails. Services to Stock Analysts and Traders Pay-Per-ViewSIG: A paid private member only area for the Stock Analysts and Traders. StockChicken.com will handle all billings for a percentage of membership fees. We will also offer these Clients real time chat. Hosted Home Pages: StockChicken.com will host the Stock Analysts and Traders home page for access by their Members. We will share advertising revenues with the Owner. Advertising: Advertising and Marketing within the StockChicken.com site and the The StockChicken.com Financial Times for their services. Services to Portal Clients SpecialInterestGroups(SIG): A privateor publicmemberonlyarea forthe Portal Clientinteracttheir users. Hosted Home Pages: StockChicken.com will host the Portal Client's Community home page for access by their subscribers. That way their users still feel like they are on the Portal Client's site. Please see Appendix XVIII. Advertising: Advertising and Marketing within the StockChicken.com site for their products/services as well as for our The StockChicken.com Financial Times Emails. Products Memberships: Members will have access to special features such as free real time quotes, SIG set-ups, and discounts on other Products. Pay-Per-View (PPV): - PPV SIG's (Special Interest Groups) for stock traders and experts. - PPV for interviews with Experts, Analysts, and Company Representatives Investor Education Classes: - Offered by Experts. - Outside and internally produced classes Financial Information: StockChicken.com will be offering a wide range of investment products such as SEC filings, analyst reports, etc. Advertising: Targeted advertising to be sold to financial service companies and consumer oriented companies. Books: Various recommended books on investing. Software: Various investment and financial software. Newsletters: StockChicken.com will have a multitude of investment and financial Newsletters for sale. Additionally, StockChicken.com will host online newsletters and home pages for these Newsletters. Newspapers: The Wall Street Journal Interactive Edition Brokerage Relationships: CyBerCorp.com pays us $.50 a trade for Members who sign up through our site. A | 3.2 Competitive Comparison We are positioning StockChicken.com in the market as a all-in-one investment Community site that will target the new breed of online investors as well as the online stock traders. To differentiate our site from other sites we are using unique features such as Pay-Per-View (PPV) and Special Interest Groups (SIG's). Additionally, we will offer Education and Advice, which are two features that the other similar sites lack. Finally, we will have all the research tools that an online investor will need to make informed investment decisions. All of the above will be offered in a state-of-the-art environment that will be fun, reliable, and accurate. 3.3 Sales Literature Copies of StockChicken.com's advertisements, direct Email, and web sales literature are attached in an appendix at the end of this document. 3.4 Sourcing Our Services and Products offerings will be totally web based. In effect, we are order takers via being an affiliate for most of the Services and Products we are offering. Services or Products not listed are built into the proprietary chat software developed by Steven Mather. The following services are offered on a fixed cost, which then turn into a advertising revenue sharing arrangement via Thomson Financial. All stock research tools-- free real time quotes (FRTQ), charting, news, reports, etc. The only Products that we will sell and make in house will be the following: Memberships: No direct cost involved. Free to Members. PPV SIG's (Special Interest Groups) for stock traders and experts: Done in house with third party credit card vendor. Newsletters: StockChicken.com will host online newsletters and home pages for these Newsletter Writers. Costs are minimal due the fact no hard material is in use. The newsletters will be sold on a gross margin basis of between 20-50%. If the newsletter is hosted with StockChicken.com, then the writer up loads to StockChicken.com directly. We will also offer expanded service on a case by case basis. Basically, StockChicken.com again will be a third party vendor for these newsletters. Advertising: Done via In-House, Advertising Agency, and Thomson Financial. In-house sales will be done for the price of the advertisement. Ads can be ready to use or we charge a set-up fee. Minimal costs. The following Products will be produced internally or provided by a third party. Again, if supplied by a third part, we are just receiving a percentage of sales via a credit card, then supplying the vendor with the information or order: PPV for interviews with Experts, Analysts, and Company Representatives: Provided by Thomson or , i another third party. PPV Education: Provided by third party and internally produced. Education: Provided by third party and internally produced. Financial Information: SEC filings, analyst reports, etc. Provided by Thomson Investments, Edgar.com, IPO Express, and Zack's Investment Research. Electronic Store: Offering over 5,000 consumer products via an affiliation with HandTech, Inc. Consumer Center: A revenue sharing arrangement with Quicken Financial which will offer insurance, mortgages, loans, etc. Books: Via TradersLibrary.com Software: Via Investorsoftware.com Newspapers: The Wall Street Journal Interactive Edition (WSJI)-- done by WSJI. Brokerage Relationships: Provided by CyBerCorp.com 3.5 Technology Technology is very important to the success of StockChicken.com. StockChicken.com is being developed with .asp and database technology using Microsoft Information Resources. The site is being designed to be easily updated and enhanced with any new technology that may be useful to the site. We at StockChicken.com plan to be the industry leader in the investment chat area by continually monitoring and embracing any new technology that will give us a competitive edge. We are currently implementing technology such as PPV (Pay-Per-View) and SIG's (Special Interest Groups) and The Consumer Center that none of our competitors offer. PLEASE SEE APPENDIX B: StockChicken.com Development Plan 3.6 Future Products and Services We have three major goals with our future Service and Product offerings: 1. To have all of the world's financial market data on StockChicken.com. This is available now, but we need to get into production for the costs involved to be a good investment for StockChicken.com. 2. To develop and market a dedicated Spanish language site for South American online investors.We plan in not only covering North American investments, but to also cover the South American and European financial markets. We currently are developing plans and partnerships to do this after we get into production. 3. To integrate multilingual translation technology into StockChicken.com to become a truly MultiNational Online Investing Community where the Member picks their language and all content is then translated into their specific language. For example, English, Dutch, Japanese, and French Members actually post and read on the same topic thread and the language is automatically translated into the language of their choice. We are currently in discussions with vendors of this type of software. 4.0 Market Analysis Summary StockChicken.com is focusing not only on the active traders and aggressive investors who are currently utilizing the Internet, but also on the next wave of the online investment community where the investor wants Community/Chat, Advice, Education, and Research. This new wave of investors will be the more traditional investors as compared to the current bulk of online investors who are active traders. We call the new online investors "The Retirement by the Book" and "Portfolio Cruise Control". We also will be focusing and aggressively marketing to newsletter writers and subscribers. 4.1 Market Segmentation Our market segmentation scheme allows some room for estimates and nonspecific definitions due to the relative newness of the online investing industry. We are catering to the online investing community at large, but we are focusing on the next wave of the investing community who are coming online-- the "nontraders". Currently, it is the online traders/aggressive investors who are utilizing the Internet to the fullest extent. This trend developed in the last three years and we feel that market segment is for the most part saturated. According to a Forrester Research Report "Net Investing Goes Mainstream" 3/99, 70% of the online investors are active stock traders. This market segment can be broken down into two groups: the "Aggressive Affluent" and the "Get Rich Quick" (FR). These market segments currently make up only 20% of the entire investing community today (FR). The "Aggressive Affluent" segment makes up 27% of the online investing community today (FR). Their mean net worth is $323,000.00 and they average 9.9 trades a year (FR). The "Get Rich Quick" segment makes up 26% of the online investing community today and have a mean net worth of $38,000.00 while making 9.9 trades per year (FR). Still, we feel that with the unique features of StockChicken.com we will still pull a large portion of the "Aggressive Affluent" and the "Get Rich Quick" market away from their established Chat and Research sites. The market segments that are going to be the next wave of online investing are what we call "Retirement by the Book" and "Portfolio Cruise Control". These investors seek more advice and trade less often. Though these segments make fewer trades, their account portfolio is on average three times bigger than the active trader accounts. By providing state-of-the-art research, investment experts, and community functions, we feel that we can garner a respectable percentage of this next "wave". The "Retirement by the Book" segment makes up 25% of the online investing community today and have a mean net worth of $49,000.00 while making only 0.7 trades per year (FR). The "Portfolio Cruise Control" make up 22% of the online investing community today, have a mean net worth of $362,000.00 while making 2.8 trades per year (FR). Another group that we are going to aggressively market to is the Newsletter Writers and Subscribers. There are approximately two thousand paid investment newsletters in circulation. If we can provide value to the newsletter writers by supplying SIG's, home pages, billing, and other unique features, then we should be able to draw a large proportion of those newsletter writers and their subscribers to StockChicken.com as Clients. Market Analysis Potential Customers Stock Traders New Online Investors Newsletter Subcribers Portal Clients (SIG's) Other Total Growth 50% 100% 100% 100% 0% 98.54% 2000 5,000 20,000 50,000 25,000 0 100,000 2001 10,000 40,000 100,000 50,000 0 200,000 2002 15,000 80,000 200,000 100,000 0 395,000 2003 22,500 160,000 400,000 200,000 0 782,500 2004 33,750 320,000 800,000 400,000 0 1,553,75 0 CAGR 6 l. 19% 100.00% 100.00% 100.00% 0.00% 98.54% Potential Market by Segmont • $1_k Tt_dors 4.2 Target Market Segment Strategy Our choice of target markets ("Retirement by the Book", "Portfolio Cruise Control", and Newsletter Writers/Subscribers) is strategic. We want to position ourselves (via our features) to appeal to and attract these next explosive waves of online investors. We are want to position ourselves as the leader in the online investment when it comes to Community, Education, Research, and Advice. The Retirement by the Book and Portfolio Cruise Control should make up 53% and 36% respectively of the online investing community by 2003 (FR). By establishing strategic relationships with the Mid-tier Brokers and Mutual Funds we feel that we can provide a Community that caters to these investors. (A note on Mutual Funds: "The next wave of online investors will be less experienced and more goal focused than online investing's early adopters. Off line, Mutual Funds are the vehicle of choice for this mainstream investing crowd, and Forrester does not believe that the Net will significantly change this behavior." (FR)) We do want to target active traders specifically and we feel we can capture a respectable percentage of that market. We are targeting this group because they are the majority of the online community now, and will generate more daily traffic for our site per Member than our "Retirement by the Book", "Portfolio Cruise Control", and Newsletter Writers/Subscribers. 4.2.1 Market Needs Since our target market is seeking information, the most important market needs are Community/Chat, Advice, Education, and Research. One of the key points in our strategy is to focus on the market that understands these needs and are willing to pay to have them filled. All investors are looking for information. We plan on offering all the information that is needed in a Community setting that will accommodate all market segments of the online investing community. The underlying needs are related to assurance and dependence. Our customers will depend on us to provide the best Community/Chat, Advice, Education, and Research that is available. 4.2.2 Market Trends The most obvious and important market trend is going to be the explosive growth that is taking place with online investing that is going mainstream. 72% of 50 brokerages and mutual fund companies reported that their core customer base is online today (FR). Even though those customers are online, the companies are just beginning to take advantage of the investing information revolution that is happening in the industry. These investors will seek more advice because there is so much more information available online. And they are becoming more involved in the process of their investment decisions. We feel that Partnering (i.e. Strategic Relationships) is another trend that is now sweeping the industry. By aligning ourselves with Partners (i.e. Data Providers, Brokerages, Newsletters, Research Sites, and Mutual Funds) we feel that we are also positioning ourselves to take advantage of the growth of the online investing community. Finally, another segment we want to capture is the worldwide investment community. This is still in it's infancy, but we have strategies devised in our Marketing Plan to take advantage of this potential monster segment. 4.2.3 Market Growth (The following figures were obtained in the Forrester Reportwhich is in the Appendix.) 19% of North American households with $750,000.00 in investable assets will trade online in 1999. As of 1999 there were 4-5 million online investment accounts. And 2.2 million households had traded online. By 2003, there will be 9.7 million households who will manage more than $3 trillion in assets-nearly 19% of total retail assets--in 20.4 million accounts. Forrester also estimates that business at the mid-tier brokerages like industry leaders Schwab, Fidelity,and Vanguard will grow 10-fold by 2003, from $106 billion to nearly $1.5 trillion in 2003. Of the market segments trading online the growth per segment is as follows: Year: Percentage of new online investors: "Aggressive Affluent": "Get Rich Quick": "Retirement by the Book": "Portfolio Cruise Control": 27% 26% 25% 22% 20% 16% 34% 30% 15% 9% 40% 36% 11% 6% 44% 39% 8% 3% 53% 36% 1999 2000 2001 2002 2003 As you can be seen, the growth will be explosive in online investing and we feel that StockChicken.com is positioning itself to capture all 4 segments of the market-- especially the "Retirement by the Book" and the "Portfolio Cruise Control" segments. 4.3 Industry Analysis We are part of the Internet investment community business, which in turn, includes several subbusinesses: 1. Community sites: Sites where regular users go to discuss stocks and other investments. A sense of community builds when users become involved in the site and business and social contacts evolve. Membership is either free, or on a monthly or annualized basis. Income is mainly derived from advertising. 2. Stock research sites: Sites where investors go to perform due diligence on stocks and other investments. Information offered includes stock quotes, charting, news, filings, and research reports. Again, membership is either free or on a monthly or annualized basis and income is mainly derived from advertising. 3. Store sites. Sites where investors go to purchase books, software, and newsletters. Income derived from these sales. 4. Individual trader/advisor sites: These sites charge a monthly (or yearly) subscription that allows investors/traders to trade the site owners stock picks. 4.3.1 IndustryParticipants The Internet Community industry is dominated by dozens of portal sites. And there are countless chat areas on all types of investment sites. The trend is going to go towards the continued use of Community to bring users to all investment sites. As for investment store sites, there are not that many that are all in one. Many of the sites just sell books via a partnership with Amazon.com or Barnes & Noble. Not many sites offer investment software. And there are only a few sites that sell newsletters. And many of those sites are the newsletter writers/publishers themselves. There are a myriad of individual trader/advisor sites. These sites will always be changing as changes happen in the market and as changes happen to the owner of the site. There is definitely a market gap in sites that offer investor education in a practical way. 4.3.2 Distribution Patterns Our distribution pattern is to sell directly to our Members via the Internet. 4.3.3 Competition and Buying Patterns Online investors understand the concept reliability of the site, accuracy of market information, advice, and service and support. And they will stay with a site who successfully provides these needs. The competing sites currently offer only one or more of the services that we are going to offer the online investor. We plan on capitalizing on this fact by effectively marketing all of our products and services to the potential user so we can be an all-in-one investment site. Currently, most online investors use various sites to accomplish what they can do at our site alone. For example, they might chat on Silicon Investor, use Yahoo Financial for research, go to various other advisor sites, get real time quotes from yet another, then go to Etrade to place the trade. By offering an all-in-one site and by partnering with online brokers, we feels that we can keep users on StockChicken.com instead of having to jump around to other sites. This means building loyalty which in turn means heavy usage/traffic by our Members. Please see Appendix XVIII. Most investors who are online stay with a site that offers information reliably and accurately. As for Community sites, online investors usually stay with an inexpensive site that has many users, ease of use, and reliability. Traders frequently use numerous sites looking for high traffic and a lot of information. There are only a handful of investor education sites that we feel provide no real competition. We are going to focus on building a free site that offers a unique community aspect, investor education, all the reliable and accurate information investors need, and useful products to enhance their wealth building efforts. 4.3.4 Main Competitors Silicon Investor (SI) (See Appendix) A site, boughtby GoToNet, originallyintendedas place to chat abouttech stocks Has turned intothe "largest financial discussion community on the web" (Quoted from their site.). SI is what we see as our main competitor in the Community area. Strengths: Reliability, speed, and ease of use. Also has many registered users. Established since 1995. 10 million plus messages. Nice chat features and nice search features. Weaknesses: Designed by techies not investors. Research material is not comprehensive. No Investor Education. No store. No Special Interest Groups (SIG's). No Pay Per View (PPV) features. Used by a lot of traders to take advantage of novice investors. And they have not been innovative in the community area. Raging Bull (RB) (See Appendix) This site, bought by CMGI, was started a year ago by SI members who wanted an Ignore feature-- a feature that would skip a certain poster's message if another poster did not want to see those posts. (We have that feature too-- the Bawk Member button.) Strengths: Offers real time quotes for free. Free membership. Good traffic. 35,000,000 monthly impressions. 300,000 Members. Weaknesses: Poor features in general-- i.e. site searches, personal messages, hot lists, etc. No SIG's or PPV. No education. AOL We do not consider AOL a main competitor. But, we realize that they are a leader in the investor community field. Strengths: Brand recognition. Very large number of users. Good information. Interviews and advisors. Weaknesses: Not accessible to non-AOL members. YAHOO Chat YAHOO Finance is the most popular site on the Net for non-AOL users. Very good information and research is available. Strengths: Every type of financial research information is available. Good partnerships. Easy to use. Weaknesses: The Chat area is known as the "Wild West" of the chat arena. Cluttered sites. 5.0 Strategy and Implementation Summary StockChicken.com plans on using unique technology to capture a large share of the next wave of online investors as well as online traders. We plan on doing this by focusing on becoming an all in one site for investing by incorporating Community, Advice, Education, and Information into a fun, reliable, and easy to use web site. By building strategic relationships with Clients (Experts, Advisors, Newsletter Writers/Publishers, investment content providers, and financial information sites) we can provide this user friendly experience to online investors for free. We plan on building those Client relationships by providing unique services such as SIG's (Special Interest Group's threads that are the "owner" controls), Pay Per View (PPV) SIG's, Portal Community arrangements, intense marketing and promotion of their services on our site, and other strategies to assist the Clients in gaining new customers as well as retaining their current customers. 5.1 Strategy Pyramids Our first strategy is to capture a large share of the next wave of online investors who will be more interested in investing than in trading. (Traders are the bulk of online community members now.) The tactics are marketing the concepts of Community, Education, Advice, and Research. The specific programs are special interest SIG's hosted by experts and newsletter writers, an interactive community, heavy marketing of books and newsletters, classes offered by experts, and excellent financial research material. A second strategy is to capture a share of the online traders. The tactic is our unique use of SIG's and PPV for traders. The specific programs are letting groups of Members set up private threads to keep out securities professionals and promoters. Another program is letting expert traders set up PPV SIG's where they can charge Members to watch their picks and interact with that trader. Our third strategy is to become a Community Portal site for financial sites (Clients). The tactic is to have financial web sites use StockChicken.com as there Community/Chat area. The specific program will allow the Client's members to maintain there hook-up to the Client's site while using Stockchicken.com. Another program is to set up a public or private SIG for their members. Our fourth strategy is to capture newsletter subscribers to our site. The tactic is to partner with the newsletter writer or publisher. In all of these programs we market and sell the newsletter from our store. One program is to set up the SIG for the writer so he can communicate with his subscribers or potential subscribers. The newsletter is sold from our store and the writer/publisher handles the mailing. Another program is to set up the SIG, and then we host the writers newsletter online via Stockchicken.com. (When Members go into the SIG the newsletter(s) is a link away.) A third program is to be a writer or publisher's Community Portal like the Client Portal discussed in the preceding paragraph. Finally, we will set up SIG's for Securities Brokers/Advisors/Experts. To join that SIG, Members will have to accept disclosures from those Experts so they can operate within legal confines of giving advice. Again, we will give those SIG owners heavy intra-site marketing and home page assistance. And we plan on offering PPV courses in partnership with those Experts. 5.2 Value Proposition Our value proposition is that we offer a reliable and accurate all-in-one financial site for the online investor. We will offer a fast and reliable unique community chat site that includes SIG's, member votes, and many other innovative community builders. We will offer state-of-the-art financial research information. Additionally, we will offer PPV for stock pickers, analysts, and company representatives. And we are going to offer quality investor education and advice. Finally, we will offer top quality products such as newsletters, books, and software. 5.3 Competitive Edge Our competitive edge is threefold: 1. Our positioning as an All-In-One site for the current and next wave of online investors-- offering Community, Education, Advice, and Research. 2. Our further positioning as a All-In-One site for all types of financial information including mortgages, insurance, college planning, retirement planning via our affiliation with Quicken.com. 3. Our proprietary chat software which incorporates SIG's, PPV, Research, and other unique functions. Additionally, we plan to enhance our competitive edge by our positioning as a strategic ally with targeted financial sites (Clients) as a Portal for their Community/Forum areas. By building a business based on long-standing relationships with satisfied Clients, we simultaneously build defenses against competition. The longer the relationship stands, the more we help our clients understand what we offer them and why they need it. 5.4 Marketing Strategy P The marketing strategy is the core of the main strategy: We plan on focusing on the new wave of online investors, more traditional investors who are seeking advice and education; as well as focusing on online traders. We plan on capturing these target markets by focusing on : 1. Community - Highly interactive - Ease of use - Reliability - Humor - Customer Support 2. Education - Wanted by both target markets - PPV Via Dow Jones University - Via PPV SIG's - Expert SIG's - Via Newsletter SIG's 3. Advice - Wanted by both target markets - Via PPV SIG's - Expert SIG's - Via Newsletter SIG's 4..Information - Wanted by both target markets - Provided by content provider and strategic partners 5. Financial Community Portal - Host Client's Community Areas 5.4.1 Positioning Statements For the next wave of online investors who need a sitewhich provides Community, Education, Advice, and Research, StockChicken.com will provide all those in a reliable and user friendly manner. Unlike our competition (Silicon Investor, Raging Bull, or Yahoo), StockChicken.com provides Education, Advice, and detailed Research, not just chat and limited research. And we are the ONLY site to allow Members to set up their own SIG's. Additionally, for Clients/Traders who want private, invitation only threads (SIG's), or the choice of PPV SIG's, StockChicken.com can provide those SIG and PPV services unlike ANY of our competition. 5.4.2 Pricing Strategy In our Pricing Strategy we plan on closely matching or being slightly less expensive than our competitors. We must charge appropriately for services and establish ourselves as the best value for an all-in-one site. Pricing Memberships:Membership will be free. Members will have access to special features such as free real time quotes, SIG set-ups, research, portfolios, portfolio Email alerts, education, and discounts on products. Pay-Per-View (PPV): - PPV SIG's (Special Interest Groups) for stock Traders and Experts. There is no fixed amount set for this product. The price will be set by the Trader/Expert and we will carry out billings for a 25-50% split of the fee. So, we will use 25% to be conservative. We will use $100.00 per month as an average for the PPV price. - PPV for interviews with Experts, Analysts, and Company Representatives.This is another product with no set price. This will be in partnership, at first, with Thomson Financial. We will assume $10.00 fee per viewing. Classes: StockChicken.com will offer investor, financial classes, and other education offered my Experts. Again, This is another product with no set price. For purposes of the Sales Forecast we will use a price of $20.00 per class to be split on a 50/50 basis with the Expert. Financial Information: StockChicken.com will be offering a wide range of investment products such as SEC filings, analyst reports, etc. Thomson Financial, Edgar.com, IPO Express, and Zack's Investment Research are our data providers. Other strategic relationships still being worked on. Edgar.com: We receive 20% of an annual sub's: $240.00 price on average. Advertising: Targeted advertising to be sold to financial service companies and consumer oriented companies. We plan on charging a price of $20.00 CPM on the message boards. The research areas are in a revenue sharing arrangement with Thomson Financialwhich turns into a 50/50 split after the basic costs of $10,000 per month are met. Books: Various recommended books on investing via TradersLibrary.com. We will be paid 25% of the gross sales. We will assume that a Member will buy two books a year at an average price of $20.00. Software: Various investment and financial software via Investorsoftware.com. We will be paid 15%of the gross sales. CyBerCorp: We are paid $.50 a trade from our Members who sign up via our site. Newsletters: StockChicken.com will have a multitude of investment and financial Newsletters for sale. Additionally, StockChicken.com will host online newsletters and home pages for these Newsletters. We will assume that the average price is $200.00 per year and our gross margin will be 30%. Newspapers: The Wall Street Journal Interactive Edition. Not applicable to the bottom line. We make $5.00 per subscription. Consumer Center: An affiliate relationship with Quicken.com where we get a referral fee of $.01 per Member when they use a tool from Quicken.com. 5.4.3 PromotionStrategy We will depend upon a wide variety of avenues in our Promotion Strategy for Memberships. 1. Direct Email: Used to initially get people to the site. We have our own database of Emails and Email lists that will carry our promotions. We also plan on purchasing investor Email lists. 2. News groups: Post and promote heavily in Internet news groups. 3. Banner Exchanges: Banner ad exchanges with targeted sites. We are a member of various banner exchange programs. 4. Advertising: We plan on running display and classified ads in various investor magazines and newspapers such as USA Today, The Wall Street Journal, Barron's, Investor's Business Daily, Money Magazine. 5. New Releases: Targeted at financial community. 6. Strategic Partnerships: Partner with financial sites. 7. Guerilla Marketing: Market heavily on AOL, Raging Bull, SI, and other stock chat areas. This tactic has already taken our Membership from 2,100 to over 2,800 in three weeks (3/1/00). 8. MemberPromotions:Promotions and giveawaysfor Memberswhorefer new Membersto thesiteand whowin variouscontests.This willgreatlyfacilitate"word-of-mouth" arketing. e planon givingaway m W laptops,T-shirts,hats, Palm Pilots,and somecash to heavyusers. For Clients,our PromotionStrategyiscoveredin the nextsectionbecauseit isin effectout Marketing Strategy. 5.4.4 Distribution Strategy All of our products will be distributed over the Internet via StockChicken.com or 3rd party vendors. 5.4.5 Marketing Programs (Our Membership Marketing Programs are basically outlined in the preceding section and throughout the Business Plan. One crucial part of the Marketing Programs is to devise a way to measure what is to know what program is working by getting new Member feedback in the registration process.) Our Marketing Strategy for Clients is as follows: 1. Cold call/sales Emails to online Investment Clubs offering to set up a SIG for them. Keep them on an Email list that will give information on StockChicken.com. Contact ten a week. 2. Contact Newsletter Writers and Publishers with an initial Email, then follow-up with a phone call. We will sell our services we have devised for them. Contact ten a week. 3. Contact Experts/Educators with an initial cold call Email and follow-up with a phone call. We will target a handful at first until we can get a system down. 4. Contact Traders/Stock Pickers via Email and follow-up with a phone call if possible. They should be easily sold on our PPV SIG idea. Contact 5 a week. 5. Contact Portal Targets via Email, telephone and letter. In person sales for large targets. 5.5 Sales Strategy StockChicken.com has three products: Advertising, Memberships/PPV (Pay-Per-View), and Products. Below, is a Sales Strategy for each category: 1. Advertising: We plan on contracting with a third party media broker as well as sell advertising directly. In house, we can approach potential advertisers with the added value of becoming their Community/Chat Portal. For example: Fidelity Mutual Funds would advertise and we would host a SIG for Fidelity Investments and make threads for their products. For the other set of advertisers we need to sell the idea of targeted advertising. For example: Priceline.com will want to advertise due to the fact that we can deliver a target audience of frequent travelers. 2. Memberships/PPV: This class of selling will depend upon the amount of quality information we can deliver in a reliable manner. The Members will need to see value in the Community proposition as well as the Education, Advice, and Research value propositions. The PPV members will have to see value in paying for Advice. To sell the PPV value proposition to the Owner, we need to sell the idea of gaining them more paying members in a easy way. In effect will will take the headaches out of the billing and the marketing process. 3. Products: In the product are we have six basic classes: Research, Brokerage relationships, Newsletters, Education, Consumer products, Books, and Software. All of these will have to be sold via marketing in our site. (We are also looking at selling some services, but that is a goal down the road.) The Research products will be heavily marketed throughout the site. These are provided by third party affiliations which include Thomson Financial, Edgar.com, IPO Express, and Zack's. We currently offer all of their products via affiliate agreements. As for brokerage relationships we have one in place with CyBerCorp.com which was recently acquired by Schwab. For the Newsletters we need to sell the writers or publishers on the concept of having their own SIG and online version of their newsletter on our site. We will do this by explaining how they will gain more clients by being in a centralized site visited by their target audience-- investors. And we will sell them on the idea that we can effectively market their newsletter from our store and throughout the site. Finally, we can again take the headache out of mailings, billings, and advertising by offering them a SIG, marketing, and by directly selling their online version of their newsletter. Education will be by Dow Jones University. Heavy intra-site marketing and The StockChicken.com Financial Times Emails. For Consumer products via Quicken.corn, we will again use heavy intra-site marketing. For products, we plan on initially using partnership sites that take the orders for us and handle the billings. We plan on aggressively marketing products throughout the site and via Special Alerts to our Members (Book of the Day, etc.). Currently, we are going to offer Books via Amazon.com or Barnes and Noble.com, Software via Anderson Software, and The Wall Street Journal Interactive Edition. 5.5.1 Sales Forecast Below are the assumptions for the sales forecast: StockChicken.comAdvertising Sales(in CPM): Price is Net to StockChicken.com of $10.00 per CPM (Per thousand views). So value is number of 1,000 impressions sold. Coop Advertising Sales (CPM): Based upon a contractual cost. They run three ads per page. Average cost of ad is $30.00. We split that 50/50, so our "net" would be $15.00 per ad. (We pay a flat fee of $5,000 a month for Thomson's non real time financial information. Once we have enough ad hits (280,000) that cost is covered and we go into a 50/50 revenue sharing program. The same arrangement is made for the real time quotes page views.) PPV SIG's - 25% Margin: Assumes each PPV SIG will have 200 paying Members. In effect, by October, 2000 there will be 25 PPV SIG's (5000/200 = 25) Edgar.com - 20% Margin: 5% of Members will buy annually Investing Classes - 50% Margin: 5% of Members will buy annually Newsletter Sales - 30% Margin: 5% of Members will buy annually Book Sales - 25% Margin: 5% of Members will buy annually Software Sales - 15% Margin: 5% of Members will buy annually PPV with Experts - 50% Margin: 5% of Members will buy annually Strategic Partners (Analyst Center / First Call Reports) - 45% Margin: 5% of Members will buy annually WSJI - $5.00 flat fee: 5% of Members will buy annually CyBerCorp - $50 a trade: For Day Traders. Assume 10 trades a day, 20 trading days a month. (From CyBerCorp.com.) # of Free Members: Number of Members SC Monthly Ad Views per Member: Assume that each Member will visit the site 60 times in a month. They would look at 2 ads per page. 5 pages visited on each visit. Co-op Monthly Ad Views per Member: Assume that each Member checks 2 stock/mutual fund price quotes per the above mentioned visits. They would see 3 ads per quote. Sales Forecast Unit Sales SC Advertising Sales (in CPM) Co-op Advertising Sales (CPM) PPV SlG's - 25% Margin Edgar.corn / IPO Express 20% Margin Investing Classes - 50% Margin Newsletter Sales - 30% Margin Book Sales - 25% Margin Software Sales - 15% Margin PPV with Experts - 50% Margin Strategic Partners - 45% Margin CyBerCorp - # of Users WSJI - $5.00 flat fee # of Free ACTIVE Members SC Monthly Ad Views per Member Co-op Monthly Ad Views per Member Other Total Unit Sales Unit Prices SC Advertising Sales (in CPM) Co-op Advertising Sales (CPM) PPV SIG's - 25% Margin Edgar.com / IPO Express 20% Margin Investing Classes - 50% Margin Newsletter Sales - 30% Margin Book Sales - 25% Margin Software Sales - 15% Margin PPV with Experts - 50% Margin FY2001 241,920 145,152 10,700 1,693 1,605 6,680 6,733 6,733 6,733 6,733 7,050 120 403,200 7,200 4,320 0 856,575 FY2001 $10.00 $15.00 $100.00 $240.00 $50.00 $200.00 $20.00 $50.00 $20.00 FY2002 1,440,000 864,000 60,000 10,000 I0,000 10,000 10,000 10,000 10,000 10,000 5,000 360 200,000 7,200 4,320 0 2,650,880 FY2002 $20.00 $15.00 $ 100.00 $240.00 $50.00 $200.00 $20.00 $50.00 $20.00 FY2003 2,844,000 1,706,400 60,000 19,750 19,750 19,750 19,750 19,750 19,750 19,750 10,000 360 395,000 7,200 4,320 0 5,165,530 FY2003 $20.00 $15.00 $ 100.00 $240.00 $50.00 $200.00 $20.00 $50.00 $20.00 Strategic Partners - 45% Margin CyBerCorp - # of Users WSJI - $5.00 flat fee # of Free ACTIVE Members SC Monthly Ad Views per Member Co-op Monthly Ad Views per Member Other Sales SC Advertising Sales (in CPM) Co-op Advertising Sales (CPM) PPV SIG's - 25% Margin Edgar.corn / I PO Express 20% Margin Investing Classes - 50% Margin Newsletter Sales - 30% Margin Book Sales - 25% Margin Software Sales - 15% Margin PPV with Experts - 50% Margin Strategic Partners - 45% Margin CyBerCorp - # of Users WSJI - $5.00 flat fee # of Free ACTIVE Members SC Monthly Ad Views per Member Co-op Monthly Ad Views per Member Other Total Sales Direct Unit Costs SC Advertising Sales (in CPM) Co-op Advertising Sales (CPM) PPV SIG's - 25% Margin Edgar.corn / IPO Express 20% Margin Investing Classes - 50% Margin Newsletter Sales - 30% Margin Book Sales - 25% Margin Software Sales - 15% Margin PPV with Experts - 50% $50.00 $100.00 $5.00 $0.00 $0.00 $0.00 $0.00 $50.00 $1,200.00 $5.00 $0.00 $0.00 $0.00 $0.00 $50.00 $1,200.00 $5.00 $0.00 $0.00 $0.00 $0.00 $2,419,200 $2,177,280 $1,070,000 $406,426 $80,262 $1,336,000 $134,669 $336,672 $134,669 $336,672 $705,000 $601 $0 $0 $0 $0 $9,137,450 FY2001 $0.00 $0.00 $75.00 $192.00 $25.00 $140.00 $15.00 $42.50 $10.00 $28,800,000 $12,960,000 $6,000,000 $2,400,000 $500,000 $2,000,000 $200,000 $500,000 $200,000 $500,000 $6,000,000 $1,800 $0 $0 $0 $0 $60,061,800 FY2002 $0.00 $0.00 $75.00 $192.00 $25.00 $140.00 $15.00 $42.50 $ I 0.00 $56,880,000 $25,596,000 $6,000,000 $4,740,000 $987,500 $3,950,000 $395,000 $987,500 $395,000 $987,500 $12,000,000 $1,800 $0 $0 $0 $0 $112,920,300 FY2003 $0.00 $0.00 $75.00 $192.00 $25.00 $140.00 $15.00 $42.50 $10.00 ( Margin Strategic Partners - 45% Margin CyBerCorp - # of Users WSJI - $5.00 flat fee # of Free ACTIVE Members SC Monthly Ad Views per Member Co-op Monthly Ad Views per Member Other Direct Cost of Sales SC Advertising Sales (in CPM) Co-op Advertising Sales (CPM) PPV SIG's - 25% Margin Edgar.corn / IPO Express 20% Margin Investing Classes - 50% Margin Newsletter Sales - 30% Margin Book Sales - 25% Margin Software Sales - 15% Margin PPV with Experts - 50% Margin Strategic Partners - 45% Margin CyBerCorp - # of Users WSJI - $5.00 flat fee # of Free ACTIVE Members SC Monthly Ad Views per Member Co-op Monthly Ad Views per Member Other Subtotal Direct Cost of Sales Total Sales by Month $2 _00.0_O "! .... in Year 1 $27.50 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 FY2001 $0 $0 $802,500 $325,140 $40,131 $935,200 $ I01,002 $286,171 $67,334 $185,170 $0 $0 $0 $0 $0 $0 $2,742,648 $27.50 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 FY2002 $0 $0 $4,500,000 $1,920,000 $250,000 $1,400,000 $150,000 $425,000 $100,000 $275,000 $0 $0 $0 $0 $0 $0 $9,020,000 $27.50 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 FY2003 $0 $0 $4,500,000 $3,792,000 $493,750 $2,765,000 $296,250 $839,375 $197,500 $543,125 $0 $0 $0 $0 $0 $0 $13,427,000 I -I'I'" $zco_Lceo- i $1.o_ _c 4., S5_ ooe, -J • --iI I" • Sales $1,5C0,000'"" $c _"_ _____-I.-_'*_ _ i 5.5.2 Sales Programs There are basically four types of Sales Programs we will incorporate. 1. Advertising Sales: We will sell advertising in-house, but, we are looking for a Net advertising agency to sell ads for us. Additionally, Thomson Financial does their own ad sales which we have a revenue sharing agreement with. Will hire an Advertising Sales Manager. 2. Newsletter SIG sales: We have a list of potential newsletter writers and publishers that we will contact. There are four Sarasota newsletter writers who we are going to target first. David Pierce will handle these sales. Additionally, Tim Watters and David Pierce will work on strategic relationships with Newsletter Publishing Houses. 3. PPV Sales: We have a list of potential PPV traders that we are in contact with. David Pierce and Tim Watters will handle these sales. 4. Affiliate/Portal Sales: We have a list of targeted portal Clients. David Pierce and Tim Watters will handle these sales. 5. Brokerage Relationships: Tim Watters will handle developing content/contracts that will allow brokerage houses to set up their won SIG's. Other sales in the Sales Forecast will take place via the StockChicken.com site, which will be direct sales. The site is designed to facilitate those sales through intra-site marketing and advertising. 5.6 Strategic Alliances We have a number of potential strategic partners. Please see the appendix for more information. Partnerships in place: 1. Thomson Financial: Data provider. 2. Zack's Investment Research: Data provider. 3. Edgar.com / IPO Express: SEC filings and IPO information. 4. CyBerCorp.com: Online Brokerage just acquired by Schwab. 5. TradersLibrary.com: Online book retailer 6. Quicken.com: Consumer products such as mortgages, insurance, financial planning tools. 7. Wall Street Journal Interactive Edition: The publication itself as well as the use of it's financial news feeds. Partnerships in the works: 1. Software retailer: Anderson Investor's Software. 2. Education Partner: Money Magazine, SmartMoney.com, Financials.com, Dow Jones University Portal Clients: Various sites under assessment. I a 5.7 Milestones The following table lists important program milestones, with dates and managers in charge, and budgets for each. The milestone schedule indicates our emphasis on planning for implementation. The most important programs are the sales and marketing programs listed in detail in the previous topics. Business Plan Milestones Milestone Manag er Planne Depart d Date ment Budget Actual Date Actual Budget Planne d Date Actual Date Budget Actual Budget $0 Get pages written Dave/K arl Marketing Plan Done Dave 7/16/99 Tech $0 9/1/99 $0 47 4/1/00 Sales & Mkting Tech $0 4/1/00 $0 0 $0 Version 2 Steve/ Karl Dave Dave 6/1/00 $0 6/I/00 $0 0 $0 Local NL Writers Advertising Sales 6/1/00 4/1/00 Bus. Dee. Sales & Mkting Bus. Dee. Tech $0 $0 6/1/00 4/1/00 $0 $0 0 0 $0 $0 PPV Sales Go into Production Dave/ Tim Steve/ Karl 6/1/00 10/1/99 $0 $0 6/1/00 10/26/9 9 2/7/00 6/1/00 $0 $0 0 25 $0 $0 Start Marketing Program Portal Clients Other Totals Dave Dave/ Tim 1/1/00 Depart ment 6/1/00 Bus. Dev. $0 $0 $0 $0 $0 $0 $0 $0 37 0 0 109 $0 $0 $0 $0 6.0 Management Summary Our management philosophy is based on responsibility, innovation, loyalty, flexibility, and mutual respect. People who work for StockChicken.com will be looked upon to get the job done in an efficient and timely manner. We plan on using flexible hours and will be goal oriented instead of time oriented in regards to completing tasks. 6.1 Organizational Structure The team includes four employees under a CEO, President, and COO. Our main divisions are business management, marketing, and the technology services sectors. 6.2 Management Team Steve Mather, CEO I CTO, Site Architect/Developer: 37 yearsold, co-foundedStockChicken.com in 1999 to focuson developinga onlineinvestorcommunity site.Over sixteenyears in IS industry having repeatedlydemonstrated strongarchitectural, echnicaland managementskills.Has managed orbeen t heavilyinvolvedin the full developmentlife cyclefor manylarge systems,bothin-houseand retail. Experienceincludesovertwelveyears in architectural esignand development,nineyears of database d and application architecture, ive yearsof UNIX development, evenyearsWindowsdevelopment, even f s s years in objectorienteddesignand development, nd two years in architecture a and developmentfor applications the Intemet. Has provento be excellentleaderand mentor.Strongbusiness on and people skillshave provento be a valuableasset to employersand projects. Possessesstrongskillsin GOAD/OOAPand OODBS withthe abilityto applythem successfully and mentorlargeteams. Constantly stayingcurrentwithlatesttechnologies, tandards,and methodologies.Industryexperienceincludes s financial,telephony,and marketingfrom the perspective businessprocessre-engineering well the of as analysis,design,development,and implementation successfularchitectures,rameworks,and projects. of f Steve is alsoan avidday traderof stocksand a popularposteron the variousstockcommunity chat areas. David Pierce, COO / CFO: 36 yearsold, co-foundedStockChicken.com 1999 to focuson developing in a onlineinvestorcommunity site. Duel Bachelorof Science Degreesin Marketingand Finance,Indiana University. pent 9 yearsin Indianapolis, N as a commercialreal estate developerand broker.Holdsthe S I CCIM designation commercialreal estate. For threeyearspriorto co-founding in StockChicken.com Davidraisedventurecapitalfor businessclientswhilebeingan avidday traderof stocksand a popular posteron the variousstockcommunity chatareas. Davidwill be in chargeof all aspectsof StockChicken.com's businessdevelopment. Timothy B. Watters, President: 33 years old,joined us in February2000 as Presidentand a director of StockChicken.com,nc.Mr. Watters comesto us with 12 years experienceas a Securities I Representative. FromJuly1991 to February2000 hewas a SecuritiesRepresentative FirstMidwest for Securities,Inc. DuringhistenurewithFirstMidwestSecurities,Inc.Mr. Wattersfocusedon stocktrading, financialplanningand equityfinancingfor private& publiccompanies.Duringhiscareeras Securities Representative Watters raisedmoneyfor varioussuccessful nternetcompanies.Tim willbe in charge Mr. I of all aspectsof StockChicken.com's businessdevelopment. Karl Mueller, Web Developer/Graphic Artist: 25 years old. Fouryearsof graphicdesign experience.Degreeis C++, Visual C++ and JAVAprogramming. as spentthelast six monthslearning H new programming techniques& developingthe web sitewith ASP, VBScript,MicrosoftFrontPage & VisualInterDev 6.3 Management Team Gaps We feel that we have a good team that will be able to build the foundation for StockChicken.com's success. The following positions need to be filled to optimize the site as well as to take us to the next level: 1. At present, we feel that we will need a full time Site Monitor and Member Support person. Entry level position, would need computer skills. We will build the interfaces to administer support. We can also have them do testing and Q&A. $36k per year. Another Customer Service person will be added in six months. (2) 2. Also, we feel that four full time Web developers with HTML, Java, SQL, NT mixture of experience. 2 experienced-- $60K per year. 2 entry level-- $40K per year. One from each will be hired immediately and the other two will be added in six months. (4) 3. EJB Developers (experienced). year. (3) We need 2 immediately with 1 more added in six months. $80k per 4. EJB Developers (entry level). We need 1 immediately with 2 more added in six months. $40k per year. (3) 5. Network Administrator. We need 1 immediately with 1 more added in six months. $60k per year. (2) 6. Infrastructure Developers. We need 2 immediately. $90k per year. (2) 7. One Office Manager. Office duties, phones, customer support, billing, etc. Will really need this once we have pay per view or e-commerce. $36k per year. (1) 8. Two secretaries. One for IT and one for Sales & Marketing. $24k per year. (2) 9. One Manager of Internet Business Development: relationships. $60k per year. (1) Experienced. PPV, Newsletters, Data, Strategic 10. One Manager of Advertising Sales: Experienced. Sales of Advertising and Products. $60k per year. Another added in six months. (2) 11. One Education product developer / manager. Experienced. $60k per year. (1) 12. One Spanish version manager in six months. $60k per year. (1) 6.4 Personnel Plan The Personnel Plan reflects the need to bolster our capabilities to match our positioning. Our total head count should increase to 7 this first year. Detailed monthly projections are included in the appendices. Personnel Plan Fixed Personnel Karl Mueler, Graphics and Development Steve Mather, CEO / CTO Customer Service Customer Service Web Developer (Exp.) Web Developer (Exp.) Web Developer (Entry) Web Developer (Entry) EBJ Developers (Exp.) EBJ Developers (Exp.) EBJ Developers (Exp.) EBJ Developers (Entry) EBJ Developers (Entry) EBJ Developers (Entry) Network Administrator (Exp.) 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% FY2001 $45,000 $120,000 $36,000 $18,000 $60,000 $30,000 $39,996 $19,998 $79,992 $79,992 $39,996 $39,996 $19,998 $19,998 $60,000 FY2002 $47,250 $126,000 $37,800 $37,800 $63,000 $63,000 $41,996 $41,996 $83,992 $83,992 $83,992 $41,996 $41,996 $41,996 $63,000 FY2003 $49,613 $132,300 $39,690 $39,690 $66,150 $66,150 $44,096 $44,096 $88,191 $88,191 $88,191 $44,096 $44,096 $44,096 $66,150 Network Administrator (Exp.) Infrastructure Developer Infrastructure Developer Consultants / Training Other Subtotal Sales and Marketing Personnel David Pierce, CO0 / CFO Tim Watters, President Manager of Education Content Manager of Spanish Version Manager of Business Development Manager of Advertising Sales Manager of Advertising Sales Other Subtotal General and Administrative Personnel Office Manager Book Keeper IT Secretary Sales & Marketing Secretary Other Subtotal Other Personnel Name or title Name or title Name or title Other Subtotal 5.00% 5.00% 5.00% 5.00% 5.00% $30,000 $90,000 $90,000 $180,000 $0 $1,098,966 $63,000 $94,500 $94,500 $189,000 $0 $1,340,804 $66,150 $99,225 $99,225 $198,450 $0 $1,407,844 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% $99,996 $99,996 $60,000 $30,000 $60,000 $60,000 $30,000 $0 $439,992 $104,996 $104,996 $63,000 $63,000 $63,000 $63,000 $63,000 $0 $524,992 $110,246 $110,246 $66,150 $66,150 $66,150 $66,150 $66,150 $0 $551,241 5.00% 5.00% 5.00% 5.00% 5.00% $36,000 $6,000 $24,000 $24,000 $0 $90,000 $37,800 $40,000 $25,200 $25,200 $0 $128,200 $39,690 $42,000 $26,460 $26,460 $0 $134,610 5.00% 5.00% 5.00% 5.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Headcount Total Payroll Payroll Burden Total Payroll Expenditures 29 $1,628,958 $244,344 $1,873,302 29 $1,993,995 $299,099 $2,293,095 29 $2,093,695 $314,054 $2,407,749 7.0 Financial Plan The most important element in the financial plan is the critical need for improving several of the key factors that impact cash flow: 1. As a start-up, the financial plan is only a forecast. 2. We plan to find Investors to invest $3,500,000 long-term this year. Out of this amount $300,000.00 s L would be in equipment. The amount seems in line with the balance sheet capabilities. 7.1 Important Assumptions The financial plan depends on important assumptions, most of which are shown in Table 6. The key underlying assumptions are: * We assume a continuing growth economy, without major recession. * We assume that there are no unforeseen changes in technology to make products immediately obsolete. * We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables. General Assumptions Short-term Interest Rate % Long-term Interest Rate % Payment Days Estimator Tax Rate % Expenses in Cash % Personnel Burden % FY2001 10.00% 10.00% 30 33.00% 10.00% 15.00% FY2002 10.00% 10.00% 30 33.00% 10.00% 15.00% FY2003 10.00% 10.00% 30 33.00% 10.00% ] 5.00% 7.2 Key Financial Indicators On our General Assumptions table, the most ambitious (and also the most questionable) assumptions are our projected sales and gross margins. This is critical to healthy cash flow, but will also be difficult. Benchmark Comparison • p:2oo3 sa_s Gr_ss OpEx 7.3 Breakeven Analysis Assumptions for Break-even Analysis: 1. Cost for Karl Mueller is $42,000 per year which is $3,500 per month. 2. Cost for hosting is assumed to be $5,000.00 per month. 3. Cost for Thomson Financial is $5,000.00 per month. This comes to $13,500.00 per month in fixed costs. In reality those costs are the full costs of those services which are stepped up the first eight months. The actual costs are as follows: 1. Karl: $2,750.00 x 12 = $42,000 2. DataReturn: - Months 1 - 4 : $3,000 x 4 = $12,000 - Months 5 - 12:$5,000 x 8 = $40,000 3. Thomson: - Months 1 - 2:$0.00 x 2 = $0.00 - Months 3 - 4:$1,000 x 2 = $2,000 - Months 5- 6:$2,500 x 2 = $5,000 - Months 7-12:$5,000 x 6 = $30,000 The above totals to: $131,000 In the Break-even Analysis the total is $156,000 So, there is a cushion of $25,000 ($156k - 131k)which comes to $2,084.00 per month in extra expenses that are supported by the Break-even number. The per unit value for a Member is $200.00 per year. So a total of 65 new members must be signed up per month with a yearly total of 780 to break-even. (Our Membership is free. Thus this is for illustrative purposes only. We assume each Member will purchase $200 worth of products or generate $200 in ad views.) This Break-even analysis does not include our major profit centers of Banner Advertising, Product Sales, PPV SIG Memberships, or Pay-Per-View Education/Reports/Interviews income. Break Even Analysis: Monthly Units Break-even Monthly Sales Break-even Assumptions: Average Per-Unit Revenue Average Per-Unit Variable Cost Estimated Monthly Fixed Cost Breakeven Analysis 44 $8,750 $200.00 $0.00 $8,750 se ooo ........ s4 .o,lo. _ ' " •sz o00 - -" -$_ooo ...... • se.ooo.,' •$8.0_ + -Sl0.0,'_ _L-0 7 14 " ' ................ " _T-=_. 21 28 _-_ "T'_-T""="'_:TT'T""'_ 35 42 49 56 63 70 t/ J 7.4 Projected Profit and Loss The most important assumption in the Projected Profit and Loss statement is that we can keep our costs to a minimum by using the Internet for not only our distribution, but, also for our virtual office environment. Another important assumption is that our Memberships will grow quickly by having strategic partners t D (Newsletter writers/publishers, site. Experts, and other financial sites) use our site as their community portal Profit and Loss (Income Statement) Sales Direct Cost of Sales Fixed Payroll Data Feeds Total Cost of Sales Gross Margin Gross Margin % Operating expenses: Sales and Marketing Expenses Sales and Marketing Payroll Advertising- 15% of Sales 2001 and 2002 Promotions Travel & Entertainment Miscellaneous Total Sales and Marketing Expenses Sales and Marketing % General and Administrative Expenses General and Administrative Payroll Payroll Burden Depreciation Leased Equipment General Office/Utlilities Insurance Rent Total General and Administrative Expenses General and Administrative % Other Expenses Other Payroll Contract/Consultants Total Other Expenses Other % Total Operating Expenses Profit Before Interest and Taxes Interest Expense Short-term Interest Expense Long-term Taxes Incurred FY2001 $9,137,450 $2,742,648 $ 1,098,966 $55,000 .................................... FY2002 $60,061,800 $9,020,000 $1,340,804 $120,000 $10,480,804 $49,580,996 82.55% FY2003 $112,920,300 $13,427,000 $ 1,407,844 $120,000 $14,954,844 $97,965,456 86.76% $3,896,614 $5,240,836 57.36% $439,992 $750,000 $150,000 $60,000 $12,000 .................................... $524,992 $7,437,149 $300,000 $63,000 $12,600 $8,337,741 13.88% $551,241 $14,694,818 $600,000 $66,150 $13,230 $15,925,440 14.10% $1,411,992 15.45% $90,000 $244,344 $0 $114,000 $18,000 $2,400 $18,000 .................................... $128,200 $299,099 $0 $228,000 $36,000 $2,520 $36,000 $729,819 1.22% $134,610 $314,054 $0 $239,400 $37,800 $2,646 $37,800 $766,310 0.68% $486,744 5.33% $0 $0 .................................... $0 $0 $0 0.00% $9,067,560 $40,513,436 $0 $0 $13,369,434 $0 $0 $0 0.00% $16,691,750 $81,273,706 $0 $0 $26,820,323 $0 0.00% .................................... $1,898,736 $3,342,100 $0 $0 $1,102,893 Net Profit Net Profit/Sales $2,239,207 24.51% $27,144,002 45.19% $54,453,383 48.22% 7.5 Projected Cash Flow The cash flow depends on assumptions for cash transactions (no accounts receivable or inventory). Pro-Forma Cash Flow Net Profit Plus: Depreciation Change in Accounts Payable Current Borrowing (repayment) Increase (decrease) Other Liabilities Long-term Borrowing (repayment) Capital Input Subtotal Less: Change in Other Short-term Assets Capital Expenditure Dividends Subtotal Net Cash How Cash Balance Cash Analysis $6.c¢o.cc_ --" FY2001 $2,239,207 $0 $0 $0 $0 $0 $3,500,000 $5,739,207 FY2001 $0 $300,000 $0 $300,000 $5,439,207 $5,439,207 FY2002 $27,144,002 $0 $0 $0 $0 $0 $0 $27,144,002 FY2002 $0 $0 $0 $0 $27,144,002 $32,583,209 FY2003 $54,453,383 $0 $0 $0 $0 $0 $0 $54,453,383 FY2003 $0 $0 $0 $0 $54,453,383 $87,036,592 .$1,ooo,ooo L....... ......... Ijjjjj JJJJt $4.000.000 •,.... S3.0OO.O00 -" ..... " 12,000.00¢ -$1.ooo.ooc L...... $c. • ..... " _' 4, • cas,, k_ F _ Ca_, 1'._,_e _ +....... i. _ • _-;J 7.6 Projected Balance Sheet The Projected Balance Sheet is quite solid. We do not project any real trouble meeting our debt obligations--as long as we can achieve our specific objectives. Pro-forma Balance Sheet Assets Starting Balances Short-term Assets Cash Other Short-term Assets Total Short-term Assets Long-term Assets Capital Assets $0 $0 $0 $0 FY2001 $5,439,207 $0 $5,439,207 $300,000 FY2002 $32,583,209 $0 $32,583,209 $300,000 FY2003 $87,036,592 $0 $87,036,592 $300,000 ti. .D Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital $0 $0 $0 $0 $300,000 $5,739,207 $0 $300,000 $32,883,209 $0 $300,000 $87,336,592 FY2001 Accounts Payable Short-term Notes Other Short-term Liabilities Subtotal Short-term Liabilities Long-term Liabilities Total Liabilities Paid in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth $0 $0 $0 $0 $0 $0 $0 $0 FY2002 $0 $0 $0 $0 FY2003 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,500,000 $0 $2,239,207 $5,739,207 $5,739,207 $5,739,207 $0 $0 $3,500,000 $2,239,207 $27,144,002 $32,883,209 $32,883,209 $32,883,209 $0 $0 $3,500,000 $29,383,209 $54,453,383 $87,336,592 $87,336,592 $87,336,592 7.7 Business Ratios The table follows with our main business ratios. Ratio Analysis Profitability Ratios: Gross Margin Net Profit Margin Return on Assets Return on Equity Activity Ratios AR Turnover Collection Days Inventory Turnover Accts Payable Turnover Total Asset Turnover Debt Ratios Debt to Net Worth Short-term Liab. to Liab. Liquidity Ratios Current Ratio Quick Ratio Net Working Capital Interest Coverage Additional Ratios Assets to Sales Debt/Assets Current Debt/Total Assets FY2001 57.36% 24.51% 39.02% 39.02% FY2001 0.00 0 0.00 0.00 1.59 FY2001 0.00 0.00 FY2001 0.00 0.00 $5,439,207 0.00 FY2001 0.63 0% 0% FY2002 82.55% 45.19% 82.55% 82.55% FY2002 0.00 0 0.00 0.00 1.83 FY2002 0.00 0.00 FY2002 0.00 0.00 $32,583,209 0.00 FY2002 0.55 0% 0% FY2003 86.76% 48.22% 62.35% 62.35% FY2003 0.00 0 0.00 0.00 1.29 FY2003 0.00 0.00 FY2003 0.00 0.00 $87,036,592 0.00 FY2003 0.77 0% 0% RMA 0 0 0 0 RMA 0 0 0 0 0 RMA 0 0 RMA 0 0 0 0 RMA 0 0 0 & _* IF- Acid Test Asset Turnover Sales/Net Worth 0.00 1.59 1.59 0.00 1.83 1.83 0.00 1.29 1.29 0 0 0 Table of Contents 1.0 1.1 1.2 1.3 2.0 2.1 2.2 2.3 3.0 3.1 3.2 3.3 3.4 3.5 3.6 4.0 4.1 4.2 4.2.1 4.2.2 4.2.3 4.3 4.3.1 4.3.2 4.3.3 4.3.4 5.0 5.1 5.2 5.3 5.4 5.4.1 5.4.2 5.4.3 5.4.4 5.4.5 5.5 5.5.1 5.5.2 5.6 5.7 6.0 6.1 6.2 6.3 6.4 7.0 Executive Summary Objectives Mission Keys to Success Company Summary Company Ownership Start-up Summary Company Locations and Facilities Products and Services Product and Service Description Competitive Comparison Sales Literature Sourcing Technology Future Products and Services Market Analysis Summary Market Segmentation Target Market Segment Strategy Market Needs Market Trends Market Growth Industry Analysis Industry Participants Distribution Patterns Competition and Buying Patterns Main Competitors Strategy and Implementation Summary Strategy Pyramids Value Proposition Competitive Edge Marketing Strategy Positioning Statements Pricing Strategy Promotion Strategy Distribution Strategy Marketing Programs Sales Strategy Sales Forecast Sales Programs Strategic Alliances Milestones Management Summary Organizational Structure Management Team Management Team Gaps Personnel Plan Financial Plan 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7.1 7.2 7.3 7.4 7.5 7.6 7.7 Important Assumptions Key Financial Indicators Break-even Analysis Projected Profit and Loss Projected Cash Flow Projected Balance Sheet Business Ratios 0 0 0 0 0 0 0