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C H A P T E R 15

Where Do You Want to Go? If a business plan serves as a road map for your company, then to use it properly you need a sense of your ultimate destination. What do you want your business to look like in three, five, or seven years? You can’t hope to just stumble across success; you have to figure out how to get there. One of the most important aspects of the business planning process, therefore, is the examination of your long-term goals.

Moreover, in the course of your planning process you will find it useful to establish markers — milestones — to keep you on track. By developing specific objectives, you have signposts to measure progress along the way.

Investors are greatly interested in this section of your business plan. When they invest capital in your company, they want to see what they are getting in return. They know how much money they can lose — the downside risk. But they also want to gauge what they might gain, how big the company might become — the upside reward. Lenders, on the other hand, are somewhat less interested in long-term growth than investors. They already know their upside potential; it’s defined in the terms of the loan.

In this section you will spell out the specific ways whereby your company can be judged and the risks involved. You may find this prospect a bit unset- tling; perhaps you even fear that it will scare off financing sources. Don’t be intimidated. Sophisticated investors and lenders give greater credence to entrepreneurs who acknowledge risk and are willing to be measured against clear-cut objectives. They understand that progress takes time and that risks are an inherent part of doing business.

Development, Milestones & Exit Plan

You can’t reach a goal you haven’t set.

“Every business grows in phases. I want to see one respectable phase in which they can succeed before they go on to the second and third phases.

They can have other things in mind, but I want them to finish the first thing, to show what they can do.” Eugene Kleiner Venture Capitalist

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In developing your company’s long-term plans, you must evaluate your goals, milestones, risks, and exit plan, each of which is discussed in this chapter.

Goals What do you want in the future, both for yourself and for your company? In founder-led and small companies, the personal goals of the entrepreneur(s) and the goals for the business should reasonably relate to one another. Otherwise, the inherent tensions will undermine the success of the business. There’s no use envisioning running a $50 million company, when what you really want is to take long vacations and be home every afternoon by 3:00 p.m. That’s just not a realistic fit. (Refer to the worksheet “Four C’s,” in Chapter 1.)

You probably have a vision of what your company may be. The vision may not be well-formed, perhaps something like “One day I want this company to be known for making the very best product of its type.” Or the vision may be very specific, set by you or investors; it might be a goal such as “Sales of $10 million within five years.”

The vision that you and the other decision-makers hold for your company shapes the nature of your day-to-day activities and should deter- mine the priorities for the expenditure of your resources. You want to emphasize those actions that support your eventual aims. Grow toward your vision.

In assessing your business concept, consider which of the following visions you have for your company and yourself:

n Steady Provider. Maintain a stable level of profit; earn a good, reliable income while owning your own business.

n Innovator. Produce new and different products or services; change the way the market views the product or service; act on your creativity.

n Quality Leader. Produce the product or service everyone would buy if price were no object; develop a reputation for excellence; take pride in creating the best.

n Market or Industry Leader. Dominate the market in terms of sales and products; have a well-known name and run a large operation.

n Niche Leader. Carve out a narrow place in the market that your company dominates; do only one thing, but do it extremely well.

n International Market or Worldwide Market Seller. Sell or distribute products or services to a global audience or to a specific country or region.

n Exploiter. Take advantage of the trends of the moment or copy the suc- cesses of others; take risks for quick rewards.

These goals are not necessarily mutually exclusive, and you can choose more than one, if they aren’t contradictory. Or, perhaps you have another

“Lifestyle objectives are major issues. Wanting to be your own boss, wanting a degree of freedom you don’t have as an employee—these were important goals for us.” larry leigon founder, ariel Vineyards

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Company Vision

Describe the vision you hold of your company for the next decade.

overall long-Term development: ___________________________________________________________________

sPECifiC Goals one Year five Years ten Years

number of Employees __________________________________________________________________

number of locations __________________________________________________________________

Annual sales __________________________________________________________________

Profits or Profit margin __________________________________________________________________

number of Products or services __________________________________________________________________

Awards or Recognition Received __________________________________________________________________

ownership Allocation __________________________________________________________________

other: __________________________________________________________________

businEss stratEGiEs

one year: ______________________________________________________________________________________

Five years: _____________________________________________________________________________________

Ten years: _____________________________________________________________________________________

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vision for your company. Use the Company Vision worksheet on the previ- ous page to focus your thoughts about the future.

Although these concepts are relatively intangible, they have tangible con- sequences. If you see your company as an innovator, you may have to sacri- fice short-term profits for the ability to experiment. If you want a company that is a market leader, you must position your company to grow to a sub- stantial size.

To give substance to your vision, express your goals in concrete terms.

This process will help you understand and articulate your goals; it is meant for internal planning rather than for inclusion in a written business plan, especially one prepared for outside funding.

strategies You now must consider what business strategy will take your company from its present situation toward your long-term goals. Developing an overall strategy gives you the basis for deciding on the priorities for specific actions and expenditures of funds.

Among the business strategies you might undertake are:

n Market Penetration. Gain a foothold in the market as you introduce either the company or a new product or service and attempt to develop sufficient sales to sustain your initial development.

n Promotion and Support. Intensify the marketing and development of your current product or service lines to increase sales and gain market share.

n Expansion. Add products or services in existing lines, additional locations, production capacity, or distribution systems in an effort to increase sales.

n Increase Focus. Narrow the scope of activities of your company by elim- inating some products or services and marshaling your resources on your remaining line(s) to increase profit margin.

n Diversify. Add new product or service lines (or buy other companies), thus broadening the nature of the company, in an effort to expand the overall size and sales of the company, and making you less dependent on your current products or services for survival.

n Go Global. Find and exploit a foreign market instead of, or in addition to, your own. Even if you’re not planning on being a global company at launch, consider the long-term international opportunities.

n Refocus. Modify the essential nature of the company in terms of market, products, or services to respond to changing conditions or substantial business reverses.

Consider the above strategies when assessing the long-term development of your company.

“Turnoffs to me as a venture capitalist? Calling yourself a visionary; your work should speak for itself. A huge focus on my return on investment; I can figure out where I can make my return. I do want to know you care about financial returns, but you can’t come across as so focused on an IPO that it seems you’re not in this to build a business, you’re in it to take it public.” andrew anker Venture Capitalist

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Priorities

Rate each area’s priority for the expenditure of funds, in hierarchical order (1-2-3, with 1 being the highest priority). Describe the specific priorities or amounts in each area.

Priorities specifics rating

Add Employees ______________________________________________________ _____________

______________________________________________________ _____________

Add new lines ______________________________________________________ _____________

______________________________________________________ _____________

increase marketing ______________________________________________________ _____________

______________________________________________________ _____________

Add locations ______________________________________________________ _____________

______________________________________________________ _____________

Add Capacity ______________________________________________________ _____________

______________________________________________________ _____________

increase salaries ______________________________________________________ _____________

______________________________________________________ _____________

increase inventory ______________________________________________________ _____________

______________________________________________________ _____________

increase Profits ______________________________________________________ _____________

______________________________________________________ _____________

Retire debts ______________________________________________________ _____________

______________________________________________________ _____________

increase Reserve ______________________________________________________ _____________

______________________________________________________ _____________

Acquire other Companies ______________________________________________________ _____________

______________________________________________________ _____________

other: ________________________________________________________________________________________

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Priorities To implement those strategies, you must undertake specific actions. For instance, if your strategy is to promote and support, you will want to use any additional resources, either of money or time, on your marketing efforts. If, on the other hand, your strategy is to diversify, you want to accumu- late resources to expend on the introduction of new product lines or the purchase of new companies.

To clarify the significance of particular activities relative to your long- term goals, develop a set of priorities for the expenditure of your resources. A list of priorities is a critical tool for every business. Although this list does not need to be included in a business plan for outside financing sources, it would be wise to refer to it whenever making major business decisions.

On the Priorities worksheet on page 253, specify the relative importance of each activity when it comes to the expenditure of funds.

Milestones achieved to Date You may describe your company as a start-up. Your potential investor may think of you as a start-up. But many new companies already have histories, sometimes impressive ones, before they have a written business plan. You can inspire confidence in your company by indicating this past history in your plan. You also demonstrate your ability to set and meet goals.

Delineating the milestones you’ve achieved to date likewise shows the level of commitment you’ve made to your new business. A potential inves- tor can get a sense of the financial and time expenditures that you’ve had to invest to reach the achievements to date.

The worksheet Milestones Achieved to Date on page 255 helps you record your accomplishments. A list of such Milestones can be included in the front of your written plan, directly after your Executive Summary, espe- cially if your progress has been particularly impressive. If yours is an annual plan for an existing company, you can indicate the milestones achieved since your last plan.

future Milestones How will you and your investors know that you are making sufficient prog- ress toward your goals? If your long-term goal is to reach sales of $3 million in year five, how much do you need in sales by year two and year three?

In the daily press of business, it can often seem that you’re making no progress at all. At any given time, you’ll have a stack of bills to pay, trouble- some customers, and problems with your staff. So you need a reminder that you have, in fact, been going forward.

A milestone list allows you and your financing sources to see what you specifically plan to accomplish, and it clearly sets out delineated objectives. These objectives are part of your business plan and are included with the written document.

“Long-term planning must be a part of everything you do. You must continually work to stay contemporary. Be inquisitive and open-minded. Don’t make comments like, ‘We’ve always done it this way,’ or ‘We’ve tried it before.’ Look for reasons to respond to new ideas and evaluate how they can improve your performance.” bill Walsh former Coach and President, s.f. 49ers

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Milestones achieved to Date

State the specific objectives you have achieved and when you achieved each one.

Event specifics Date Completed

incorporation ______________________________________________________ _____________

lease signed ______________________________________________________ _____________

Key Employees Hired: ______________________________________________________ _____________

initial Financing secured ______________________________________________________ _____________

Product design Completed ______________________________________________________ _____________

market Testing Completed ______________________________________________________ _____________

Trademarks/Patents secured ______________________________________________________ _____________

strategic Partnerships secured ______________________________________________________ _____________

First Product shipped ______________________________________________________ _____________

level of sales Reached ($) ______________________________________________________ _____________

level of sales Reached (units) ______________________________________________________ _____________

level of Employees Reached ______________________________________________________ _____________

Profit level Reached ______________________________________________________ _____________

second Product line developed ______________________________________________________ _____________

second Product line Tested ______________________________________________________ _____________

second Product line shipped ______________________________________________________ _____________

Additional Financing secured ______________________________________________________ _____________

debts Retired ______________________________________________________ _____________

Additional location opened ______________________________________________________ _____________

other: ________________________________________________________________________________________

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future Milestones

State your specific future objectives and when you plan to achieve each one.

Event specifics Goal Date

incorporation ______________________________________________________ _____________

lease signed ______________________________________________________ _____________

Key Employees Hired: ______________________________________________________ _____________

initial Financing secured ______________________________________________________ _____________

Product design Completed ______________________________________________________ _____________

market Testing Completed ______________________________________________________ _____________

Trademarks/Patents secured ______________________________________________________ _____________

strategic Partnerships secured ______________________________________________________ _____________

First Product shipped ______________________________________________________ _____________

level of sales Reached ($) ______________________________________________________ _____________

level of sales Reached (units) ______________________________________________________ _____________

level of Employees Reached ______________________________________________________ _____________

Profit level Reached ______________________________________________________ _____________

second Product line developed ______________________________________________________ _____________

second Product line Tested ______________________________________________________ _____________

second Product line shipped ______________________________________________________ _____________

Additional Financing secured ______________________________________________________ _____________

debts Retired ______________________________________________________ _____________

Additional location opened ______________________________________________________ _____________

other: ________________________________________________________________________________________

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A milestone list focuses on the specific objectives you intend to achieve and the dates by which you expect to accomplish them. These must be defined in concrete terms and a number assigned to any measurable activity. Thus, omit goals expressed in ways such as: “developing a substantial cus- tomer base.” Instead, specify: “reaching annual sales level of 50,000 units by the end of the third fiscal year.”

A milestone list also shows how you intend to build your company, roll out products, add new locations, secure strategic relationships, and so forth. This list creates a very detailed picture of your company’s future, and gives readers of your plan a clear idea of the size and scope of the company you envision.

When assigning dates to your milestones, remember that everything takes longer than planned; problems always arise. One of the frustrations of all entrepreneurs, but especially new ones, is realizing how long everything takes to get done. Progress comes slowly. So allow yourself plenty of time when you are establishing chronological goals.

Complete the Future Milestones worksheet on page 256 to outline your objectives. This list should be included with your business plan, whether used for internal planning or for raising funds.

risk Evaluation Investors make financing decisions based on an evaluation of the potential risks versus potential rewards. They will naturally consider what risks your company faces, whether or not you outline such risks in your plan. Showing that you have already assessed the potential risks in your business reassures investors that you are not just naively optimistic in your planning.

On the Risk Evaluation worksheet in Chapter 9, you assessed the nature of the risks facing your company in each area and described the steps you can take, or have already taken, to lessen that risk. Include this risk assess- ment in either the Strategic Positioning section or the Development and Milestones section of your plan.

Globalization: future Development Having a global vision expands your company’s long-term growth potential.

You may not be planning on being a worldwide company when you first launch your business, but going global may be part of your long-term development plans. You should certainly at least think about your interna- tional sales opportunities even if only reaching your local or national market seems daunting at this early stage. Of course, you do not want to dilute your limited resources while just getting established but, as part of your business plan, looking beyond your borders can help you recognize the larger oppor- tunities available to you.

Looking internationally, you may find markets that are far more under- served than your home market. As you grow your business, you may find that competing in your home country is more expensive, less profitable, and

“A plan should tell us how, as funders, we will know you’re making progress, that you’re on the road to success. Spell out what challenges you face in getting to market, what specific accomplishments you must achieve to build your company. We want five or six milestones to measure as we go along. For us, these are ‘risk-reduction points’ — they let us know you’re on the right track.” ann Winblad Venture Capitalist

“Our strategy is to build sales in the stores we’re in before expanding into more stores and a wider area. This gives us the opportunity to develop our product line, and to show retailers good sales figures when presenting our products.” Deborah Mullis Entrepreneur

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more challenging than exploiting global opportunities. And, as you become successful in your home market, other countries present you with new market opportunities, allowing you to leverage your investment in products, services, personnel, and infrastructure across a broader geographic area.

You’ll also want to look ahead to your global operations options. For example, in your first years in business, you may only want or need to hire local staff or to do your manufacturing in your home country. As you grow, you may look internationally to save costs or to handle growing demand.

As part of your long-term development planning, consider your global options. Complete the worksheet below.

Globalization: future Development

Complete this worksheet to identify potential international opportunities and approximately when you hope to enter other countries.

Which countries, if any, would be good candidates for your products/services in the future? _____________________

Which countries would be good for you to locate operations in (manufacturing, administrative, customer service, call

centers, etc.) in the future? _______________________________________________________________________

list the specific countries you intend to expand into and the approximate years when you plan on entering those

countries:

Country business function Year

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“We want to know how this company gets to be larger than a small business. For us, most companies must be able to show that they could grow to the size of being an IPO (Initial Public Offering) in a realistic period.” ann Winblad Venture Capitalist

Exit Plan When banks or individuals lend you money, it’s clear how they expect to get their money back and make a profit: You are to pay them out of income, with interest. They evaluate your business on the basis of whether they think there’s enough profit in your operating budget to pay back the loan.

But how do investors get their money back? Since investors become owners of the company (through their stock holdings), their profit is earned in a different manner than banks and lenders. Some investors may be putting money in for the long run, expecting to take an active part in the development and operation of the company and getting their reward through the distribution of profits.

Other investors, however, especially venture capitalists, eventually plan to liquidate their investment — to convert their holdings to cash or easily traded stock. Ideally, these investors want to know at the outset how they will get a substantial profit out of their investment. They want to see your exit plan.

Developing an Exit Plan Considering your potential exit plan benefits you as well as investors. After all, you’ve devoted substantial time and money of your own to this company, and you should have an idea of the way in which you’ll reap rewards. Annual income is the major motivation for many entrepreneurs, but ideally your company will have worth beyond its annual profits, and you should eventu- ally benefit from that worth.

If there is more than one partner or principal in the business, creating a clear exit strategy can reduce the friction that comes from having unspo- ken exit assumptions. One founder may dream of building a company worth millions with the aim of selling it in the next few years, while the other founder may hope to build a modest business to run for many years to come.

A number of options exist for exiting from a company, although venture capitalists may be interested in only two or three of them. Generally, sophis- ticated investors look for companies that can go public (sell stock that will be traded to the general public on stock exchanges or “over the counter”) or that are candidates for acquisition by larger companies. Investors like these exit strategies because they get out of the company cleanly, usually with substantial rewards, based on just one event: either an IPO — an initial public offering (when the stock is first publicly traded) — or the sale of the company.

These two strategies though, often result in the top management, includ- ing the founder(s), either having to leave or having far less control over the company. This may be an acceptable option given the nature of the financial rewards involved.

Novice entrepreneurs often imagine being able to buy out their inves- tors, but this is not usually a realistic option. In companies that are very

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successful, the investor has little motivation to sell and the amount of money needed to purchase their stock could be prohibitive. In less successful com- panies, the investors may want to get out, but the entrepreneur is unlikely to have the extra cash necessary to buy them out.

Exit plan options are briefly outlined on the following page, describing the major exit strategies and their advantages and disadvantages. The disadvantages assume the current management would like to have a continuing role in the company, which may or may not be true in your situation.

Preparing the Development, Milestones and Exit strategy section of Your Plan In preparing a business plan for outside investors, the two most impor- tant aspects of your Development section are your milestones lists and the description of your exit plan. Through these, investors get a clear idea of how the company has grown, will continue to grow, and how they will realize their financial rewards.

For a plan to be used for internal purposes, more details can be included about the specific priorities for expenditures of resources, making your plan a useful tool that you can refer to frequently when making major expendi- ture decisions.

A Development Plan Preparation Form on page 262 is provided for you to outline the Development section of your business plan.

Chapter summary The Development section of your business plan shows that you have given careful consideration to how your company will grow over time. By including a Future Milestones chart, you provide a clear timetable of your company’s development and allow yourself to be judged by objective measurements. By describing the potential risks your company faces, you display confidence in your ability to overcome such risks. Investors will be interested in how they can recoup the money they have devoted to your company, and they will appreciate that you have considered a realistic exit plan.

“It’s easy to get into an investment, but investors want to know, ‘how do we get out?’ It’s not good enough to just say that there will be a public offering, because selling to the public may not be realistic at times. Instead, you have to show you have an attractive business that other businesses will want to own, either because it complements an existing product line or on its own.” Eugene Kleiner Venture Capitalist

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Exit Plan options

option Description advantages Disadvantages

Go Public sell shares in the company to stock easily convertible to must be large company: the public, traded on a stock cash, liquidity; current approx. $25 to $50 million; or exchange “over the counter.” management stays. highly regulated; management can be replaced by stockholders.

acquisition Bought by another existing Receive cash and/or stock; must be appropriate fit for company. current management may existing co.; management have continuing role. leaves or has new boss.

sale Bought by individuals. Receive cash. must find willing buyer; management goes.

Merger Join with existing company. Combined resources; new partners or bosses; current management may usually little or no cash; stay; may receive stock or less control. some cash.

buyout one or more stockholders buy seller gets cash; others stay must have sufficient cash; out the interests of another. in control of company. seller must be willing.

franchise sell concept to others to Receive cash; current Concept must be appropriate; replicate. management stays; future legally complicated. potential.

hand Down give company to next stays in family; current Family tensions; no cash; generation. management may continue. tax implications.

Close End operations. Relatively easy; feeling of no financial reward; feeling being finished. of loss.

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Development Plan Preparation form

describe your company’s goals for the next five to ten years, in terms of position in the market, sales, number of em-

ployees, etc.: ___________________________________________________________________________________

describe the basic strategy you will use to reach those goals, and the priority for the expenditure of funds: _________

describe the major risks facing your company: ________________________________________________________

describe the exit plan for your investors: _____________________________________________________________

Use this information as the basis of your plan’s Development section.

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saMPlE Plan: dEvEloPmEnT And ExiT PlAn

DEVEloPMEnt anD Exit Plan long-term Goals ComputerEase plans to grow steadily over the next five years, becoming a known and respected brand providing software training to large- and medium-sized businesses in person and in the online sphere. Within the next decade, the company will bring in $5 million annually in online sales. In its on-premise business, it will capture a market share of at least 50% of all corporate software training (in terms of revenues) in the Greater Vespucci area. Within 10 years, the company plans to have expanded its physical presence throughout the country, with offices in five to 10 locations, having captured at least one-third of the share of the corporate software training market in the U.S., with revenues of $3 million annually. In total, within 10 years the company hopes to reap $8 million annually in sales.

strategy for achieving Goals To reach the long-term goal of becoming one of the major players in corporate software training in the online world as well as the dominant training provider in the Midwest, ComputerEase will continue to add new courses to its product line and add training classrooms and locations each year.

The first priority is to double the number of products in the company’s online course portfolio within the year, and to continually expand it every year. A second priority in that same time frame is to open the company’s second Corporate Training Center in the city of Whitten Park. That location will serve both as an additional training class- room and as a base of additional marketing activities.

In each of the following two years, ComputerEase plans to win at least 10 major new corporate accounts to deliver custom online training on enterprise applications as well as off-the-shelf software. ComputerEase also plans on opening at least one additional company-run Corporate Training Center per year, concentrating on cities within a three-hour drive of Vespucci that have a substantial number of large- and medium-sized corporations.

By year three, ComputerEase management will assess future options for growth. Likely scenarios include the addition of more company-run Corporate Training Centers, the possibility of franchising the operation, or the possibility of merging with or being acquired by another online training company.

Greater Expansion Plans In addition to expanding online operations, ComputerEase will continue to develop in-person training programs as well, by increasing the number of company-run loca- tions. ComputerEase will choose major metropolitan areas based on an assessment of sales potential and the intensity of the competition in each market at the time of expansion. It is estimated that at least one metropolitan area would be added each year. To fund such expansion, the company will require additional capital, which would

States vision of company.

Gives priority for expenditure of funds.

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saMPlE Plan: dEvEloPmEnT And ExiT PlAn (continued)

ideally be secured from bank financing. In the event that conventional financing is not secured, funds will be sought from investors.

The ComputerEase concept for in-person training also lends itself well to franchising. Since corporations with offices throughout the United States often prefer to have all their computer training provided by the same company, a franchise operation gives the company greater marketing clout. Moreover, the franchising concept produces additional revenue streams to the company from the franchisees, both from franchise fees and through the purchase of materials and staff training. If the decision is made to franchise, venture capital investment will be sought. Current investors could choose to liquidate their holdings in ComputerEase at that time or to convert their holdings to stock in the franchise operation.

In addition to expanding across the U.S., ComputerEase plans to develop into a leading online provider of software training in English-speaking countries where busi- nesses are automated. We also plan to support additional languages in the future, beginning with Spanish, due to the proportion of Spanish-speakers in North and Latin America.

risks associated with Expansion ComputerEase faces risks on two fronts. The first is that increased competition in the online training market will become so intense that margins collapse, making it difficult to be profitable given the cost of developing and supporting high-quality courseware. The second is that new on-premises competitors will enter the market from outside the Greater Vespucci area. It is highly likely that existing franchised software training companies from other parts of the country will open franchises in this region. Since these national companies offer financing to their franchisees, the major barrier to entry — the cost of establishing a Training Center — can be overcome. If the fran- chisee is highly capable, this represents the greatest risk to ComputerEase.

To prepare for both these eventualities, it is critical that ComputerEase quickly and aggressively increase its market share — both in its geographic market and online — and begin building strong brand awareness for its products. Corporate customers are slow to change established vendors, and ComputerEase anticipates that it will be able to retain a high percentage of existing customers, even in the face of new competitors. Moreover, ComputerEase management remains open to the possibility of a merger or other agreement with a national company if that appears to be a better financial option.

Another risk is that market conditions will deteriorate. ComputerEase is highly depen- dent on the business economy. Companies reducing their training budgets will have a direct negative impact on ComputerEase revenues.

To counteract that, the company is rapidly increasing its marketing to individual consumers — on the Web, in print publications, and in offering Saturday and evening classes. In the face of an economic downturn or layoffs, individuals need to take classes to improve their marketable skills, and this provides some balance to fluctuations in the corporate market.

Describes potential exit opportunity for investor.

Recognizes and acknowledges potential risks.

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265 C h a P t E r 1 5 : d E v E l o P m E n T, m i l E s T o n E s , & E x i T P l A n

saMPlE Plan: dEvEloPmEnT And ExiT PlAn (continued)

the Exit Plan In establishing itself as a market leader, ComputerEase will become a likely target for acquisition by or merger with a national software training company or other national for-profit educational institution. For-profit education companies are among the fastest growing firms in the United States, and they regularly acquire existing training schools as a method of achieving their growth targets.

Moreover, as other software training companies have demonstrated, the ComputerEase concept lends itself well to franchising. Franchising would produce additional revenue streams to the company from the franchisees, both from franchise fees and through the purchase of materials and staff training. If the decision is made to franchise, venture capital investment will be sought. Current investors could choose to liquidate their holdings in ComputerEase at that time or convert their holdings to stock in the fran- chise operation.

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