Running Oil Based Fragrances Company - Research Paper Example

? Business planning for running oil based Fragrances Company Research Paper Outline Executive Summary........................................................................................................…....4 i. Business Opportunity………………………………………………..…..….…..….5 ii. Market Landscape………………………………………………………………….5 iii. Value Position………………………………………………………………………5 iv. Business Strategy……………………………………………………………………5 v. Financial Summary……………………………………………………………….…6 Business Opportunity……………………………………………………………………..…7 i. Mission Statement………………………………………………………………....…8 ii. Market Landscape…………………………………………………………………….9 iii. Competitors………………………………………………………………...…………9 Customers……………………………………………………………………………………..10 i. Customer Profile……………………………………………………………...………10 ii. Customer Feedback…………………………………………………………….……..10 Marketing Plan………………………………………………………………………….……11 i. Goal………………………………………………………………..…………………11 ii. Strategy……………………………………………………………………………….11 iii. Products…..…………………………………………………………………………..11 iv. Elegance Experience………….………………………………………………………11 Why is Elegance Different……………………………………………………………….…...11 Phased Approach………………………….…………………………………………………..11 i. Phase I……………………..………………………………………………………….12 ii. Phase II……………………….……………………………………………………….15 iii. Phase III…………….…………………………………………………………………18 iv. Phase IV………………,……………………………………………………………….21 Management Team……………………………….…………………………………………….22 Exit Strategy……………….……………………………………………………………………23 Bibliography……………………………………………………………………………………24 Appendix……………………………………………………………………………………….25 A. Executive summary i. Business opportunity Elegance Fragrances Company seeks to create a strong oil based fragrance brands in United States through its marketing advantage. It will offer its patrons with a wide variety of oil fragrance selections with a special appeal to the health-aware-public outlined in the marketing segment of this plan. The products will be healthy and environment friendly as they don’t contain neither toxics, nor harmful substances such as aluminum (Abrams 123). Though the Arabic and Muslim communities are our target customers, the products are expected to catch the attention of many people from different walks of life. The increasing numbers of people interested in aesthetics has increased the demand for fragrances not only among the Arabic and the Muslim communities but also other communities across the world. Elegance fragrances will be of high quality, and of low cost (Levesque & McNeil 78). The patrons will enjoy a variety of oil based fragrances ranging from home fragrances, air fresheners to odor neutralizers. The significance of the business opportunity is in instituting the elegance brand. The brand will be established through a four-phased approach to evaluate, fabricate proficiency, and raise capital in order to grow the business to an international scale (Stutely 63). This approach will allow the elegance brand to generate $4 million in cash annually. The first phase, which entails testing, will be funded by the founders of the business while the second phase will require investors to fund. The second phase will require 42, 200 US dollars to start the company after the first phase is complete. Elegance Company seeks for investor who will fund the second phase and in exchange acquire equity share in the company. ii. Market Landscape The American fragrance retail market is nearly 15.2 billion US dollars. At the moment, there are more than fourteen companies who offer the United States public with air fresheners, home fragrances, and odor neutralizers (Walker 7). The fragrance market is dictated by trends in fragrances giving rise to the presently budding segments. These companies are belligerently increasing their outlet stores. One of these companies has been ranked in fortune 100 companies, and among the most growing franchises in United States. Among these companies that provide fragrances, none of them offers oil based fragrances with natural fragrances that would target the Arabic and Muslim patrons. Elegance Company will provide its oil based fragrances to the section of the market that is health conscious and trends towards natural fragrances. iii. Value Position Elegance aims to offer a truly advanced oil based fragrance to its customers by fulfilling the desires of the patrons looking for a natural oil based fragrance, and offering the customers a variety of natural fragrances. The marketing plan will involve intensified advertising campaign prior to the start of the business and after one month of business. Flyers will be distributed around the city and the vicinity and also at any sports events of the town (Stutely 67). There will also be local radio coverage and newspapers where there will be small advertisements. iv. Business Strategy This will be enforced in stages in order to evaluate the natural oil based fragrance concept at minimal cost. This strategy will allow the company to make use of the experiences in one level to enhance the next level. Transition from one phase will be guided by the accomplishment and attainment of the phase’s checkpoints. Phase Timeframe Description Checkpoint Phase I 6 Months Test Market concept at low cost At least 50 percent of the patrons involved in sampling the natural oil based fragrance will buy it again Phase II 1 ? Years Authenticate concept by opening a retail store Financial performance of the store supports the long-term business plan Phase III 1? Years Open a regional chain of 4 more stores to offer natural fragrances The yield of the regional chain stores will be appealing to potential investors Phase IV 5 Years Establish a national and International franchise v. Financial Summary Summary Year 1 Year 2 Year3 Year4 Year5 Year6 Number of Stores 0 1 3 8 20 40 Revenues $12,500 $450,000 $950,000 $1,500,000 $2,500,000 $4,000,000 EBITDA $1000 $100,000 ($250, 000) $50, 000 $180, 000 $500,000 Investment Required $20,000 $200,000 $700,000 B. Business Opportunity The natural fragrances by Elegance Company will bring a flourishing Saudi Arabian favorite to the United States, and add marketing advantage to the strong brand, and dictate the next trend in oil based fragrances. Natural oil based fragrances will jolt the fragrances market in the country through high customization and high quality through the inventive use of natural fragrances. Natural oil based fragrances will appeal to everyone, certainly the Arabic and Muslim communities. It will offer its patrons with a wide variety of oil fragrance selections with a special appeal to the health-aware-public outlined in the marketing segment of this plan. The products will be healthy and environment friendly as they don’t contain neither toxics, nor harmful substances such as aluminum. Though the Arabic and Muslim communities are our target customers, the products are expected to catch the attention of many people from different walks of life. The significance of the business opportunity is in instituting the elegance brand. The brand will be established through a four-phased approach to evaluate, fabricate proficiency, and raise capital in order to grow the business to an international scale (Stutely 89). The first phase will entail testing the market at a very low cost through opening a stand during one of the Muslim and Arabic festivities. The second phase will entail building a sustainable retail outlet, testing different fragrance blends, establishing the growth of the business and explicating best practice operations. The third phase will engross creating brand awareness at the regional levels by opening a regional chain of premium quality retail stores. Lastly, Elegance Company will take its brand equity and outfitted proficiency to the national level by establishing a franchise venture. i. Mission Statement The primary aim of Elegance Fragrance Company is to offer natural oil based fragrances in an enjoyable, interesting atmosphere of Belmont and Harlem Avenues. The patrons to be served include clients of all ages. Elegance Company will offer premium quality oil based fragrances to its customers through: Fulfilling the needs of the people seeking natural oil based fragrances Giving the patrons a wide variety of natural fragrances ii. Market Landscape The American fragrance retail market is nearly 15.2 billion US dollars. Natural oil based fragrances will compete in a segment of over 3 billion US dollars, consisting of high quality natural oil based fragrance chains. Presently, there are more than fourteen franchised ventures offering natural fragrances in air fresheners, home fragrances, thixotropic sprays and odor neutralizers. The chart below shows the sales of the natural fragrances segment over the past six years. It is notable that the segment sales increased by 19.23 percent in 2011 from 2010. This growth in the sales of the segments can be attributed to the growth in market shares of the companies in the segment. In addition, research reports indicate that the high quality products by the companies, and products tailored to meet the desires of the customers have contributed to the growth of the segment. iii. Competitors Elegance Fragrance Company will face competition from the renowned Majimoto and Boss Companies. These businesses have been in business for a long period and have a high market share. However, Elegance Company expects that its favorable prices and unique products will provide the restaurant with a competitive edge (IBIS World 1). These players in the market have continuously expanded their business operations, accounting for approximately 14 percent growth over the past six years. The table below shows other players and competitors in the oil based natural fragrance market segment. Competitor Year Outlets Average Sales per outlet Products offered Vintage 1992 201 $420,000 Multiple natural fragrances Chastity 1996 311 $256,000 Multiple natural fragrances including fruit flavors Pelican 1989 120 $352,000 Multiple natural fragrances including fruit flavors C. Customers i. Customer Profile The natural fragrance target market engrosses individuals looking for healthy and environment friendly fragrances made from deluxe natural ingredients. The main target customers will be the Arabic and Muslim communities who hold a high value for natural fragrances. Research indicates that almost 36 percent of the world’s fragrances are bought by Arabic and Muslim communities (Walker 8). These communities value high quality products and will be willing to pay for the natural oil based fragrances. ii. Customer Feedback Elegance Company conducted surveys and focus groups where the customer’s feedback was positive. They described the products as outstanding, modern, spectacular and trendy. In these focus groups and surveys, the customers were exposed to the numerous oil based natural fragrances that will be offered by the company. Almost all the respondents noted that the experience was exceptional and gave a distinctive feeling of comfort. D. Marketing Plan i. Goal Elegance Fragrance Company’s goal is to be the primary brand in high quality oil based fragrance retail shops by generating a high-ranking fragrance experience among its patrons. ii. Strategy Elegance will position itself as a premium oil based fragrance retailer that employs high quality natural ingredients and nothing but natural ingredients. The marketing tactics to be employed are discussed in details in the operation section. iii. Products Elegance oil based natural fragrances are made from natural ingredients such as fruits, aqua and flowers. The company will offer the products in fruit and base options. The base option will consists of premium, and all natural aqua. The fruit option will consist of chamomile, strawberry and cinnamon fragrances. The products will be packaged in outstanding and trendy glass containers. The products will be of high quality and will retail at $5 to $10 according to the size of contents. iv. Elegance Experience The sign and welcoming storefront will intrigue customers and draw them into the store. The store’s atmosphere will be appealing and relaxed, but fashionable. The stores will be decorated with Muslim and Arabic decorations, and unsophisticated tones. Muslim and Arabic art works will hang on the walls. Arabic and Muslim communities esteem courteousness and so the store will have an individual at the entrance to welcome them into the store and thank them after shopping. E. Why is Elegance Different Elegance is no ordinary oil based fragrance retailer. It uses high quality, fresh and natural ingredients. The current players in the market do not use purely natural ingredients but mix them with artificial ingredients. The artificial ingredients which include chemicals are not health considerate and may cause health complications in the long run. Elegance’s exceptional brand and intellectual property will be protected by trademarks and copyrights. The company’s logo, slogan and decor will also be trademarked. F. Phased Approach The company will come up with a segmented operational arrangement to evaluate, fabricate proficiency, and raise capital in order to grow the business to an international scale. Phase I will entail testing the market at low cost through opening a stand during one of the Arabic and Muslim festivals. Phase II will engross opening a retail store financed by the founders in order to establish a sustainable retail outlet, developing best practice operations and establishing the base for business growth. The third phase will engross creating brand awareness at the regional levels by opening a regional chain of premium quality retail stores. Lastly, in the fourth phase Elegance Company will take its brand equity and outfitted proficiency to the national level by establishing a franchise venture. TTest Phase I Purpose The primary aim of this stage is to test Elegance oil based fragrances in a potential market within the school setting at low cost. Consumer sales and qualitative market data will be collected at this stage. The results obtained by the company in this stage will determine whether it should proceed with the venture or not. This stage is devised to determine the experiences in the market and its performance will dictate continuance to phase II. Implementation Elegance will implement this stage through having numerous vendor stands during the Eid ul fitri festivals. Theses stands will be appropriately allocated around the streets to target the Arabic and Muslim community members celebrating that day. Two stands will be located in Harlem and Belmont avenues, the same location where we anticipate to locate the company. During such festivals, it will be less costly since the stands will only require at least one person, who will issue the free samples too. Marketing Techniques At this stage, the company will employ all the marketing techniques that can create awareness among the people at grass root levels (Stutely 112). Elegance will employ the use of public relations during this festival and distribute flyers to the people during the event. The products will be offered at low discounted prices. This will allure the patrons to look for our booth. Financial Projections The profits realized from this stage will be used in the second phase as capital. The statement of overall overheads, start up costs, and projected sales is shown below. Income Statement Projected Sales Natural Oil based Fragrance Units 8000 Revenues Natural Oil based Fragrance unit (*$8) $64,000 Total Revenues $64,000 Cos of Goods Sold (*$3) $24,000 Gross Margin $40,000 Operating costs Festival Fee Utilities Other Start-up Expenses Total Operating Costs $100 $1,000 $9,000 $10,100 Operating Income $29,900 Taxes $3,000 Net Income $26,900 Initial Investment Start up costs Equipments ATR machines Storage Boxes $5,000 $10,000 Other Expenses Internal Decor Permits and Licenses Miscellaneous Inventory Fees $400 $300 $500 $24,000 $2000 Total Start Up costs $42,200 Check Point The company will evaluate the consumer reaction collected at the festival. If the analysis reveals that more than half of the customers will be willing to purchase our products, then the company will advance to phase II (Levesque & Mc Neil 119). Phase II Purpose The primary aim of this stage is to establish a sustainable venture demonstrating Elegance. The company will continue to understand its patrons by creating operational effectiveness. Since The Arabic and Muslim communities value fragrances especially during their holidays, the company will also test with other oblations in order to counterbalance the seasonality. Implementation The company will look for a retail space within the city that is accessible to all, cost effective, and near the Muslim and Arabic communities. The possible location of the venture will be between Harlem and Belmont avenues. Marketing Techniques This venture will also focus on public relations and use of coupons within the neighborhoods. This will create a strong customer base. This is intended at attracting large amounts of customers who will be given an unforgettable service experience (Venture Planning Group 1). In addition, the grand opening of the venture will attract more people as the products will be sold at discounted prices. Financial projections Income Statement Projected Sales Natural Oil based Fragrance Units 20, 000 Revenues Natural Oil based Fragrance unit (*$8) $160,000 Total Revenues $160,000 Cost of Goods Sold (*$3) $60,000 Gross Margin $100,000 Operating costs Personnel Rent Insurance Utilities Advertising/promotion Store opening Expenses Total Operating Costs $10,000 $5,000 $200 $300 $500 $8,000 $24,000 Operating Income $76,000 Taxes $5,000 Net Income $71,000 Initial Investment Elegance Company will require 106, 500 US dollars to start the second phase. Start-up costs Equipments ATR machines Storage Boxes $5,000 $15,000 Other Expenses Internal Decor Permits and Licenses Grand Opening Initial Inventory Miscellaneous Working Capital $2000 $4000 $4000 $60,000 $1,500 $15,000 Total Start Up costs $106, 500 Check Point The second phase will aim at affirming the financial performance of the venture and determine whether it supports the business’s long term goals. Phase III Purpose The company will aim at opening four more Elegance oil based fragrance stores in order to establish a regional chain. Implementation The new stores will be established based on cost effectiveness, and proximity to Arabic and Muslim communities. They will be designed similar as the first store. Marketing Tactics The new stores will focus on the Muslim and Arabic communities within the city and will; employ the use of public relations. The company will aim at generating a lucrative business venture by establishing a strong customer base. The marketing techniques will attract huge masses of patrons and create loyalty (Abrams 162). In addition, the stores will use coupons and fliers to members within the neighborhood, grand store opening and discounted prices during the grand opening and Muslim and Arabic festivals. Financial Projections Income Statement Projected Sales Natural Oil based Fragrance Units Store 1 20, 000 Store 2 20,000 Store 3 15,000 Store 4 23,000 Store 5 16,000 Revenues Natural Oil based Fragrance unit (*$8) $160,000 $160,000 $120,000 $184,00 $128,00 Total Revenues $160,000 $160,000 $120,000 $184,000 $128,000 Cost of Goods Sold (*$3) $60,000 $60,000 $45,000 $69,000 $48,000 Gross Margin $100,000 $100,000 $75,000 $115,000 $80,000 Operating costs Personnel Rent Insurance Utilities Advertising/promotion Store opening Expenses Total Operating Costs $10,000 $5,000 $200 $300 $500 $8,000 $24,000 $10,000 $5,000 $200 $300 $500 $8,000 $24,000 $9,000 $4,000 $200 $400 $800 $5,000 $19400 $9,000 $4,000 $200 $400 $800 $5,000 $19400 $10,000 $5,000 $200 $300 $500 $8,000 $24,000 Operating Income $76,000 $76,000 $55,600 $95,600 $56,000 Taxes $5,000 $4500 $3,500 $8,700 $3,500 Net Income $71,000 $72,100 $52,100 $86,900 $52, 500 Initial Investment Required The profits realized in the second phase can be used to cover part of the start-up costs in the third phase. The company will seek for external funding of $291, 000 to start up the phase. Start-up costs Equipments ATR machines Storage Boxes $15,000 $25,000 Other Expenses Internal Decor Permits and Licenses Grand Opening Initial Inventory Miscellaneous Working Capital Advertising $6000 $6000 $4000 $282,000 $1,500 $15,000 $7,500 Total Start Up costs $362, 000 Check Point The performance of the regional chain must be lucrative and appealing to the potential investors in order to move to the fourth phase. Phase IV Purpose This stage aims at increasing the company’s leverage to national and international level. The company will do this through enticing other investors to expand to other cities. Implementation This will be attained through employing highly trained and competent personnel to operate and build up the venture. At this stage, the company will build frameworks and start screening and awarding potential ventures (Stutely 154). Marketing Tactics This business venture will market not only to the customers but also to its investors. The company will be involved in intensified marketing campaigns in trade shows. Grass root marketing techniques will also be employed to directly influence the patrons. Financial Projections Income Statement Year 3 Year 4 Year 5 Year 6 Year 7 Revenues Franchise Fee Royalties Sales and Marketing Royalty $400,000 $250,000 $100,000 $400,000 600,000 150,000 $600,000 900,000 200,000 $1,200,000 1200,000 250,000 $2,400,000 2000,000 300,000 Total Revenues $750,000 $1150,000 $1,700,000 $2450,000 $4,700,000 Operating costs Management Rent Sales and Marketing General and Administration Other Expense Total Operating Costs $600,000 $20,000 $450,000 $300,000 $1370,000 $600,000 $20,000 $480,000 $250,000 $1350,000 $600,000 $20,000 $500,000 $350,000 $1470,000 $700,000 $20,000 $600,000 $250,000 $1570,000 $700,000 $20,000 $650,000 $350,000 $1720,000 Operating Income ($620,00) ($200,00) $230,000 $880,000 $2980,00 Taxes $350,000 Net Income ($620,00) ($200,00) $230,000 $880,000 $2,630, 000 G. Management Team The company was first started by two founders and operated two stores in Saudi Arabia. The two founders shared the same vision, and the available resources, business apprehension and passion for natural fragrances will inspire their business growth. During the first and the second phase, the business will be managed by the two founders. Additionally, since the work may seem a lot to them casual laborers may be contracted to work at the retail shops. The two founders are committed to attaining their goals and will only take salary after their business opens national and international outlets. H. Exit Strategy After its establishment, Elegance Oil based fragrance Company will have numerous exit strategies. According to Abrams (189), the business venture will either be sold to another existing Fragrance Company, use an IPO to fund its expansion, or continue its operations as a lucrative business. Works Cited Abrams, Rhonda M. The Successful Business Plan: Secrets & Strategies. Palto Alto, Calif: Planning Shop, 2003. Print. IBIS World. "Beauty, Cosmetics & Fragrance Stores in the US: Market Research." Market Research Reports & Analysis | IBISWorld US. IBIS World, Jan. 2013. Web. 10 Apr. 2013. Levesque, Paul, and Art McNeil. Dreamcrafting: The Art of Dreaming Big, the Science of Making It Happen. San Francisco, CA: Berrett-Koehler, 2003. Print. Stutely, Richard. The Definitive Business Plan: The Fast-Track to Intelligent Business Planning for Executives and Entrepreneurs. Harlow: Financial Times Prentice Hall, 2001. Print. Venture Planning Group. "Competitive Intelligence: Global Flavor and Fragrance Market Outlook and Leading Suppliers." Report Linker. Report Linker, Jan. 2013. Web. 10 Apr. 2013. Walker, Rob. "A challenging Global Climate For Fragrances." GCI Magazine Apr. 2013: 5-8. Web. 10 Apr. 2012. Appendices Consolidated Pro Forma Income Statement Year 1 Year 2 Year 3 Year 4 Year 5 Revenues Sales by Outlets Revenue from franchised outlet Royalties Sales and Marketing contribution $1500,000 $1250,000 $1100,000 $1400,000 1600,000 1150,000 $1600,000 1900,000 1200,000 2,200,000 2200,000 1250,000 $3,400,000 3000,000 1300,000 Total Revenues $2750,000 $3650,000 $3900,000 $4525,000 $7,500,000 Cost of Goods Sold 800,000 1200000 14000000 1200000 12000000 Gross Margin 195000 2450000 2500000 3325000 6,300,000 Operating costs Management Rent Sales and Marketing General and Administration Other Expense Total Operating Costs 600,000 $20,000 $480,000 $250,000 $1350,000 $600,000 $20,000 $500,000 $350,000 $1470,000 $700,000 $20,000 $600,000 $250,000 $1570,000 $700,000 $20,000 $650,000 $350,000 $1720,000 EBITDA Depression and Amortization EBIT Interest Expense Interest Income 500 1200 1000 7800 800 1300 1200 10,000 900 12500 1500 9000 1800 12500 12000 28900 6700 18900 60000 120,000 Net Income Before Taxes Income taxes 165,000 50,000 1950000 100,000 2600,000 350,000 3890000 850,000 6500000 1800000 Net Income $105,000 $1,800,000 $2250,000 $3040,000 $4700000 Competitor Information Competitor Fee Royalties Vintage $90,000 5.5% Chastity $120,000 4% Boss $80,000 6% Majimoto $130,000 8% Pelican $70,000 9% Read More