Letter of Transmittal

98 West Green Dr. #133

Athens, Ohio 45701

February 12, 2001

Y.S.E.

3142 Southern Blvd.

Youngstown, Ohio 44507

Dear Mr. H.G. Waller and Mr. John Waller,

As you requested, we have prepared a business plan for Y.S.E. Enclosed you will find a detailed analysis of our ideas and plans to increase the size and revenue of Y.S.E. as you look to expand in the upcoming years. Some of the subjects discussed within the business plans contents are as follows:

§ A company overview

§ An industry/competition analysis

§ Information on the company’s organizational structure

§ Our sales/service, marketing, and computer technology strategy

§ Information on the selected insurance

§ Forecasted financial statements and summaries

After extensive research, we have found that Y.S.E. possesses a great potential for growth in the wholesale and repair of spray equipment industry. Our plan for expansion not only includes building a stronger customer base in the local area where Y.S.E. has established themselves, but also expanding to the national market with a strong web presence. We believe that with an increased focus on the direction of the company and implementation of the strategies discussed throughout the plan, Y.S.E. will not be a competing company, but the company to compete with.

We would like to thank you for the academic opportunity you have given us with this project. We would also like to thank you for taking the time to read over the business plan we have composed. We invite and encourage you to contact us with any questions that you attain throughout your reading of the business plan via the database. Thank you again and we look forward to following the growth of Y.S.E. in the future.

Sincerely,

Jennifer Fisher

Thomas Gentile

Briana Jenkins

David Josepho

Travis Mohler

Table of Contents

Executive Summary................................................................................................... 4

Company Overview................................................................................................... 5

Industry Analysis....................................................................................................... 5

Competition Analysis................................................................................................. 6

Organizational Structure............................................................................................. 8

Sales and Service Strategy......................................................................................... 9

Marketing Strategy.................................................................................................. 11

Computer Technology Strategy................................................................................ 15

Insurance Strategy................................................................................................... 16

Financials................................................................................................................ 17

References Cited..................................................................................................... 19

Appendices............................................................................................................. 21

Executive Summary

Y.S.E. has developed a plan to focus on becoming a larger company offering our customers more services using a number of new strategies, the redirecting of our current employees, and the adding of new employees. Y.S.E. operates in a variety of different industries, including the development of spray systems, wholesale distribution of pressure washers, air compressors, abrasive cleaning and spray equipment, along with the selling of unique parts. Y.S.E. has also been committed to quality service of all of the systems we sell. With the experience we have obtained through25 years of experience, Y.S.E believes that we have the capabilities to increase our presence in all of our industries.

We are asking for a loan for the amount of $150,000 from the Mahoning Valley Economic Development Corporation to help initiate the increased presence in our industries. The loan we are requesting will support us by adding additional employees, renovating a larger building, obtaining a larger inventory of our products and parts, increasing our service potential, becoming a limited liability company (LLC), and innovatively marketing our company.

By making this transition from a sole proprietorship to a LLC, Y.S.E. will be provided with a combination of the best features of the corporate and partnership forms of business. Y.S.E. will be able to avoid being taxed twice by the federal income tax and will also have the ability of making a smooth transition to a corporation.

Additional employees will help Y.S.E. extend our sales and service to a larger customer base, while continuing to maintain the excellent customer relationships we have formed. Our employees will be trained with an extensive knowledge in a particular area of the business to ensure that our quality care and concern for our customers continues. We plan to form a larger market by utilizing a more aggressive sales strategy with our additional employees. An interactive presence on the Internet will increase our sales and allow other customers outside of our region to have access to us.

With our increased sales and repairs it will be necessary for Y.S.E. to relocate to a building that is double the size of our current location. A larger building will also provide us with an opportunity to store a greater inventory so we can service our extended customer base.

With the funds we receive from the Mahoning Valley Economic Development Corporation, these strategies will be able to be completed giving us the competitive advantage needed for Y.S.E.’s expansion. We will be working together as a company with these strategies to accomplish the expansion goal we have set for ourselves. Y.S.E. has the opportunity of not only creating a bigger company, but also to create a number of new jobs in the Mahoning County area.

Mission Statement

Throughout the past 25 years, Y.S.E. has been a leader in finding innovative solutions to meet the changing needs of the surface preparation and coating industry. Y.S.E. and our employees are dedicated to bringing each customer the right product at a competitive price with the highest level of service and respect.

Company Overview

Y.S.E., located in Youngstown, Ohio, is a company involved in the distribution and service of paint application and removal equipment for the past 25 years. Participating in the wholesale of paint-related equipment to industrial customers and independent contractors, we carry a large inventory consisting of air compressors, airless paint systems, pressure washers, parts, and consumables that are necessary in the paint application and removal process.

Repair work accounts for a large portion of Y.S.E.’s business, which includes repair for many manufacturers of such items as air compressors, airless paint systems, pressure washers, and generators. Warranty repair contracts have also been established with a couple of the manufacturers we sell agreeing that Y.S.E. will repeatedly repair defects in certain products. We are responsible for all parts and labor necessary to repair the products and will be compensated by the manufacturer as agreed upon in the warranty repair contracts.

Rentals consist of a portion of Y.S.E.’s business to maintain the quality relationships between our company and customers. Along with all the different rentals Y.S.E. offers, we supply an abundance of unique parts. Included in these parts are, for example, hoses, nozzles, fittings, gauges and regulators. The extensive assortment of miscellaneous items from different manufacturers gives us a competitive advantage in the sales and repair sectors.

Industry Analysis

The U.S. government organizes every industry into a specific code called Standard Industrial Classification Codes (SIC Codes) and more recently has developed a more detailed and focused system called North American Industry Classification System (NAICS). The SIC and NAICS codes that Y.S.E. fits under are listed respectively below:

5082 (421810) Sandblasting Equipment and Supplies
3559 (333298) Special Industry Machinery
5085 (421840) Spraying Equipment Wholesale
7359 (532490) Spraying Equipment Rental

(Reference USA, 2000)

Using these codes, we can consider these industries as potential markets. Y.S.E. already has established a reasonably sized customer base under these industries; however, there are many more customers available. Currently, we have over 300 customers, but with our added manpower, advertising, and future strategies, we will be able to extend our current market. The following chart demonstrates the demand for potential products. On the left side of the chart, the numerous types of coatings are listed. On the right side, the potential markets where Y.S.E. can target are listed.

(paint.org, 2001)

Based on information collected by the U.S. Census Bureau in the 1997 Economic Census Report, the growth of the industries where Y.S.E. competes can be evaluated by state. Segmented by the SIC codes, the growth of the markets measured in terms of the changes in sales revenues from 1992 to 1997, Y.S.E. can realize the share of each market available to us. In Ohio, West Virginia, and Pennsylvania, the average growth rates of the industries that we are involved with were 53.1%, 39.5%, and 33.5%, respectively (census.gov, 2001). These figures demonstrate the opportunity available to Y.S.E. in our target markets.

The Chairman and CEO of Sherwin Williams, Christopher Conner stated, “We continue to anticipate sales increases for the year in the mid-single digit range” (Van Arnum, 2000). Over the last three years, the average growth rate of the paint sold was 4.5% (paint.org, 2001). We expect the paint application and removal equipment industry will have a similar growth rate in the future. Y.S.E. realizes that the economy is beginning to slow down, which we expect to have a nominal effect on our business. Although the number of homes sold and the number of consumables purchased will decrease, Y.S.E. will be focusing on industrial customers. This will protect us from a dramatic impact if the economy falls into a recession.

Competition Analysis

The industries in which Y.S.E. competes are composed mainly of small entities similar to us; however, there are a couple of larger competitors like Sherwin Williams, Home Depot, and Lowe’s. Sherwin Williams is the only one of the larger competitors to concentrate on the consulting aspect of the industry. They have developed a distinct division called SherWorks that develops paint application solutions for its customers (sherwinwilliams.com, 2001). Lowe’s simply sells equipment like air compressors, pressure washers, and sandblasters. Home Depot distinguishes themselves from the larger competitors by offering rentals of these types of equipment.

D.F.M., a local competitor of Y.S.E., provides its customers with a similar product mix as Y.S.E. Although the two companies seem similar, Y.S.E. differentiates itself from D.F.M. through its superior customer service and knowledgeable team. We pride ourselves on supplying with our customers with quality products at reasonable prices and enhancing our reputation in our industries.

All the larger competitors have an advantage over Y.S.E. because they have the funds to support bulk purchasing. Y.S.E. will be able to compete with the larger competitors by supplying each customer with personalized service. Home Depot does provide rentals; however, they do not have a repair department. If for some reason the equipment does not function properly, then Home Depot does not have anyone on location to repair the equipment.

Our personal sales team and service calls will offer a substantial deviation from the norms of the overwhelming feel of corporate America. Y.S.E. can offer an array of services to complete, sustain, and perfect the paint spray application process setting us apart from our competitors. Although we realize that there is competition within our target market we are confident that we will be more than able to compete effectively.

Future Industries

As Y.S.E. looks to increase the inventory of the products we already carry, we are also looking at other profitable markets within the industry. An opportunity to consider is the powder coating industry. Powder coating is a higher quality, and is an environmentally friendly alternative to liquid paint coating. With its 95% efficiency to its target, the product will release 5% overspray making it safer for employees to use. In 1999, the powder coating markets totaled $950 million, 5% of the coatings consumption, and by the year 2004 there is an expected increase of nearly $330 million to $1.28 billion in total revenue in this market (Van Arnum, 2000).

This expected increase in demand provides an opportunity for Y.S.E. to explore and implement these powder coating products to expand our potential customer base. Because of the number of advantages powder coating equipment offers to its user and the environment, the cost exceeds that of a conventional system (epa.gov, 2001). With the loan requested, we will have a better opportunity in acquiring a position in the powder coating market.

Environmental Protection Agency

The United States Environmental Protection Agency (EPA) is making a campaign for people and businesses to use more efficient and accurate paint spraying equipment because of the health benefits it provides for the employees, their environmental safety, and their overall cost reduction. Recently, the EPA has become more concerned and aware of the overspray generated by paint spray equipment. (See Appendix A.) Many systems are less efficient, therefore releasing the harmful chemicals that paint contains, such as isocyanates (the leading cause of occupational asthma), solvents, and paint additives into the air.

Y.S.E. currently carries high-volume low-pressure (HVLP) spray equipment because of its increased efficiency compared to conventional spray systems. As federal, state, and local regulations continue emphasizing source reductions of pollutants, we will be looking into developing more sales of equipment with more safety features. For example, we are looking into the powder coating industry because these systems are the most efficient and produce the least amount of overspray (epa.gov, 2001).

Occupational Safety and Health Act

We at Y.S.E. are fully aware of the expectations the Occupational Safety and Health Act (OSHA) has for our business and the products we use as we expand, renovate, and relocate. We will be using the Four-Point Program and other suggestions, provided by OSHA, as a guideline. This program consists of Management Commitment and Employee Involvement, Worksite Analysis, Hazard Prevention Control, and Training for Employees, Supervisors, and Managers (osha.gov, 2001). Within the Worksite Analysis section is a group of checklists, which we will use to ensure we are aware of and avoid all safety and health hazards (See Appendix B.). We will also provide our customers with these checklists to ensure their safety in their workplace when using the equipment purchased or rented from us.

Organizational Structure

Formally, Y.S.E. operated as a sole proprietorship with Homer Waller as the sole owner. Along with the new strategies Y.S.E. is planning to implement into the operations of the business, we will be changing our structure to a limited liability company (LLC). (See Appendix C.) A LLC has a variety of advantages including being taxed as a partnership and limited liability for the owners. The LLC will provide Y.S.E. with an organizational structure that will change as we continue our growth. A LLC provides a smooth transition between a privately held company to that of a publicly held company. We can move to a corporation without a dramatic change in the organizational structure.

Although the amount of paperwork necessary to file with the state is rather extensive, the overall benefits provided by the LLC will make the decision worthwhile. (See Appendix D.) With a LLC, Y.S.E. will be able to be owned by numerous members. This style of ownership will allow us to easily continue the business throughout an unlimited number of generations.

Along with the new organizational structure, changes will also be made in the management. Homer Waller formally was responsible for all the operations of the business, which included the financial and managerial responsibilities. The financial and managerial responsibilities will be passed on to John Waller leaving more time for Homer Waller to practice his skills more frequently. The officers will be as follows:

President: H.G. Waller

Vice President: John Waller

Treasurer: Harold Waller

Secretary: Ellen Waller

YSE Sales and Service Strategy

Current Employees

H.G. Waller, the owner and founder of Y.S.E., has been a major component of the entire company throughout our 25 years of business. He has been both a sales and repairperson for Y.S.E. He has handled the day-to-day operations of the company as well as the accounting, marketing, and financial aspects.

The expansion of Y.S.E. will allow Mr. Waller to devote more time to consulting businesses for customers’ individual coating needs and to developing the systems that will be implemented. Mr. Waller can utilize his expertise more often, making our company more suitable to our customers’ needs. Using his unique ability to service the machines Y.S.E. sells, he will also play a vital role in training all new repair technicians.

John Waller has worked full-time for four years at Y.S.E as both a sales and repairperson. Prior to that, he had worked for many years as a part-time employee at the company. John’s knowledge of the company and our customers will enable him to now run the day-to-day operations of the company. He has the background needed to direct the technical, financial, and managerial roles at Y.S.E. His vision for Y.S.E. will lead the company to perform beyond our fullest potential.

Harold Waller will remain based in the Youngstown headquarters of Y.S.E., and will continue his role of building relationships between customers and the company in the Youngstown area. He has been in sales for over 30 years, the last 26 at Y.S.E., and has been able to establish accounts and maintain relationships with customers. He has an extensive knowledge of the inventory and knows what services we are able to perform. He will have control over the inventory and will be required to package and ship out orders to the customers. He will also help to train the new sales employees and provide them with the background knowledge of the parts and service needed.

Ellen Waller has the ability to handle an office and run many of the programs Y.S.E. depends on to function such as the bookkeeping and accounts receivable and payable. Having been with Y.S.E. for over four years, she will be instrumental with the expansion phase to make sure the office keeps up-to-date and runs smoothly. She will continue to assist John in running the day-to-day operations of the company as an assistant and will train the new office employee.

Future Employees

Y.S.E.'s growth will be highlighted by the addition of ten new jobs over the next three years. With the expansion of the company into new markets such as Cleveland, Akron/Canton, Pittsburgh, and Wheeling, Y.S.E. will hire four new salespeople. We will also hire four additional repair people in each of the target markets. In addition, the company will hire one general office person and one employee to stock the warehouse and package and ship orders.

Y.S.E. will hire the sales and repair people and have them trained in Youngstown. It will take the sales people approximately three months and the repair people six months to be trained. It will include learning the inventory and equipment of Y.S.E., and shadowing Greg and John Waller on repair and sales trips to obtain first hand knowledge as to how Y.S.E. repairs and sells the merchandise we carry.

Beginning in January 2001, Y.S.E. will hire one salesperson and one repairperson. The salesperson will come from the Cleveland area and preferably have experience in sales of similar products. After three months, the newly trained salesperson will focus on the Cleveland market. The Cleveland market was chosen because of the large number of potential customers in the area and the geographical distance relative to Youngstown.

The repairperson hired in January 2001 will continue training for an additional three months while the salesperson begins to establish accounts. Y.S.E. will consider recruiting these repair people from the technical and vocational schools in Mahoning County including Mahoning Valley Joint Vocational School, Choffin Career Center, Trumbull County Joint Vocational School, and ETI Technical College.

Once the salesperson and the serviceperson have been completely trained, they will work closely as a team to meet our customers’ goals. Each repair and salesperson will communicate with one another via cellular telephones and lap top computers provided by our company. The team will document each visit on a database and record each customer’s specific needs and meet them promptly in order to ensure customer satisfaction. The teams will frequently visit the customers in order to ensure that they are receiving quality service and products.

Beginning in July 2001 and ending in December 2002, the cycle will continue to be repeated every six months. The training will take place in Youngstown and each team will move to the target market after the completion of training. The projected dates that each team will be established in the target markets are:

In 2002, a general office person will be added to the staff to help Ellen Waller with the increased volume of work due to the new customers. This person must be knowledgeable in computers and have an understanding of how the company operates and what sort of products and services we offer. Due to walk-in sales, the new office assistant must possess the qualities necessary to handle customer relations on a daily basis. Also, in 2002, a warehouse employee will be added to ease the workload of Harold. This person must have a training period to learn the inventory of the company and the processes used to package and ship orders to customers.

Marketing Strategy

The primary objective of Y.S.E. is to cater to the needs of our target market, which includes the industrial and contracting segments of the surface preparation and coating industry. Y.S.E.’s Mission Statement indicates that we strive to find innovative solutions to suit the varying needs of our customers in the paint application and removal processes. Y.S.E. will develop these solutions by utilizing the following plans:

§ Sales Advantage- Y.S.E.’s sales advantage includes maintaining existing relationships with current customers as well as expanding our customer base by developing long-term mutually beneficial relationships.

§ Service Advantage-The ability of Y.S.E. to recognize the needs of each individual customer and provide the personal consulting that is desired.

Our tight knit sales and service teams will exchange information on a regular basis to continually satisfy the rapidly changing needs of each customer. This distinction will set Y.S.E. apart from its competitors because our sales and service teams will be working together to surpass the goals of each of our customers.

Target Market

Y.S.E.’s main target is to expand our current product mix to other areas including the tri-state area of Ohio, West Virginia, and Pennsylvania. Focusing on these states with our individual teams, we will be able to expand our products and services to more independent contractors as well as companies needing spray application and removal equipment.

Product Plan

Buying power is a critical aspect of the selling of consumables to contractors. With the loan provided by the Mahoning Valley Economic Development Corporation, Y.S.E. will be able to increase its overall buying power to offer our customers more competitive prices in a price sensitive market.

Y.S.E. also plans to utilize our expertise in continuing to develop, and eventually patent, innovative ideas in the spray application equipment sector of our business. The cost of a patent includes several components, but could be extremely beneficial for Y.S.E. to obtain. These prices might seem rather high, but patents are relatively minimal compared to the cost of turning an invention into a product. If the cost of Y.S.E.’s patent exceeds the amount of expected profit, then a patent is not suggested. (See Appendix E.)

Working together with our individual customers and developing customized solutions, Y.S.E. will be able to develop an array of unique and innovative products. With the additional funding provided by Mahoning Valley Economic Development Corporation, it will increase our inventory so that products are quickly accessible to our industrial customers.

Service contracts will also be offered to our customers for a nominal additional cost. The service contracts include frequent check-ups with the customer to maintain the conditions of their equipment. This will reduce the frequency of costly repair on the machinery. The customers will be required to pay for large projects; however, the frequent visits will be included in the price paid for the service contract.

Price Plan

Mark-up-The typical mark-up that Y.S.E. applies to a product is 30% above cost. Compared to other stores that sell similar products, Y.S.E.’s mark-up is comparable. Y.S.E. will maintain its current mark-up, but will take into consideration the customer when deciding the ultimate price. With repeat business Y.S.E. will lower the mark-up depending on how much revenue Y.S.E. receives from that particular customer.

Labor-The ability to service a variety of different equipment from various manufacturers is a competitive advantage that we possess. Y.S.E. will continue to provide prompt and quality service to our increased customer base. With the increased sales and service force, Y.S.E. will ensure our present and potential customers that the new sales volume will not adversely affect the quality of service.

Y.S.E.’s rates are competitive with the industry including our main competitor D.F.M. We charge a flat $45 per hour charge for repairs done at our Youngstown location. We plan to charge the same amount per hour when the repairs are done on the site of the customer plus an additional travel fee of $0.25 per mile.

Rental Equipment-Y.S.E.’s rental fees are competitive with the competition in the area. D.F.M., a local competitor, has rental prices slightly lower than Y.S.E., but the rental market is not targeted at being entirely price competitive. Y.S.E. rentals are designed to provide our customers with the necessary equipment during a temporary break down, repair, or while waiting for a new product to be delivered. We provide our customers with all the necessary equipment during these times. The prices are as follows:

Ø Sandblasters $75 per day

Ø Air Compressors $85 per day

Ø Pressure Washers $65 per day

Ø Airless Paint Systems

Ø Electric $65 per day

Ø Gas Powered $85 per day

Ø Air Operated $85 per day

Inventory-If a product is in high demand, then Y.S.E. would like to increase the total quantity purchased. Currently, we receive an estimated discount of 30% when we buy from our suppliers and they usually extend an additional 10% discount if we purchase in volume. For example, for a typical sandblast nozzle, one to five items costs $75 each, six to nineteen items costs $68 each, and more than 20 items costs $63 per item. Presently, we only have the funds to sustain the $68 cost and would like to use the loan to enable greater purchasing volume. We will be able to increase our profit margin by $5 per item sold with our greater purchasing power.

Distribution

Since Y.S.E. has already established relationships with UPS, Federal Express and the U.S. Postal Service, all of Y.S.E.’s products can be shipped through one of these channels. Under certain conditions, parts are urgently needed by customers to ensure that they will lose as little manufacturing time as possible. With the additional jobs created by the loan requested, a service person or one of the sales people can drive the part where it is needed. Of course, the customer will incur the additional charges because of the personal delivery; however, the benefit of having the part quickly will save the company money when considering the manufacturing time that could have been lost.

Because Y.S.E. has additional building space available to us, the plans are to move the main operations of Y.S.E. to the new building and convert the old building into a warehouse. The close proximity will allow the parts to be easily accessible to the employees working at each location. The new location can be turned into a showroom, where the more expensive equipment could be modeled. For example, the new building could have an entire room dedicated as a spray booth that the company is able to duplicate and customize for any customer. The opportunity for customers who inquire about a new spray booth to see something comparable to what they want will increase our overall marketability.

Promotion Plan

Personal Selling-Personal selling is the ability of a salesperson to build and maintain relationships with individual customers. When a salesperson can effectively use personal selling, then the customers feel a personal relationship and satisfaction with the sales team working with their company. Our additional salespeople will allow us to make personal visits to our customers on a regular basis. We believe that this focus will make our customers feel valued.

Telemarketing-Our sales people will be dedicated to contacting current customers to ensure their satisfaction with our products and services. Y.S.E. is also striving to contact potential customers to establish a strong relationship. Manufacturers of the equipment that Y.S.E. sells, provide us with a list of clients who might need the products and services that Y.S.E. provides. Y.S.E. will be able to hire additional sales people to take actual sales calls in the field while the current salesperson can utilize his expertise, skills, and connections to take advantage of the leads that the manufacturers have received.

Catalog-With an increase in inventory, Y.S.E. will have additional merchandise that will need to be presented to our customers. We plan to develop a visually pleasing catalog that presents our new and old merchandise to our customers. This catalog will also have a listing of all of the parts and model numbers available to Y.S.E. and our customers. We will distribute these catalogs to our primary customers and they will be available by request on our newly developed web site.

Advertising-An expansion of Y.S.E.’s current marketing strategy is necessary to reach our intended target market. Y.S.E. plans to advertise its products and services through a variety of different channels. These channels include the implementation of an advertising campaign on the Internet where Y.S.E.’s customers can search through our entire catalog, inquire about special services, and order parts and products online.

Also included in the promotional plan is advertising in trade magazines relevant to the different industries that Y.S.E. supplies. The most personal means of communicating with the potential customers is an implementation of a telemarketing strategy to maintain relationships and continue superior service. The final method of reaching customers entails creating a presence at industry related tradeshows.

An Internet advertising campaign will promote Y.S.E.’s name to a variety of potential and current customers in the industry on the World Wide Web. This relatively inexpensive means of advertising will reach far more people than any other means of communication. Prices for online space can be found at exhibitcitynews.com and are comparable to advertising prices in this industry. (See Appendix F.)

Advertisement in relevant trade magazines will increase the awareness of Y.S.E throughout the country. Readership of the trade magazines typically includes companies and people who are either involved directly in the industry or companies who are needing the products. Trade magazines offer different solutions to its audiences in the form of articles, but most importantly in the advertisements. The cost of print advertisement in publications relevant to the industry can be found at exihibitcitynews.com. (See Appendix F.) If Y.S.E. were to enter the advertising segment of the trade magazines, then we would be able to make people aware of its specialized consultation abilities.

Trade Shows-Attending trade shows is a must for Y.S.E to market its business effectively. It is a way for Y.S.E to make its name known, and importantly to network with other businesses and gain potential customers. With this type of network, we will increase our sales greatly as well as gain current knowledge about the industry. We have found upcoming tradeshows in the area that we will consider attending, and will continue to look into more in the future. (See Appendix G.)

Y.S.E. will consider contracting Artfair, a company that specializes in designing trade show exhibits, to help them develop displays such as pop-up exhibits, panel systems or table top displays. At these trade shows people will definitely remember Y.S.E.’s name because of the professional exhibits that are shown. In turn, the marketing investments to Artfair can be quite profitable for Y.S.E. (Artfair 2001).

Certifications

Y.S.E. is planning on developing the expertise of our employees through certifications. These certifications are a way of showing our customers the great knowledge and expertise we have gathered about the industries where we do business. We are specifically interested in our current and future employees becoming certified member of the Society for Protective Coatings (SSPC). A SSPC certification identifies and awards recognition to individuals who have in-depth knowledge of the principles and practices of industry. This certification also attests to the professional credibility of the coatings practitioner, and thereby raises the standards of the protective coating profession. Development knowledge on corrosion and ways to control it by applying coatings are also enhanced. (See Appendix H.)

There are many specific benefits our employees will receive with a SSPC certification, such as being registered at SSPC’s offices. With this registration, the SSPC will publish our employees’ names, titles, and contact information in the Journal of Protective Coatings &Linings, a SSPC member directory, and on their web site, SSPC online. Our employees will receive a unique certification number and copies of the program logo that we can use on business cards, letterheads, our web site, etc., and a certificate and wallet card documenting the certification (SSPC.org, 2001).

Computer Technology Strategy

We will be purchasing a number of computer programs to expedite the transition from bricks and mortar to clicks and order. These programs consist of E-Commerce Construction Kit, AdWorks Website Promoter, and Peachtree Complete Accounting 8.0. (See Appendix I.) The software we have chosen will help us design and create

e-commerce, and maintain the necessary functions of a business including, but not limited to, inventory control, accounting, and customer account information. We have also chosen software to enhance our Internet presence while supplying information about when and from where our web site users are from.

The accessibility that the Internet provides for our customers will make it faster and easier for them to submit and track each individual order placed with Y.S.E. A presence on the Internet will provide a boundless market indicating that Y.S.E. will be able to easily reach potential customers. The web site will also sponsor special promotional prices on some of our products from time to time to encourage the use of Y.S.E.’s new e-commerce concept.

Insurance Strategy

Company Related Insurance

The insurance package that Y.S.E will possess as a LLC is known as a Business Owner’s Policy, or BOP. A BOP combines general liability insurance and a property package insurance policy to cover our commercial liability and property insurance for physical assets, such as contents that are leased or owned. This package insurance may also cover our loss of business income and extra expenses resulting from an insured peril. This business insurance package policy also insures lost or damaged property for replacement value, meaning we will receive a settlement amount sufficient to replace the property without deducting for depreciation. This plan will also cover other people at Y.S.E.’s personal property to the extent that Y.S.E. is legally liable for the damage (businessinsurancenow.com, 2001).

Employee Related Insurance

Health and Life insurance are important to future business success. Keeping employees happy is as important to Y.S.E. as customer satisfaction. We recognize the importance of employee satisfaction and we currently cover two employees on our insurance plan because the others are covered by a spouse’s superior plan. Y.S.E. understands that in order to attract employees we must acquire a plan that is comparable to any other business.

The Blue Cross Blue Shield Association (also known as Anthem) is an excellent health care provider to nearly 75 million Americans (bluecares.com, 2001). Y.S.E. will seek to have a group life insurance policy that will offer our employees a death benefit of two times their salary. Also an extensive health plan from Anthem will be provided to all of Y.S.E.’s fulltime employees. (See Appendix J.) Along with these coverage benefits we plan to provide Social Security, unemployment and workman’s compensation insurance. This will be initiated in the first year of expansion and is by no means limited to only those coverage plans. As Y.S.E. grows we will be looking to protect our assets and valued employees by adding such things as Key Person insurance and many various fringe benefits (See Appendix K.)

Forecasted Financial

We have created detailed financial forecasts for Y.S.E. based on the last three years of financial statements as well as an in-depth analysis of where the company is now and where we want to be in the future. We have based our projections on past sales and expenses as well as our new sales structure, marketing plan, advertising, and the launch of a fully operational e-commerce website. We have shown a small sample of the balance sheet, income statement, and cash flows (For the full projected financial statements see Appendix L). All projections are based in 2001 dollars. Y.S.E.’s fiscal year is from July 1 to June 30.

Balance Sheet

Y.S.E.’s balance sheet shows how the company, by the end of 2003, will have a strong financial base with which the company will be in a prime position to expand even further. We will significantly increase the amount of equity in the company along with our accounts receivables and accounts payable.

Balance Sheet

Current Assets		$ 529,847
Fixed Assets		$ 61,521
Total Assets		$ 591,395

Liabilities		$ 205,113
Owner's Equity		$ 386,282
Total Liabilities and Owner's Equity		$ 591,395

Income Statement

Y.S.E.’s projected income statement is the most telling sign of the company’s expansion. We will increase our overall expenses, but will make a net profit of over $24,000 just two years after receiving the loan. The income statement also shows, with the increased number of salespeople, gross sales will reach over $1 million dollars by 2003. We have tracked all expenses and have allowed for a small amount of error, and we are confident that a loan in the amount of $150,000 will take Y.S.E. to where we can realize our full potential.

Income Statement

	2001	2002	2003
Sales	$ 584,288	$ 986,918	$1,315,891
Cost of Goods Sold	$(243,560)	$(394,567)	$ (473,480)
Gross Profit	$ 304,728	$ 592,351	$ 842,411

Other Expenses (Excluding Interest)	$(340,648)	$(545,958)	$ (558,968)
Depreciation	$ (7,497)	$ (7,497)	$ (7,497)
Interest	$ (15,000)	$ (14,059)	$ (13,024)
Operating Income Before Taxes	$ (58,417)	$ 24,837	$ 262,922

Income Tax Expense	N/A	N/A	N/A
Net Income	$ (58,417)	$ 24,837	$ 262,922

Cash Flow

As shown by the projected cash flow statement, we will have plenty of cash to expand and grow the business. While we realize the business is subject to seasonal swings, with the loan and the increased cash being kept in the business, Y.S.E. will be able to survive any slow period in sales.

Cash Flows

	2001	2002	2003
Beginning Cash	$ 1,770	$ 80,546	$ 67,597

Cash In	$ 679,404	$ 943,055	$ 1,282,994
Cash Available	$ 681,174	$1,023,601	$ 1,350,591

Cash Out	$(600,628)	$ (965,004)	$(1,046,892)
Ending Cash	$ 80,546	$ 67,597	$ 303,699

Reference Cited

Anthem. (2000). Medical Coverage Cost-Share Options [Online]. Available: http://www.anthem.com/anthem/affliates/antemhealthny/products/cap.html [2001, February 11].

Artfair Displays. (2000). Custom Exhibits [Online]. Available: http://www.artfairdisplays.com/ [2001, February 7].

Blue Cross Blue Shield. (2000). Featured Programs and Partners [Online]. Available: http://www.bluecares.com/index.html [2001, February 11].

Business Insurance Now. (2000). General Liability and Property Insurance Package [Online]. Available: htpp://www.businessinsurancenow.com/genlib.html [2001, February 6].

EPA. (2001, February 9). The Automotive Refinishing Industry [Online]. Available: http://www.epa.gov/ttbnrmrl/625/7-91/016.htm [2001, February 3].

EPA. (2001, February 9). New Chemicals Environmental Initiative [Online]. Available: http://www.epa.gov/opptomotr/dfe/autobody/profile/diisopro.pdf [2001, February 1].

EPA. (2001, February 9). Environmental Technology Verification Report: HVLP Spray Equipment [Online]: Available: http://www.epa.gov/etv/04/shpp4c.pdf [2001, February 3].

Exhibit City News. (2000). Advertise [Online]. Available: http://www.exhibitcitynews.com/advertise.htm [2001,February 4].

Marinelli, A. J. (1987). Worker Protection & the Law of the Occupational Safety & Health Act. Suffolk University Law Review, 4, XXI, 1055-1059.

NPCA. (2001). Products of the Paint and Coating Industry [Online]. Available:

http://www.paint.org/ind_info/types.htm [2001, February 6].

NPCA. (2001). Total Sales 1995-1999 Quarterly [Online]. Available: http://www.paint.org/ind_info/fftotal.htm [2001, February 10].

OSHA. (2001, January 18). About OSHA [Online]. Available: http://www.osha.gov/about.html [2001, February 2].

Patents. (1995, June 28). What Things Cost [Online]. Available: http://www.patents.com/cost.htm [2001, January 24].

Phillips, P. (2000, May). Examining North America Coatings Consumption. Coating World, 5, 42.

Reference USA. (2001). Detailed Listings [Online]. Available: http://reference.infousa.com/bd/detail.c…1=000504530&gotoRow=1&abi=none&type=none [2001, February 1].

Shaw, A. (2000, June). Powder Power. Modern Paint and Coatings, 6, 25.

Sherwin Williams. (1999). SherWorks [Online]. Available:

http://www.sherwinwilliams.com/contractors/res-com/products/services/sherwerks.asp [2001, February 2].

SSPC. (2000). SSPC Certification Programs [Online]. Available: http://www.sspc.org/site/cert.html [2001, February 8].

Tradeshow Week. (1997-2000). Tradeshow Directory [Online]. Available: http://www.tradeshowweek.com/index.asp?page=directory [2001, February 4].

U.S. Census Bureau. (1997). Economic Census: Comparative Statistics for West Virginia, Ohio, Pennsylvania, and United States [Online]. Available:

http://www.census.gov/epcd/ec97sic/E97SWVF.htm

http://www.census.gov/epcd/ec97sic/E97SOHF.htm

http://www.census.gov/epcd/ec97sic/E97SUSF.htm

http://www.census.gov/epcd/ec97sic/E97SPAF.htm [2001, January 28].

Van Arnum, P. (2000, October 16). Coatings 2000: Rising Raw Materials Costs Paint an Uncertain Future. Chemical Market Reporter, 16, 258.

Appendices

Appendix A Environmental Protection Agency...................................................... 22

Appendix B Occupational Safety and Health Act................................................... 23

Appendix C Business Formation Options.............................................................. 25

Appendix D Limited Liability Company Paperwork............................................... 27

Appendix E Patents.............................................................................................. 54

Appendix F Print and Online Advertising Prices..................................................... 55

Appendix G Trade Shows.................................................................................... 56

Appendix H SSPC Protective Coatings Specialist Certification.............................. 57

Appendix I Software Features............................................................................. 58

Appendix J Company Insurance........................................................................... 59

Appendix K Employee Insurance.......................................................................... 60

Appendix L Pro Forma Financial Statements........................................................ 61

APPENDIX A

Environmental Protection Agency (EPA)

The United States Environmental Protection Agency (EPA) is an organization dedicated to protecting human health and safeguarding the natural environment (air, water, and land) upon which life depends. The EPA’s purpose is to ensure that everyone is protected from significant risks to human health and the environments where they live, learn, and work by using the best scientific knowledge available. They effectively and fairly enforce federal laws protecting human health and the environment. The EPA releases information to make it possible for everyone to effectively participate in managing the environmental risks. Along with all of the work the EPA does in the United States they also work with other nations to protect the global environment (epa.gov, 2001).

Here is some of the data the EPA has provided us with to show the environmental effects, efficiency, and advantages of the spray systems (epa.gov, 2001):

APPENDIX B

Occupational Safety and Health Act

The Occupational Safety and Health Act (OSHA) provides a flexible and comprehensive plan to decrease the incidents of employment-related injury, illness, and disease. OSHA requires employers to furnish their employees with hazard-free employment conditions, thus contributing to the health and welfare of all workers. OSHA performs random inspections of companies to make sure that the particular company is current with its health and safety standards. OSHA authorizes the Secretary of Labor to make the enforceable safety and health standards and sets forth the procedures for promulgating such standards (Marinelli, 1987).

Management Commitment and Employee Involvement

Management Commitment and Employee Involvement is the demonstration of personal concern of employee safety and health by the owner or manager of the company. This includes the involvement of Y.S.E.’s employees to help make any changes to increase the safety and health of its environment by interacting frequently with the management team.

Worksite Analysis

Worksite Analysis is a group of processes that help the owner or manager make sure they know what is needed to keep the workers safe. Some of the actions we must make in our Worksite Analysis are:

Request a visit from the state Consultation Program expert covering both safety and health to get a full survey of the hazards which exist in our workplace and those which could develop.
Set up a way for the expert to help us make changes that will not introduce new hazards.
Set up a system within our company to regularly check for all hazardous and unhealthy conditions.
Use Checklists provided by OSHA for all potential safety or health complications

Example checklist (if we were to use spray equipment within our facilities and what we would provide to a customer purchasing one of our spray products):

Ø Is adequate ventilation assured before spray operations are started?

Ø Is mechanical ventilation provided when spraying operations are done in enclosed areas?

Ø When mechanical ventilation is provided during spraying operations, is it so arranged that it will not circulate the contaminated air?

Ø Is the spray area free of hot surfaces?

Ø Is the spray area at least 20 feet away from flames, sparks, operating electrical motors and other ignition sources?

Ø Are portable lamps used to illuminate spray areas suitable for use in a hazardous location?

Ø Is approved respiratory equipment provided and used when appropriate during spray operations?

Ø Do solvents used for cleaning have a flash point to 100°F or more?

Ø Are “No Smoking” signs posted in spray areas?

Ø Is the spray area clean of combustible residue?

Ø Are spray booths constructed of noncombustible material?

Ø Is the spray booth completely ventilated before using the drying apparatus?

Ø Is the electric drying apparatus properly grounded?

Ø Are belts and pulleys inside the booth fully enclosed?

Ø Do ducts have access doors to allow cleaning?

Hazard Prevention and Control

Hazard and Prevention Control is being aware of the potential hazards in the workplace and designing a system to prevent or control these hazards.

Set up safe work procedures, based on the analysis of the hazards in our employees’ jobs.
Provide personal protective equipment to our employees when necessary.
Regular equipment maintenance.
Plan for any emergency within the workplace.

Training for Employees, Supervisors, and Managers

Training for employees, supervisors, and managers is the owner’s responsibility. He or she must ensure that all employees know about the materials and equipment they work with, what known hazards are in the operation, and how they are controlling the hazards.

Ask the consultant to recommend training for our worksite.
Train all employees on every potential hazard and how to protect themselves.
Pay particular attention to our new employees (osha.gov, 2001).

APPENDIX C

Business Formation Options

Sole Proprietorship

When considering which formation is the most appropriate for an individual business, both the advantages and disadvantages must be considered. When a business is organized as a sole proprietorship, the ownership is limited to the one person who organized the business. The primary disadvantage is that the sole owner has unlimited liability, meaning that for any loss the company suffers, the owner is personally liable. The company is also limited to the ideas of the sole proprietor, which in the long run could stifle creativity.

The primary advantage of a sole proprietorship is that this form of business is relatively easy to establish and requires a limited amount of paper work. Filing with the state is not mandatory unless the business files under a trade name rather than a personal name. The owner is personally taxed on any income, avoiding the double taxation faced by corporations.

General Partnership

The general partnership option for business formation requires that the partners assume personal liability for the losses of the business creating unlimited liability for the individual partners. Aside from the main disadvantage of unlimited liability, another concern is that each partner is ultimately responsible for the actions of the other.

An agreement between the partners must be established prior to the formation of the general partnership to assure that the partners agree to the amount contributed by each, the terms of the management, how profits and losses will be distributed and how the partnership could be terminated. Among the disadvantages, there are many advantages to a general partnership. A general partnership is relatively easy and inexpensive to form and, with respect to taxes, the partners are taxed individually. The partners, again, are able to avoid the double-taxation faced by corporations. Partnerships are not subject to Federal Income Taxes on the money they earn, but they are required to file an informational return. This return makes the government aware of the profits and losses of the business for each year.

Limited Partnership

A limited partnership consists of the same characteristics of a general partnership with the exception of the responsibilities of each partner. The limited partnership consists of at least one general partner and one or more limited partners. A general partner is responsible for the management of the business and does not have limited liability. On the other hand, a limited partner is only permitted to contribute to the capital of the company and has limited liability.

S Corporation

An S Corporation has the tax advantages of a partnership in that the members do not suffer from double taxation. The S Corporations share the advantage of limited liability with corporations.

The primary drawback to the S Corporation is that the shareholders must be U.S. citizens, owners of only one type of stock, and the number of shareholders cannot be greater than 75. In order to qualify for the S Corporation status, the shareholders must submit large quantities of paperwork and are subject to many state and federal regulations.

Corporation

While having the advantage of limited liability, the corporation has the disadvantage of facing double taxation. The corporation is taxed as a separate entity and then the individuals are taxed as well. Corporations are also much more expensive to form and operate. They require a large amount of paperwork to establish and are subject to strict regulations. A corporation, however, has the means to raise additional capital much easier then the other business entities by additional shares of stock being sold. Another advantage of a corporation is that the transfer of ownership is much easier because shares of stock can be sold.

Limited Liability Company

A LLC should be considered when a company desires both limited liability and partnership taxation. Limited liability companies combine the best features of the corporate and partnership forms of business. The corporate characteristics of limited liability provided by a LLC means that the members are protected from personal liability for any debts.

For federal income-tax purposes a limited liability company can be treated as a partnership. This method of taxation is known as the “pass-through” method, meaning that individual members pay taxes. A LLC will always be taxed as a partnership if it possesses no more than two of the four corporate characteristics. These characteristics include a continuity of life, centralization of management, free transferability of interest, and limited liability. A company avoids double taxation because only the individuals pay taxes and not the corporation.

After the Articles of Organization are filed with the Secretary of State and an $85 filing fee is paid, the Operating Agreement needs to be drafted. The Operating Agreement determines how the Members will operate and manage the LLC.

APPENDIX D

Limited Liability Company Paperwork

On the following pages is all the paperwork necessary to file for a LLC with the state of Ohio. The Operating Agreement chosen was the Member-Managed Operating Agreement. John Waller will take over the daily management of Y.S.E., while Homer Waller will focus on the products and services. In the Operating Agreement the conditions and responsibilities of the Members are completely explained. Some of the items included in the document are the terms for the dissolution of the LLC, Member contributions, and individual authority delegated to each Member.

The Articles of Organizations must be submitted, along with an $85 filing fee, to the Secretary of the State of Ohio in order to properly establish the LLC. The Articles of Organization must include the following:

· Company name

· Duration of Entity

· Address of the primary location

· Purpose for which the company was formed

Prescribed by Approved:

Bob Taft, Secretary of State Date: 2/12/2001

30 East Broad Street, 14th Floor Fee: $85.00

Columbus, Ohio 43266-0418

Form LCA (July 1994)

ARTICLES OF ORGANIZATION

(Under Section 1705.04 of the Ohio Revised Code)

Limited Liability Company

The undersigned, desiring to form a limited liability company, under Chapter 1705 of the Ohio Revised Code, do hereby state the following:

FIRST: The name of said limited liability company shall be Y.S.E., Limited Liability Company

SECOND: This limited liability company shall exist for an indefinite amount of time

THIRD: The address to which interested persons may direct requests for copies of any operating agreement and any bylaws of this limited liability company is:

(i) the amount of money contributed by such Member to the Company (including the amount of any Company liabilities which the Member assumes (within the meaning of Treas. Reg. # 1.704‑1(b)(2)(iv)(c)), but excluding liabilities assumed in connection with the distribution of Company property and excluding increases in such Member's share of Company liabilities pursuant to section 752 of the Code);

(ii) the fair market value of property contributed by such Member to the Company (net of any liabilities secured by such property that the Company is considered to assume or take subject to pursuant to section 752 of the Code);

(iii) allocations to such Member of Company Book income and gain (or the amount of any item or items of income or gain included therein);

(iv) upon the revaluation of Company property pursuant to Section 2.02(a) of this Appendix, the Book gain (if any) that would have been allocated to such Member if such Company property had been sold at its Adjusted Fair Market Value as of the date of such revaluation; and

(v) upon the distribution of Company property to a Member, if Company property is not revalued pursuant to Section 2.02(a) of this Appendix, the Book gain (if any) that would have been allocated to such Member if such Company property had been sold at its Adjusted Fair Market Value immediately prior to the distribution.

(i) the amount of money distributed to such Member by the Company (including the amount of such Member's individual liabilities for which the Company becomes personally and primarily liable but excluding liabilities assumed in connection with the contribution of property to the Company and excluding decreases in such Member's share of Company liabilities pursuant to section 752 of the Code);

(ii) the fair market value of property distributed to such Member by the Company (net of any liabilities secured by such property that such Member is considered to assume or take subject to pursuant to section 752 of the Code);

(iii) allocations to such Member of Company Book loss and deduction (or items thereof);

(iv) upon the revaluation of Company property pursuant to Section 2.02(a) of this Appendix, the Book loss (if any) that would have been allocated to such Member if such Company property had been sold at its Adjusted Fair Market Value as of the date of such revaluation; and

(v) upon the distribution of Company property to a Member, if Company property is not revalued pursuant to Section 2.02(a) of this Appendix, the Book loss (if any) that would have been allocated to such Member if such Company property had been sold at its Adjusted Fair Market Value immediately prior to the distribution.

(d) The Company shall make such other adjustments to the Capital Accounts of the Members as are necessary to comply with the provisions of Treas. Reg. # 1.704‑1(b)(2)(iv).

2.02. REVALUATION OF COMPANY PROPERTY.

(a) Upon the occurrence of a Revaluation Event, the Members may in his, revalue all Company property (whether tangible or intangible) for Book purposes to reflect the Adjusted Fair Market Value of Company property immediately prior to the Revaluation Event. In the event that Company property is so revalued, the Capital Accounts of the Members shall be adjusted in accordance with Treas. Reg. # 1.704‑1(b)(2)(iv)(f).

(b) Upon the distribution of Company property to a Member, if Company property is not revalued pursuant to Section 2.02(a) of this Appendix, the property to be distributed shall be revalued for Book purposes to reflect the Adjusted Fair Market Value of such property immediately prior to such distribution, and the Capital Accounts of all Members shall be adjusted in accordance with Treas. Reg. # 1.704‑1(b)(2)(iv)(e).

2.03. RESTORATION OF NEGATIVE BALANCES. No Member with a deficit balance in its Capital Account shall have any obligation to the Company, to any other Member, or to any third party to restore or repay said deficit balance.

2.04. TRANSFERS OF INTERESTS.

(a) Upon the transfer of a Member's entire interest in the Company, the Capital Account of such Member shall carry over to the transferee.

(b) Upon the transfer of a portion of a Member's interest in the Company, the portion of such Member's Capital Account attributable to the transferred portion shall carry over to the transferee. In the event that the document effecting such transfer specifies the portion of such Member's Capital Account to be transferred, such portion shall be deemed to be the portion attributable to the transferred portion of such Member's interest for purposes of this Section

ARTICLE III ALLOCATION OF BOOK INCOME AND LOSS

3.01. BOOK INCOME AND LOSS.

(a) The Book income or loss of the Company for purposes of determining allocations to the Capital Accounts of the Members shall be determined in the same manner as the determination of the Company's taxable income, except that (i) items that are required by section 703(a)(1) of the Code to be separately stated shall be included; (ii) items of income that are exempt from inclusion in gross income for federal income tax purposes shall be treated as Book income, and related deductions that are disallowed under section 265 of the Code shall be treated as Book deductions; (iii) Section 705(a)(2)(B) Expenditures shall be treated as deductions; (iv) items of gain, loss, depreciation, amortization, or depletion that would be computed for federal income tax purposes by reference to the Tax Basis of an item of Company property shall be determined by reference to the Book Value of such item of property; and (v) the effects of upward and downward revaluations of Company property pursuant to Section 2.02 of this Appendix shall be treated as gain or loss respectively from the sale of such property.

(b) In the event that the Book Value of any item of Company property differs from its Tax Basis, the amount of Book depreciation, depletion, or amortization for a period with respect to such property shall be computed so as to bear the same relationship to the Book Value of such property as the depreciation, depletion, or amortization computed for tax purposes with respect to such property for such period bears to the Tax Basis of such property. If the Tax Basis of such property is zero, the Book depreciation, depletion, or amortization with respect to such property shall be computed by using a method consistent with the method that would be used for tax purposes if the Tax Basis of such property were greater than zero.

(c) Allocations to the Capital Accounts of the Members shall be based on the Book income or loss of the Company as determined pursuant to this Section 3.01. Such allocations shall be made as provided in the Agreement except to the extent modified by the provisions of this Article III.

3.02. ALLOCATION OF NONRECOURSE DEDUCTIONS. Notwithstanding any other provisions of the Agreement, Nonrecourse Deductions shall be allocated among the Members in proportion to their respective Shares.

3.03. ALLOCATION OF MEMBER NONRECOURSE DEDUCTIONS. Notwithstanding any other provisions of the Agreement, any item of Member Nonrecourse Deduction with respect to a Member Nonrecourse Debt shall be allocated to the Member or Members who bear the economic risk loss for such Member Nonrecourse Debt in accordance with Treas. Reg. # 1.704‑2(i).

3.04. CHARGEBACKS OF INCOME AND GAIN. Notwithstanding any other provisions of the Agreement:

(a) Company Minimum Gain. In the event that there is a net decrease in Company Minimum Gain for a taxable year of the Company, then before any other allocations are made for such taxable year, each Member shall be allocated items of Book income and gain for such year (and, if necessary, for subsequent years) to the extent required by Treas. Reg. # 1.704‑2(f).

(b) Member Nonrecourse Debt Minimum Gain. In the event that there is a net decrease in Member Nonrecourse Debt Minimum Gain for a taxable year of the Company, then after taking into account allocations pursuant to paragraph (a) immediately preceding, but before any other allocations are made for such taxable year, each Member with a share of Member Nonrecourse Debt Minimum Gain at the beginning of such year shall be allocated items of Book income and gain for such year (and, if necessary, for subsequent years) to the extent required by Treas. Reg. # 1.704‑2(i)(4).

(c) Application for Waiver. In the event that the Members determine in his that the application of the provisions of Section 3.04(a) or Section 3.04(b) of this Appendix would cause a distortion in the economic arrangement among the Members, any Member may on behalf of the Company, request a waiver of the application of either or both of such provisions pursuant to Treas. Reg. # 1.704‑2(f)(4) or Treas. Reg. # 1.704‑2(i)(4).

(d) Qualified Income Offset. In the event that any Member unexpectedly receives any Account Reduction Item that results in an Excess Deficit Balance at the end of any taxable year after taking into account all other allocations and adjustments under this Agreement other than allocations under Section 3.04(e) of this Appendix, then items of Book income and gain for such year (and, if necessary, for subsequent years) will be reallocated to each such Member in the amount and in the proportions needed to eliminate such Excess Deficit Balance as quickly as possible.

(e) Gross Income Allocation. If, at the end of any taxable year, the Capital Accounts of any Members have Excess Deficit Balances after taking into account all other allocations and adjustments under this Agreement, then items of Book income and gain for such year will be reallocated to such Members in the amount and in the proportions needed to eliminate such Excess Deficit Balances as quickly as possible.

3.05. REALLOCATION TO AVOID EXCESS DEFICIT BALANCES. Notwithstanding any other provisions of the Agreement, no Book loss or deduction shall be allocated to any Member to the extent that such allocation would cause or increase an Excess Deficit Balance in the Capital Account of such Member. Such Book loss or deduction shall be reallocated away from such Member and to the other Members in accordance with the Agreement, but only to the extent that such reallocation would not cause or increase Excess Deficit Balances in the Capital Accounts of such other Members.

3.06. CORRECTIVE ALLOCATION. Subject to the provisions of Sections 3.02, 3.03, 3.04, and 3.05 of this Appendix, but notwithstanding any other provision of the Agreement, in the event that any Regulatory Allocation is made pursuant to this Appendix for any taxable year, then remaining Book items for such year (and, if necessary, Book items for subsequent years) shall be allocated or reallocated in such amounts and proportions as are appropriate to restore the Adjusted Capital Account Balances of the Members to the position in which such Adjusted Capital Account Balances would have been if such Regulatory Allocation had not been made.

3.07. OTHER ALLOCATIONS.

(a) If during any taxable year of the Company there is a change in any Member's interest in the Company, allocations of Book income or loss for such taxable year shall take into account the varying interests of the Members in the Company in a manner consistent with the requirements of Section 706 of the Code.

(b) If and to the extent that any distribution of Section 751 Property to a Member in exchange for property other than Section 751 Property is treated as a sale or exchange of such Section 751 Property by the Company pursuant to Treas. Reg. # 1.751‑1(b)(2), any Book gain or loss attributable to such deemed sale or exchange shall be allocated only to Members other than the distributee Member.

(c) If and to the extent that any distribution of property other than Section 751 Property to a Member in exchange for Section 751 Property is treated as a sale or exchange of such other property by the Company pursuant to Treas. Reg. # 1.751‑1(b)(3), any Book gain or loss attributable to such deemed sale or exchange shall be allocated only to Members other than the distributee Member.

ARTICLE IV

ALLOCATION OF TAX ITEMS

4.01. IN GENERAL. Except as otherwise provided in this Article IV, all items of income, gain, loss, and deduction shall be allocated among the Members for federal income tax purposes in the same manner as the corresponding allocation for Book purposes.

4.02. SECTION 704(C)(1)(A) ALLOCATIONS. In the event that the Book Value of an item of Company property differs from its Tax Basis, allocations of depreciation, depletion, amortization, gain, and loss with respect to such property will be made for federal income tax purposes in a manner that takes account of the variation between the Tax Basis and Book Value of such property in accordance with section 704(c)(1)(A) of the Code and Treas. Reg. # 1.704‑1(b)(4)(i). The Members may in his discretion select any reasonable method or methods for making such allocations, including, without limitation, any method described in Treas. Reg. # 1.704‑3(b), (c), or (d).

4.03. TAX CREDITS. Tax credits shall be allocated among the Members in accordance with Treas. Reg. # 1.704‑1(b)(4)(ii).

ARTICLE V

OTHER TAX MATTERS

5.01. EXCESS NONRECOURSE LIABILITIES. For the purpose of determining the Members' shares of the Company's Excess Nonrecourse Liabilities pursuant to Treas. Reg. ## 1.752‑3(a)(3) and 1.707‑5(a)(2)(ii), and solely for such purpose, the Members' interests in profits are hereby specified to be their respective Shares.

5.02. EXCULPATORY LIABILITIES. The Members may in his discretion, (a) treat deductions attributable to Exculpatory Liabilities as deductions that are not Nonrecourse Deductions, and (b) disregard Exculpatory Liabilities in the determination of Company Minimum Gain.

5.03. TREATMENT OF CERTAIN DISTRIBUTIONS.

(a) In the event that (i) the Company makes a distribution that would (but for this Subsection (a)) be treated as a Nonrecourse Distribution; and (ii) such distribution does not cause or increase a deficit balance in the Capital Account of the Member receiving such distribution as of the end of the Company's taxable year in which such distribution occurs; then the Members may in his, sole discretion treat such distribution as not constituting a Nonrecourse Distribution to the extent permitted by Treas. Reg. # 1.704‑2(h)(3).

(b) In the event that (i) the Company makes a distribution that would (but for this Subsection (b)) be treated as a Member Nonrecourse Distribution; and (ii) such distribution does not cause or increase a deficit balance in the Capital Account of the Member receiving such distribution as of the end of the Company's taxable year in which such distribution occurs; then the Members may in his sole discretion treat such distribution as not constituting a Member Nonrecourse Distribution to the extent permitted by Treas. Reg. # 1.704‑2(i)(6).

5.04. REDUCTION OF BASIS. In the event that a Member's interest in the Company may be treated in whole or in part as depreciable property for purposes of reducing such Member's basis in such interest pursuant to section 1017(b)(3)(C) of the Code, the Members may in his sole discretion, upon the request of such Member, make a corresponding reduction in the basis of the Company's depreciable property with respect to such Member. Such request shall be submitted to the Company in writing, and shall include such information as may be reasonably required in order to effect such reduction in basis.

5.05. ENTITY CLASSIFICATION. Neither the Company nor any Member shall file or cause to be filed any election, the effect of which would be to cause the Company to be classified as other than a partnership for federal income tax purposes, without the prior written consent of all Members.

APPENDIX E

Patents

The cost of a patent consists of preparing and filing a patent application, various prosecution costs, and the issue fee. After 3 ½, 7 ½, and 11 ½ years of the issue date of the patent, one is required to pay a maintenance fee to the U.S. patent office keeping the patent in force.

The filing fee can range from $400 to $1,000 or more depending on the number of claims in the application. The different prosecution fees vary according to the particular situation involved. After hearing about he subject matter, the attorney will be able to estimate the cost of the patent application. The general application fee that covers an invention that can be simply described could cost as little as $2,000 to file with the patent office. Other inventions that are extremely complicated can cost as much as $8,000 to $10,000 (patents.com, 1998).

APPENDIX F

Print and Online Advertising Prices

Internet Advertising
Banner Rates:
Top of section page– Ad runs for 30 days from date placed on site. No rotation.
· Random placement: $220 · Specific placement: $275 · Rotating section placement with five advertisers: $90
Bottom of section page– Ad runs 30 days from date placed on site. No rotation.
· Random placement: $175 · Specific placement: $225 · Rotating section placement with five advertisers: $75

Publication Rates:
Rate Sheet:
SIZE	RATE	3 ISSUES	6 ISSUES	12 ISSUES
			PER ISSUE	PER ISSUE
1/16 page		$ 210.00	$ 195.00	$ 180.00
	FULL COLOR	N/A	N/A	N/A

1/8 page		$ 410.00	$ 365.00	$ 330.00
	FULL COLOR	N/A	N/A	N/A

1/4 page		$ 730.00	$ 685.00	$ 625.00
	FULL COLOR	$ 1,095.00	$ 1,025.00	$ 935.00

1/2 page		$ 1,215.00	$ 1,115.00	$ 1,025.00
	FULL COLOR	$ 1,755.00	$ 1,615.00	$ 1,295.00

Full page		$ 1,790.00	$ 1,675.00	$ 1,585.00
	FULL COLOR	$ 2,280.00	$ 2,110.00	$ 1,985.00

Cover, 2, 3 & 4		$ 2,345.00	$ 2,070.00	$ 1,915.00
	FULL COLOR	$ 3,020.00	$ 2,925.00	$ 2,390.00

(ExhibitCityNews, 2001)

APPENDIX G

Trade Shows

Great Lakes Industrial Show	Industry: Industrial
Dates and Location: Oct. 31-Nov. 2, 2001 International Exposition (I-X) Center Cleveland, OH - U.S.A.	Contact: Cotten C. Morgan,Show Mgr. North American Expositions Company 33 Rutherford Ave. Boston, MA 02129 Phone: (617) 242-6092 Fax: (617) 242-1817

Cleveland APEX	Industry: Metalworking & Coatings Technology
Dates and Location: Oct. 23-25, 2001 International Exposition (I-X) Center Cleveland, OH - U.S.A.	Contact: Larry Postl,Show Mgr. Society of Manufacturing Engineers One SME Dr., P.O. Box 930 Dearborn, MI 48121-0930 Phone: (313) 271-1500 Fax: (313) 271-2861 Email: expo@sme.org

(tradeshowweek.com, 2001)

APPENDIX H

SSPC Protective Coatings Specialist Certification

The SSPC was founded in 1950 as the Steel Structures Painting Council, a nonprofit professional organization concerned with the use of coatings to protect industrial steel structures. In 1997 this council became SSPC, the Society for Protective Coatings. The main focus of the new SSPC is the protection of steel structures from corrosion, but also expanded their services to protecting other kinds of industrial surfaces, such as concrete. The SSPC’s members come from every facet of the protective coating industry.

CANDIDATE REQUIREMENTS:

To be a candidate for SSPC Protective Coatings Specialist Certification a person must possess the following education:

5 yrs. (experience in an area in the protective coatings industry)/Bachelor’s Degree or;
7 yrs./Associate’s Degree or;
10 yrs./High school graduate/GED

The candidate must present three professional references
The candidate must then meet training requirements in:

C-1 Fundamentals of Protective Coatings for Industrial Structures and C-2 Specifying and Managing Protective Coatings Projects
Or alternative courses:

C-3 Supervisor/Competent Person Training for Deleading of Industrial Structures

C-5 Supervisor/Competent Person Refresher Training for Deleading of Industrial Structures

C-7 Fundamentals of Dry Abrasive Blast Cleaning

Or 15 years of documented coatings work experience in some areas of the industry

Then the candidate must take and pass the exam given by the SSPC

These courses range from 1-5 days and 8-40 hours. A member has $250 nonrefundable application fee for certification and a $150 exam fee. A nonmember has a $350 nonrefundable application fee for certification and a $250 exam fee (SSPC.org, 2001).

APPENDIX I

Software Features

E-Commerce Construction Kit Deluxe:

Helps build a professional Web site
Uses 12 templates and 30 styles to create 360 unique designs
Applies advanced navigation bar themes
Automatic order processing
Designs and edits frame pages and links graphically
Creates and supports DHTML features in a drop-and-drag environment
Applies cascading style sheets and themes
Keeps site updated from remote locations via the Internet
Accepts credit cards or checks in a secure environment
Includes Quick Start Guide, Comprehensive User Guide and E-Commerce Guide printed manuals

AddWeb Website Promoter:

Quick, easy designs
Includes free automatic search engine updates
Extremely comprehensive reporting system allows you to get full detail, statistics
Helps to make changes to web pages that can boost our position on search engines
Checks web pages ranking on major engines
Performs searches on engines
Generates link pages that help link to other sites

Peachtree Complete Accounting 8.0

Multiple employees can view and modify business information on the network simultaneously
Service-based businesses can bill, pay and report accurately with comprehensive time and expense tracking
Update prices by an amount or percent for all or part of inventory with a simple click, and globally increase or decrease prices, rounding up or down to a specific cent or dollar amount
Give employees access at the module level, or drill down to 5 screen levels of access/no access, read, add, edit and full, for specific security needs
Easily determine which jobs are most profitable by comparing all job expenses versus revenue
Create job and project estimates quickly by breaking jobs down to the phase level
Track all costs and streamline billing procedures by keeping track of expenses like travel, copies, meals, etc
Can choose from more than 125 reports to better track, forecast and budget finances and get the information vital to business' success and growth
Add fields and gather personal information like birth dates, title, etc. for employees, customers and vendors
Set up memorized transactions for quotes, sales invoices, purchase orders, payment and general journal entries (bestbuy.com, 2001)

APPENDIX J

Company Insurance

Types of insurance with General Liability and a property package insurance policy, known as Business Owner’s Policy (BOP), include the following benefits:

§ Property insurance for physical assets that are leased or owned

§ Lost or damaged property for replacement value

§ Loss of business income and extra expense

§ People’s personal property when the business owner is liable for the damage

§ Accidents

§ Bodily injury

§ Property damage

§ Libel, Slander, False advertising

§ Policy may include named perils or all-risk coverage, or Actual Cash Value (ACV) coverage for the buildings

§ Outdoor sign insurance**

§ Money and securities insurance**

§ Employee dishonesty insurance** (businessinsurancenow.com, 2001)

** denotes that the insurance is an option that we can choose for a nominal expense.

APPENDIX K

Employee Insurance

An effective and efficient insurance plan has many facets to ensure that employees get the coverage they deserve. Some of the options desired are listed in this appendix:

Solid Foundation Of Coverage

After meeting an annual deductible members have benefits for:

Physician office visits

Inpatient and outpatient surgery

Hospital care

Laboratory tests and x-rays

Mental health/substance abuse care

Emergencies

Medical Coverage Cost-Share Options

Deductible: $500, $1,000, $2,000, $5,000, and $10,000.

Co-insurance (In/Out): 100/80, 90/80, 80/60, 60/50 .

Co-insurance basis: High UCR or Standard UCR

Co-insurance max (In/Out): $500/$1,000, $1,000/$2,000, $2,000/$4,000,

$4,000/$8,000.

Prescription Drug Coverage Options:

Co-payment

2 tier traditional: $5/$15, $10/$20 generic/brand name

3 tier formulary: $5/$15/$25, $10/$20/$30, $10/$25/$40

generic/formulary brand name/non-formulary brand name

Mail service only: $7/$15

Deductible: $50, $75, $100

Annual Maximum: $500, $800, $2,000, Unlimited

Emergency Care

Should an emergency arise, members are assured of receiving care for medically necessary services. Anthem’s Managed Benefits department must certify hospital admissions within 48 hours of the emergency.

Diverse Pharmacy Benefits

Anthem’s pharmacy program features access to a broad network of 53,000 participating pharmacies around the country. Also members have access to maintenance prescriptions through the mail with their mail-order pharmacy program (anthem.com, 2001).

APPENDIX L

Pro Forma Financial Statements

Y.S.E.
Balance Sheet
December 31, 2003

ASSETS

CURRENT ASSETS:

	Cash		$ 303,699
	Accounts Receivables		$ 131,589
	Inventory		$ 94,586	$ 529,874

FIXED ASSETS:
		Vehicles	$ 78,400
		Buildings	$ 75,964
		Less Depreciation	$ (92,843)	$ 61,521

		Total Current Assets:		$ 591,395


LIABILITIES AND EQUITY

LIABILITIES:
		Accounts Payable		$ 82,675
		Loan Payable (Building)		$ 3,578
		Loan Payable (MVEDC)		$ 118,860

OWNER'S EQUITY:
		Owner's Equity		$ 386,282

		Total Liabilities and Owner's Equity		$ 591,395

Y.S.E.
Income Statement
For Three Years the Year Ended December 31, 2003

		2001	2002	2003
Sales	Freight	$ 7,420	$ 13,356	$ 17,808
Sales	Labor	$ 54,604	$ 98,287	$ 131,050
Sales	Parts	$ 464,150	$ 835,470	$ 1,113,960
Sales	Rentals	$ 8,192	$ 14,746	$ 19,661
Sales	Warranty Parts	$ 8,080	$ 14,544

Y.S.E.

Business Plan

Prepared For: Mahoning Valley Economic Development Corporation

Prepared By: Team 6

Jennifer Fisher

Thomas Gentile

Briana Jenkins

David Josepho

Travis Mohler

Date: 2.12.2001

Jennifer Fisher

Thomas Gentile

Briana Jenkins

David Josepho

­­­Mission Statement

Industry Analysis

Competition Analysis

Future Industries

Environmental Protection Agency

Occupational Safety and Health Act

Current Employees

Future Employees

Marketing Strategy

Certifications

Insurance Strategy

Balance Sheet

Balance Sheet

Income Statement

Cash Flow

Appendices

Management Commitment and Employee Involvement

Worksite Analysis

Hazard Prevention and Control

Training for Employees, Supervisors, and Managers

The Articles of Organizations must be submitted, along with an $85 filing fee, to the Secretary of the State of Ohio in order to properly establish the LLC. The Articles of Organization must include the following:

· Company name

· Duration of Entity

· Address of the primary location

· Purpose for which the company was formed

APPENDIX E

Patents

Peachtree Complete Accounting 8.0

Solid Foundation Of Coverage

Emergency Care

APPENDIX L

LIABILITIES AND EQUITY

Mission Statement