A Comprehensive Overview of the Proposed Business Venture: the Business Plan - Admission/Application Essay Example

Table of Content Content Page TABLE OF CONTENT i EXECUTIVE SUMMARY iii INTRODUCTION 01 2. OPPORTUNITY RATIONALE 01 3. THE INDUSTRY ANALYSIS 02 4. THE COMPANY AND PRODUCT DESCRIPTION 03 5. MARKETING PLAN 05 6. DESIGN AND DEVELOPMENT PLANS 08 7. MANUFACTURING AND OPERATIONS PLAN 09 8. MANAGEMENT TEAM 10 9. OVERALL PROJECT SCHEDULE 11 10. CRITICAL RISK ASSESSMENT 12 11. THE FINANCIAL PLAN 12 12. CONCLUSION 13 13. REFERENCES 14 List of Appendices Page 1. Appendix I - Development Gantt Chart 15 2. Appendix II - Sales Forecast for 5 years 16 3. Appendix III- Cost of Production Estimates 17-18 4. Appendix - IV Pro-forma Income Statement (annual for 5 years) 19 5. Appendix V - Balance Sheet (annual for 5 years) 20 6. Appendix VI - Cash flow Statements (monthly for 2 years) 21-22 7. Appendix VII - Additional Workings and Calculations 23-24 including Monthly breakdowns 8. Appendix VIII -Break Even Analysis 25-26 9. Appendix IX Competitor List 27 Executive Summary Ice cream and desserts is a product category which has much demand across any age category and holding a high potential in any part of the world. Even though Canadians can enjoy ice creams in true spirit only during summer months, having a place to go for a range of exclusive and freshly made ice-creams, cakes, desserts or a simple hot cappuccino or a hot chocolate is the perfect way to relax and enjoy. This is the offer which Snow White and Desserts ice cream and dessert palour will offer to the customers. The industry overview indicates that there is a marked trend towards consuming more homemade style ice creams with fresh and rich ingredients. The majority of Canadian customers are not ready to accept reduced quality of commercial ice creams. Hence the potential for specialized ice creams is high in this market. By combining beverages as ice coffee, milk shakes, hot cappuccino and hot coco, with the desserts and ice creams, the SW&D offers a year round reason for customers to visit the outlet. The business model that would be used in the SW&D venture would be a Differentiated Value experience where even through the pricing would be up-market and above market averages, the exotic varieties of deserts, the freshness and natural ingredients will deliver a value package that will differentiate the company. The products will be exclusive and exotic in nature but reasonably priced to maintain affordability. The expectations is that SW&D’s premium image will offer a low price elasticity in terms of economic considerations and make customers willing to pay additional money to experience the SW&D quality. Combined expertise of the two partnering entrepreneurs, Neil and Susan Shucroft will offer culinary expertise in dessert making which Neil acquired in qualifications and experience during the years in Europe as well as Susan’s service management experience in food service field. The initial financial analysis points to a highly lucrative venture and the capital funding to be invested can be recovered within 2 years period of time. This is a relatively low investment venture with high profitability returns of around 50% GP margins and 15% average NP margins. Such profitability is common to Food service industry, if the venture’s operations are managed stringently and with cost and quality consciousness. This business report provides a comprehensive market analysis and prose the business and functional level strategies as well as a preliminary financial analysis for the review of prospective investors of this exciting business project. 1. INTRODUCTION This business plan proposes to open a new ice cream and cake retailing outlet - Snow White & 7 Desserts, (SW&D) in Halifax, Canada. The market for customized ice creams is growing, especially with the reduced quality of mass manufacturers who are changing their ingredients to cheaper substitutes. More and more customers choose homemade style ice creams which are made of fresh natural dairy products, instead of milk substitutes used by mass producers (Steinman (2008). SW&D has identified this shift in consumer preferences and aims to offer a range of customized ice creams, desserts and cakes. Halifax is an ideal location to open this venture, given the vibrant nature of the summer months. The long term vision for SW&D is to expand as an outlet chain across Canada and the Municipality of Halifax will offer the ideal expansion grounds initially. 2. OPPORTUNITY RATIONALE a. The consumers are increasingly looking for customized specialty ice creams with distinct, creamy natural ingredients. b. With the economy coming out of stagnation, people are willing to spend on small indulgences such as ice-creams and cakes. c. Norva Scotia region where Halifax is located is one of the most promising of Canadian tourism attractions with over 2 million visitors in recent years. Halifax tourism and own population are growing steadily (398,000 in year 2009), providing an expanding customer base. 3. THE INDUSTRY ANALYSIS 3.1 Market Overview Ice-cream industry in Canada has experienced slow yet steady growth, despite its non operational nature during winter months. The Canadian production of ice cream is 400 million liters of hard and approximately 20 million liters of soft ice creams (Sector Profile, 2006) Other items as sundaes and shakes account for 175 million liters. Out of this production Canada also exports around 15 thousand tones over the previous year, mainly to USA and Arab countries (Consumption of Dairy Products, 2010). Total ice cream sales in Canada reached almost $2.1 billion in sales value. The industry is not fragmented and two giants, Nestle and Unilever holds over 60% of the market share (Euromonitor, 2006). Rest of the market is fragmented with regional chains, vendor franchises and chart sales. 3.2 Market Trends a. Per capita per annum- approximately 9.7 liters (Ice Cream Production and Consumption Data, 2010). b. Family size containers accounting for 68% of the sales and dominate retail sales. c. Increasing demand for specialized ice cream retailing which couples product offers as cakes and desserts. d. Increasing trend towards impulse ice cream purchases gaining in popularity with 7% growth over years and now accounting for over 20% of overall market sales. e. Promising growth of 12-15% in frozen yoghurt driven by healthier eating choices. 3.3 Competition The market is heavily competed by the packed ice cream manufactures, mainly Nestles and Unilever. Other small scales operators account for the rest of the market share of around 50%. 3.3.1 Direct Competitors Direct competition for SW&D will come from the other ice cream parlors in the region such as Dairy Queen, Black Bear Ice Cream Parlor, Cows Homemade Ice Cream, Kendales Ice, Cows Halifax, Cold Stone Creamery to name a few. In addition to these well known outlets, there is a host of other outlets which capitalize on the growth of impulse purchases (Dairy market.com, 2008). 3.3.2 Indirect Competition Indirect competition to ice creams comes from other desserts and confectionaries that will compete for customers’ share of spend on impulse indulgent foods. However, in this business scenario, SW&D is planning to counter this by incorporating a wide dessert line up in to its menu. Secondly, packed ice creams which are generally consumed at home also pose an indirect competition. This segment of the Canadian ice cream market accounts for over 68% of total sales (Sector Profile, 2006). 4. THE COMPANY AND PRODUCT DESCRIPTION 4.1 The Company The proposed company is an ice cream and desserts parlor to be located in Halifax – Canada. The proposed name for the business is Snow White and 7 Desserts. This dessert parlor will offer Halifax consumers a chance to experience exotic European premium tastes, with specialized recipes that offer high quality specialty ice creams and desserts. The name gives a twist of fun to the concept of product line where, Snow White represents the ice creams and the 7 desserts represent the 7 dwarfs. 4.2 The Business Concept SW&D will operate as a place where people will go to experience desserts of excellence. It’s a place for creamy sugary decadence! The business concept is to offer sit-in style dessert experience as well as to offer take home family packs. In addition to this, SW&D will undertake supply of desserts and ice creams to parties and functions as well as fundraiser events etc. The ice cream will be made in-house along with all the other dessert items. The central kitchen including the ice cream making operation will be located at the same location as the ice cream parlor. 4.3 The Product Description SW&D’s product range consist of over 15 varieties of ice cream flavors in soft and hard form, made out of finest fresh dairy products sourced locally. The local fresh fruits as berries are used for most of the delectable recipes of the ice creams, smoothies, frozen yoghurts etc. Other desserts include a range of cakes, gateaux, caramels, parfaits, mousses etc. 4.4 Additional Business SW&D will also offer hot and cold beverages to customers, including coffee, tea, hot chocolate, smoothies and fruit juices. This becomes necessary for supporting and complementing the cake products and operations during winter months. 4.5 Competitive Advantages There are number of key advantages of the proposed business: The entrepreneur in context has trained in food and beverages in one of the top Swiss hotel schools and followed specialized culinary courses in frozen and cold desserts. This knowledge is expected to help SW&D gain an instant market footing at the launch stage and establish its brand presence in the market as a premium scale dessert location which can be afforded by the normal consumers. a. The entrepreneur has an excellent location advantage at one of the most frequented of piers in Halifax. The space allows for the central kitchen concept to be incorporated. b. There are no ice cream parlors within 3 mile radius of the proposed location, except for the mobile Popsicle and tub ice cream vendors. 4.6 Entry and Growth Strategy The entry in to the market will be with this initial outlet and the management of SW&D plans to expand up to 25 outlets in different locations by 2015. Franchisee options will be considered within expansion efforts. The five year plan is rather conservative, yet justified by slow growth rates in Canadian ice cream market. 5. MARKETING PLAN 5.1 Overall Marketing Strategy SW&D will pursue a niche marketing strategy with its specialized ice creams and desserts, with a premium market positioning (Boyle, 2007). It is a place for family, friends and individuals to enjoy what they like. The premium image will be supported by the product quality, the names to be given, the choice of ambiance for the outlets, friendly service. 5.2 Target Customer profile SW&D’s main target segment will include families and couples in Halifax area as well as the tourist population travelling to Halifax. The demographics profile is wide and will include families, young adults and couples as well as children from families in middle and upper income strata. These clients would have disposition towards adventure, appreciation of premium quality food and giving in to life’s little luxuries. For them, SW&D will become an essential part of their daily life where a dessert, a cake or a special treat is picked up on their way home, for after dinner, included in the child’s lunch box, or enjoyed at SW&D while being out and about. 5.3 Product Strategy SW&D will offer premium quality ice creams and desserts. Ice creams will be offered in cones and bowls for eating-in customers and packed on request in individual, medium and large packs to suit different family sizes when it comes to take away options. The cakes and other desserts will also be available in individual portion sizes or in whole form for as per customer need. These items will have the uniqueness of product, product names, taste, ingredients, design and packaging to live up to the exclusive image in the mind of the consumer. The core product will be augmented by service by friendly staff and rich ambiance of the outlet. 5.4 Pricing strategy SW&D products will be prices at a premium but maintained at prices which are at par with similar premium range ice creams and cakes. The affordability of the products will be kept in mind to attract the customers. Introductory pricing strategy will be to prompt trial of product and get customers accustomed to the location. 5.5 Distribution strategy The initial distribution of SW&D products would be from the main outlet. As the business expands, there can be other outlets from which the customers can be catered to. The vision is to have an SW&D present in every major shopping mall and other key locations. In addition, mobile trucks with the SW&D products will be available for promotions and events as well as for mobile selling in parks where customer seating will be arranged. 5.6 Advertising and Promotion The SW&D products aim to bring fun, premium quality and little indulgences to life. This brand massage will be included in all promotional strategies and tactics. Top of line and below the line advertising options will be utilized (Armstrong & Kotler 2000). a. Initial outlet opening will be advertised in Halifax Radio stations. b. There will be direct mailer shots inserted to Halifax news papers, with discount coupons of up to 30% which can be redeemed during the 1st week of outlet opening. c. The introductory offers during the 1st month will offer cross promotional sampling for customers to create trial of a wider range of SW&D products. d. Free sampling operations will be carried out at sporting events etc, along with distribution of discount coupons. e. Snow white and 7 dwarfs will be a main attraction for the children to attend SW&D opening party. Snow White represents the ice creams while the 7 dwarfs will represent 7 decadent ranges of desserts such as 1) cakes, 2) caramels, 3) mousses, 4) parfaits, 5) smoothies, 6) sweet pies and tarts, & 7) fruity yoghurts and shakes. This same concept can be adopted in servicing birthday parties and other fun events which SW&D will carter to. f. Public relations activities should also be incorporated (Belch & Belch, 2004) where SW&D can sponsor local child welfare activities, and contribute a certain margin of profits from sales towards fun raising events it attend etc. g. A customer care hotline and a comment book should be in place for customer feedback which is critical for assessment and modification of the marketing strategies. h. An interactive website is to be developed for SW&D where club membership is to be promoted. A raffle draw to select 25 winners to receive free ice cream or free cake for their birthday may be an initial promotional offer to attract membership registrations. These members may be a closely targeted group for special promotions, new product emails campaigns etc. The members can be engaged to promote the company by introducing “bring in friends to SW&D and win” promotions. 6. DESIGN AND DEVELOPMENT PLANS 6.1 Design and Development Strategy The development strategy concerning products, ambiance, outlet layout and logos etc. will all aim to give a premium image with a touch of exclusivity. The novelty of the venture and the projects will be highlighted with European imagery, artifacts and names applied to the product items. Few of the European dessert items will be included to enhance this image further. The founder, Niel Schucroft’s past experience gained in Europe in culinary art will be a key facilitating factor in managing the development project accordingly. 6.2 Development Activities There are number of development issues and key tasks which is a part of launching SW&D. The product recipes play a key role in the success of the business. As the ice creams and desserts will be manufactured in-house, the using of proper ingredients and innovative recipes can give SW&D a distinct advantage and a differentiation platform. The designing and development of the outlet ambiance is also a key task, especially since the company is focusing on expanding the same concept as a chain of outlets within future business plans. The stores layout and interior designs have already been completed and the recipes of different ice cream products as well as desserts and cakes are already available. Most have been tested and sampled. The selection of items and flavors must be finalized with sample testing sessions organized between selected samples of prospective customers. 6.3 Development Timeline The target is to open SW&D for March 2011 so that the outlet will be fully functional by the summer of 2011. See Appendix I for a Gantt chart of the planned time line of development activities of the project. 7. MANUFACTURING AND OPERATIONS PLAN 7.1 Production Cycle As the products are perishable in nature, and since freshness is the key to product quality, it is important that all products are made to serve daily or 2 day’s sales volume. This will mean that SW&D will operate on a daily basis, producing the cakes, desserts and ice creams necessary for the next day. This will be a very fast production cycle, and since the product shelf off-take (stock turnover rate) is fast as well, the impact on working capital is positive. A short production cycle and faster stock turnover results less need for working capital to be tied up in to work in progress or stocks in sale. 7.2 Operations Strategy Success of a retail business depends heavily on the location. This is especially applicable to a business venture as SW&D since the location should be attractive and easily accessible and in safe surroundings for families, young couples, youth and tourists to patronize freely and easily. The available location is approximately 3,000 sq ft building with a 25ft wide road frontage and two storied building. The building is strategically located at …………………….. (give an address) in close proximity to the Halifax pear and other tourist attractions. The distance to other competitor outlets is an added advantage where there are no ice cream parlors within a 4 mile radius of this location. The location chosen for the venture will be rented out on a long term lease with consent for making any structural modifications and alterations to suit the requirements of the venture. Given the large space availability, the production floor will be designed and set up to cater to the needs of future planned expansions. This location will then act as the central production center for the rest of the outlets. 7.3 Scope of Operations The processes required for the productions and service is mainly divided in to three phases. The preparation of mixtures, baking or freezing and retailing or serving consists of the entire operation process. The raw material ordering, storing and issuing will need to be handled separately. Quality Control aspect has to remain one of the key concerns of the operation process. The production and service will operate as two separate processes where production side will be headed by the founder while the retail and service section will be handled by Susan Schucroft, the managing partner of the proposed venture. SW&D will partner up with local dairy and fruit farmers to get fresh ingredients needed for the entire product range. Special ingredients such as emulsifiers and provers will be imported directly from Europe. 8. MANAGEMENT TEAM 8.1 Team Background and Responsibilities Neil Schucroft and Susan Schucroft will act as managing partners with responsibilities of production operations and the service operations divided between them. Neil has experience in desserts and ice creams along with a Diploma in Culinary Arts, specializing in European cuisine from Schiller University – Switzerland. This is one of the most prestigious of hospitality schools in Europe which combines up to 60% study time with apprenticeships in top European restaurants and hotels for the students. Neil has worked after studies as a cook and a pastry chef at La’ Palace hotel in Geneva as well as a Pierre to Chatux in France. These experiences will serve SW&D immensely and help them retain a distinctly exclusive image. The head of production will have two assistant cake and dessert cooks as well as a helper for the ice cream making operation. As the operation grows in capacity, this staff strength will be increased to meet the man power needs. Susan Schucroft is a well experienced retail floor manager at Wal-Mart currently but has previous experience in the food service industry, having worked at a number of Hagen Dass outlets in the capacity of crew member and getting promoted to regional stores manager, during their stay in Europe. Acting as the Head of Servicing, she will be responsible for retailing and serving the customers and managing the dining in facilities. Susan will double up as the cashier and service manager until the operations reach a break-even point. There will be 3 service staff at the initial phase of operation and later recruitments for the service crew will be on part time basis. Administration and finance operations will be handled by Mr. Nigel Allan, a Chartered Accountant who will serve on the SW&D’s board and also work on part time basis until the company establish itself and expands to a size that warrants the engaging of a full time finance manager. 8.2 Board Of Directors The Board of Directors of SW&D will comprise of Neil and Susan Schucroft and Mr. Nigel Allan who will serve in the board and provide the venture with his financial expertise. Following is the Board and Equity Structure a. Chairman and Managing Director – Neil Shucroft -50% b. Director – Susan Schucroft - 40% c. Director – Neigel Allan – 10% 9. OVERALL PROJECT SCHEDULE The project is scheduled to be implemented and launched by Mar 2011, which leaves just over 4 months for the finalizing of the rest of the activities related to the project. This time frame is inclusive of the securing of project funding from a prospective investor. 10. CRITICAL RISK ASSESSMENT Market Acceptance – This is one of the most critical risks of a project of this nature which offers products that depends largely on consumer tastes and preference of flavors and recipes. The success of the proposed SW&D will also depend on the location acceptability and the concept acceptability of an ice-cream and dessert palour. Competitor reactions – There are many well established ice cream outlets in the area such as Dairy Queen and …………….. These outlets may choose to retaliate with special promotions and aggressive marketing strategies. Availability and timing of financing – This is one of the most critical risks which SW&D will face in launching as per plan and managing the venture in viable fashion. The project needs a number of key equipment for baking and mixing as well as for ice cream making. The display cabinets etc. and the store refurbishment are other major capital expenditures which the venture will need the funding for. Delay of funding arrangements can seriously affect the project plan. Since the launch is targeted for 2011 summer season, failing to capture this seasonal sale will affect the projected estimates as well as opportunity to have a successful launch for the outlet. Operating expense overruns – Since most of ingredients are sources locally, SW&D has a good advantage over those operators that import ingredients from foreign suppliers which leads to constant price fluctuations. However, if costs of productions and operational costs become higher than the forecasted, this can reduce profitability and affect the overall viability of the product. 11. THE FINANCIAL PLAN. The financial analysis indicates that the venture has very high profit potentials where the GP margins are in the range of 50% while the Net profit margins are in the range of 13-19%. The costs have been adjusted for price fluctuations and volume expansions. The details of the financial analysis are provided in appendices as follows: 11.1 Break-Even Analysis  The breakeven is calculated for each major product group which is presented in Appendix VIII. The Ice served ice cream alone will need 30,967 units to break even. Selling only the beverages will need 188,288 units and with only ice cones 89,828 units are needed for break even. The desserts and cakes have high contribution values, reducing the Break Even units to approximately 11,000 and 15,600 units. These amounts are almost 50% less than the forecasted sales volumes. 11.2 Balance Sheet  The balance sheet forecasts of SW&D indicates a very strong financial position for the operation with the asset values increasing and profits reserves being substantial. There is high liquidity as sales are on cash and there will be no major accounts payables and accruals in the current liabilities of the company. There is a high product turnover which increases the company’s liquidity and avoids debtors receivables. Appendix V provides the forecasted balance sheets for 5 years. 11.3 The Income Statement  The details of financial forecasts for the first 5 years have been forecasted utilizing figures from sales forecasts, pricing strategy, detailed cost estimates, overhead budgets. (See Appendix II, III and VI for the workings. All projections are based on Canadian $ and this Income Statement is provided as Appendix IV. The SW&D targets to achieve a sales revenue of C$ 683,450 in the first year of operation and then to achieve a 15% growth within its second year. A net profit of 13-15% is targeted from the operation. A reduction of NP during 2nd and 3rd year is anticipated as aggressive growth leads to additional expansion costs. 11.4 Cash Flows  SW&D cash flow forecasts indicate a robust cash position. The capital funds to be borrowed at the initiation will be sufficient for the operation and no additional short term debt is needed as per forecast. The operation is expected to have positive cash inflows due to the fast goods turnover and no credit being involved in retail sales of this nature. Appendix VI provides 2 years cash flows in monthly basis. The purchase of new assets is included in the forecast. 12. CONCLUSION This Business Plan has provided a comprehensive overview of the proposed business venture, its business model; the environmental analysis in which the venture has to compete and succeed as well as the strategic plans intended to be implemented. The plan also consists of the marketing strategies, operational strategies, and the risk analysis of the venture. The financial analysis provided highlights the profitability forecasts which are highly attractive and therefore, this is a highly attractive project which has the potential for successful and launching and sustenance as well as long term growth as a chain of outlets across different parts of Canada and may be internationally in future. References Armstrong, G. & Kotler, P. (2000). Marketing: An Introduction, 5th ed, Person Education Inc, Singapore. Boyle, E. (2007) “A process model of brand cocreation: brand management and research implications” Journal of Product & Brand Management . Volume 16 Number 2 2007 pp. Sector Profile: (2006) Ice Cream, Agriculture and Agri Food Canada. Accessed 19.10.2010 http://www4.agr.gc.ca/resources/prod/doc/dairy/pdf/prof_icecream_e.pdf Global ice cream industry – strategic market, international trade & production review Report (2008) Dairy market.com. Accessed 20.10.2010 http://www.dairymark.com/pdf/icecream.pdf Belch, G. E. & Belch, M. A. (2004). Advertising & Promotion: An Integrated Marketing communication perspective, Irwin, Illinois. Canadas Dickie Dee Ice Cream products poised to expand presence in USA market (1991) http://www.thefreelibrary.com/Canadas+Dickie+Dee+Ice+Cream+products+poised+to+expand+presence+in...-a011189348 Consumption of Dairy Products. 2010 Canadian Dairy Information Centre (CDIC). Accessed 20.10.2010 http://www.dairyinfo.gc.ca/ Ice Cream Production and Consumption Data. (2010). Dairy Science and Technology Centre, University of Guelph. Accessed 20.10.2010 http://www.foodsci.uoguelph.ca/dairyedu/home.html   Jon Steinman (2008) Is Canadas "Ice Cream" Disappearing? Deconstructing Dinner Accessed 16.10.2010 http://www.kootenaycoopradio.com/deconstructingdinner/column_iscanadasicecreamdisappearing.htm Euromonitor, (2006). Ice Cream in Canada, February. Appendix I Development GANTT Chart for SW&D Outlet Opening Project Milestones Duration Dec-10 Jan-11 Feb-11 Mar-11 Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10 Week 11 Week 12 Week 13 Week 14 Presenting Project Plan 1                             Securing Funding 2                             Purchase of equipment 2                             Finalize the restaurant layout 1                             Refurbish the restaurant area 4                             Install and finalize kitchen layout 3                             Test run the kitchen equipment 1                             Produce launching marketing communications /logos/signage 3                             Finalize the menus 3                             Test market the alternative menus 2                             Printing of menus 2                             Purchase of Restaurant furniture 4                             Purchase of raw material 2                             Install cash registers / fax / Telephone 1                             Fabricating sign boards 4                             Install sign board 1                             Soft launch of the outlet 1                             Public launch of the outlet 5                             Appendix - II SW&D Sales Volume Forecast Product Line Unit-C$ Year 1 Year 2 Year 3 Year 4 Year 5 Ice Cream Servings Serving 21,000 24,150 27,800 31,950 36,750 Ice Cream Scoops Scoop/cone 17,500 20,125 23,150 26,650 30,650 Cakes 1Kg 2,160 2,485 2,900 3,350 3,850 Desserts Unit packs 3,500 4,025 4,650 5,350 6,200 Beverages Units- cups served 26,250 30,200 34,750 40,000 46,000 *350 working days per year Annual 15% growth target SW&D Sales Revenue Forecast Product Line Avg. Unit Price-C$ Year 1 Year 2 Year 3 Year 4 Year 5 Ice Cream Servings $ 15.00 315,000 362,250 417,000 479,250 551,250 Ice Cream Scoops $ 4.00 70,000 80,500 92,600 106,600 122,600 Cakes $ 45.00 97,200 111,825 130,500 150,750 173,250 Desserts $ 35.00 122,500 140,875 162,750 187,250 217,000 Beverages $ 3.00 78,750 90,600 104,250 120,000 138,000 Total Revenue 683,450 786,050 907,100 1,043,850 1,202,100 * An Average retail price of the product range is taken to forecast the revenue Costs of Goods Sold - Forecast Product Line Cost Year 1 Year 2 Year 3 Year 4 Year 5 Ice Cream Servings $ 7.41 155,505 178,831 205,859 236,590 272,134 Ice Cream Scoops $ 1.39 24,238 27,873 32,063 36,910 42,450 Cakes $ 24.00 51,840 59,640 69,600 80,400 92,400 Desserts $ 20.00 70,000 80,500 93,000 107,000 124,000 Beverages $ 1.75 45,938 52,850 60,813 70,000 80,500 Total Cost of Goods   347,520 399,694 461,334 530,900 611,484 Appendix – III Average Cost of Production Ice Cream Served Items   3 scoops $ 3.41 wafers/sprinkles/nuts/cherries $ 2.00 Sauces $ 2.00 total ingredient cost $ 7.41     Avg. Selling Price $ 15.00     GP margin $ 7.60 51% Ice Cones and Scoops   Ice Cream Scoops 1 $ 1.14 cup/cone $ 0.25 total ingredient cost $ 1.39     Avg. Selling Price $ 4.00     GP margin $ 2.62 65% Cakes   Cost of Ingredients $ 20.00 electricity $ 2.00 Manpower $ 2.00 Total cost $ 24.00     Avg. Selling Price $ 45.00     GP margin $ 21.00 47% Desserts   Cost of Ingredients $ 16.00 electricity $ 2.00 Manpower $ 2.00 Total cost $ 20.00     Avg. Selling Price $ 35.00     GP margin $ 15.00 43% Beverages   Cost of Ingredients $ 1.50 Manpower $ 0.25 Total cost $ 1.75     Avg. Selling Price $ 3.00     GP margin $ 1.25 42% Production Cost of Ice Cream Scoop 1 Batch of 30 Lts. Ingredients Qty Rate /Unit Total Cost Milk 15 lt $ 2.50 $ 37.50 corn flour 5kg $ 2.00 $ 10.00 Cream 5lt $ 2.50 $ 12.50 Sugar 7 kg $ 3.00 $ 21.00 fruits / Nuts / Flavours assorted $ 5.00 $ 5.00 Total ingredient cost of the production batch     $ 86.00 Mixing/churning/freezing - electricity cost     $ 7.00 Manpower     $ 15.00 Other     $ 5.50 Total cost     $ 113.50 Cost per Lt     $ 5.68 Cost per scoop at 5 scoops per Lt     1.135 Appendix – IV Description Amounts – C$ Year 1 Year 2 Year 3 Year 4 Year 5 Sales Revenue 683,450.00 786,050.00 907,100.00 1,043,850.00 1,202,100.00 Cost of Sales 347,520.00 399,693.88 461,334.25 530,900.00 611,484.00 Gross Profits 335,930.00 386,356.13 445,765.75 512,950.00 590,616.00 GP Margin % 49% 49% 49% 49% 49%             Overhead Costs:           Outlet rent 18,000.00 18,000.00 18,000.00 18,000.00 18,000.00 Staff Salaries 185,600.00 245,400.00 286,200.00 296,000.00 321,000.00 Disposable Service items 2,500.00 3,000.00 3,500.00 4,000.00 4,500.00 Cleaning detergents 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 Electricity 4,500.00 5,000.00 5,000.00 5,500.00 5,500.00 Depreciation of equipment 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 Packaging material 3,500.00 4,000.00 4,500.00 5,000.00 6,000.00 Telephone and internet 500 750 1,000.00 1,250.00 1,500.00 Transport cost 750 750 750 750 750 advertising costs 8,000.00 10,000.00 10,000.00 10,000.00 10,000.00 Other costs 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 Total Overheads 235,350.00 298,900.00 340,950.00 352,500.00 379,250.00 Net Profits 100,580.00 87,456.13 104,815.75 160,450.00 211,366.00 Interest on Loan funding - 4% on 100,000 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 Net Profit after interest 96,580.00 83,456.13 100,815.75 156,450.00 207,366.00 Net profits % 14% 11% 11% 15% 17% Pro-forma Financial Forecasts for 5 Years Appendix V Year End Balance Sheet for SW&D - Fro-Forma 5 Years Assets Balance Sheet Values - C$ Current Assets: Year 1 Year 2 Year 3 Year 4 Year 5 Cash 10,000.00 100,000.00 161,352.00 224,802.00 318,668.00 Accounts Receivable 900.00 1,000.00 1,500.00 2,500.00 1,500.00 Inventory 5,000.00 7,000.00 7,500.00 7,500.00 8,000.00 Prepaid Expenses 100.00 1,000.00 1,500.00 500.00 1,000.00 Sub Total 16,000.00 109,000.00 171,852.00 235,302.00 329,168.00 Fixed Assets: Kitchen Equipment 100,000.00 141,000.00 150,000.00 145,000.00 145,000.00 Ice Cream Maker 10,000.00 21,000.00 20,000.00 45,000.00 42,000.00 Freezers and chillers 30,000.00 42,000.00 41,000.00 40,000.00 55,000.00 Display cabinets 25,000.00 23,000.00 21,000.00 35,000.00 34,000.00 Restaurant Furniture 30,000.00 25,000.00 23,000.00 22,000.00 21,000.00 Restaurant Cutlery and other 5,000.00 6,500.00 7,000.00 6,500.00 7,500.00 Computer/cash register /fax 11,500.00 13,536.00 12,000.00 11,500.00 11,000.00 Others Assets 5,000.00 6,000.00 5,000.00 4,500.00 4,500.00 Sub Total 216,500.00 278,036.00 279,000.00 309,500.00 320,000.00 Total Assets 232,500.00 387,036.00 450,852.00 544,802.00 649,168.00 Liabilities           Current Liabilities:           Accounts Payable 2,500.00 4,000.00 4,000.00 2,500.00 5,000.00 Expenses Payable 5,000.00 5,000.00 5,000.00 6,000.00 2,500.00 Loans Payable (short term) - OD - - Long-term Liabilities: Loans Payable (long term) 200,000.00 180,000.00 160,000.00 140,000.00 120,000.00 Shareholders Equity Beginning Retained Earnings - 96,580.00 198,036.00 281,851.75 396,301.75 Net Income less dividends paid 101,456.00 83,815.75 114,450.00 125,366.00 Capital Stock 25,000.00 - - - - Total Liabilities and Shareholders Equity 232,500.00 387,036.00 450,851.75 544,801.75 649,167.75 Cash Flow Forecast - SW&D - Year 1   Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec Total Cash Inflows:   Opening Cash balance -     217,503 213,718 222,433 250,148 289,425 310,640 320,918 326,008 328,248   Loan Proceedings     200,000                   200,000 Equity Contribution     25,000                   25,000 Sales Revenue - - 26,750 34,250 58,000 96,000 117,250 82,875 81,625 53,625 48,750 84,325 683,450 Depreciation     1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 10,000 Sales of Fixed assets - - - - - - - - - - - - - Total Cash Inflows - - 252,750 252,753 272,718 319,433 368,398 373,300 393,265 375,543 375,758 413,573 918,450 Cash Outflows: - - Raw material purchases - - 14,163 17,950 29,200 48,200 57,888 41,575 41,263 28,450 26,425 46,415 351,528 Equipment Purchase                 10,000       10,000 Loan Installment - grace period                       - Interest Payment     350 350 350 350 350 350 350 350 350 350 3,500 Dividend Payment - Not declared in 1st year                         - Expense Payments     20,735 20,735 20,735 20,735 20,735 20,735 20,735 20,735 20,735 20,735 207,350 Total Outflows - - 35,248 39,035 50,285 69,285 78,973 62,660 72,348 49,535 47,510 67,500 572,378 Income over Expenses - - 217,503 213,718 222,433 250,148 289,425 310,640 320,918 326,008 328,248 346,073 346,073 Cash Balance C/F - - 217,503 213,718 222,433 250,148 289,425 310,640 320,918 326,008 328,248 346,073   Cash Flow Forecast - SW&D - Year 2   Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec Total Cash Inflows:   Opening Cash balance 346,073 337,708 324,880 314,565 297,125 312,773 349,155 304,377 333,447 351,392 343,774 341,219 341,219 Loan Proceedings - - - - - - - - - - - - - Equity Contribution - - - - - - - - - - - - - Sales Revenue 30,750 20,375 25,775 31,625 74,875 115,950 116,300 102,200 80,700 51,825 53,300 82,375 786,050 Depreciation 835 835 835 835 835 835 835 835 835 835 835 835 10,020 Sales of Fixed assets - - - - - - - - - - - - - Total Cash Inflows 377,658 358,918 351,490 347,025 372,835 429,558 466,290 407,412 414,982 404,052 397,909 424,429 1,137,289 Cash Outflows: Raw material purchases 17,025 11,113 14,000 16,975 37,138 57,478 57,453 51,040 40,665 27,353 28,765 45,300 404,303 Equipment Purchase             71,536           71,536 Loan Installment - grace period                         - Interest Payment 350 350 350 350 350 350 350 350 350 350 350 350 4,200 Dividend Payment       10,000     10,000     10,000 5,000   35,000 Expense Payments 22,575 22,575 22,575 22,575 22,575 22,575 22,575 22,575 22,575 22,575 22,575 22,575 270,900 Total Outflows 39,950 34,038 36,925 49,900 60,063 80,403 161,914 73,965 63,590 60,278 56,690 68,225 785,939 Income over Expenses 337,708 324,880 314,565 297,125 312,773 349,155 304,377 333,447 351,392 343,774 341,219 356,204 351,351 Cash Balance C/F 337,708 324,880 314,565 297,125 312,773 349,155 304,377 333,447 351,392 343,774 341,219 356,204   Appendix VII Additional Workings for Cash Flow Statement Salaries Year 1 Year 2 Year 3 Year 4 Year 5 Head of production 60,000 63,000 64,200 66,000 69,000 Head of servicing 36,000 39,000 42,000 45,000 48,000 Service Staff 24,000 35,000 45,000 50,000 60,000 Cooks 20,000 40,000 65,000 65,000 70,000 Helpers 21,600 42,000 45,000 45,000 48,000 Cashier 24,000 26,400 25,000 25,000 26,000 Total 185,600 245,400 286,200 296,000 321,000 Equipment Purchases Year 1 Year 2 Year 3 Year 4 Year 5 Asset Value 216,500 216,500 278,036 279,000 309,500 Depreciation 10,000 10,000 10,000 10,000 10,000 Net Value 206,500 206,500 268,036 269,000 299,500 Balance Sheet Value 216,500 278,036 279,000 309,500 320,000 Equipment Purchases 10,000 71,536 10,964 40,500 20,500             Loan Payment Capital Sum 200,000     Period   120 months     Monthly Installment   1,667     ** 2 year grace period with interest charge only in 1st and 2nd year         Expense Apportionment Forecast for Cash Flow Planning 1st Year Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Staff Salaries 18,560 18,560 18,560 18,560 18,560 18,560 18,560 18,560 18,560 18,560 Disposable Service items 250 250 250 250 250 250 250 250 250 250 Cleaning detergents 100 100 100 100 100 100 100 100 100 100 Electricity 450 450 450 450 450 450 450 450 450 450 Packaging material 350 350 350 350 350 350 350 350 350 350 Telephone and internet 50 50 50 50 50 50 50 50 50 50 transport cost 75 75 75 75 75 75 75 75 75 75 advertising costs 800 800 800 800 800 800 800 800 800 800 Other costs 100 100 100 100 100 100 100 100 100 100 Total Overheads 20,735 20,735 20,735 20,735 20,735 20,735 20,735 20,735 20,735 20,735   2nd year Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Staff Salaries 20,450 20,450 20,450 20,450 20,450 20,450 20,450 20,450 20,450 20,450 20,450 20,450 Disposable Service items 250 250 250 250 250 250 250 250 250 250 250 250 Cleaning detergents 83 83 83 83 83 83 83 83 83 83 83 83 Electricity 417 417 417 417 417 417 417 417 417 417 417 417 Packaging material 333 333 333 333 333 333 333 333 333 333 333 333 Telephone and internet 63 63 63 63 63 63 63 63 63 63 63 63 transport cost 63 63 63 63 63 63 63 63 63 63 63 63 advertising costs 833 833 833 833 833 833 833 833 833 833 833 833 Other costs 83 83 83 83 83 83 83 83 83 83 83 83 Total Overheads 22,575 22,575 22,575 22,575 22,575 22,575 22,575 22,575 22,575 22,575 22,575 22,575 Break Even Analysis of Products Ice Cream Served Items   Avg. Selling Price $15.00 3 scoops ($3.41) wafers/sprinkles/nuts/cherries ($2.00) Sauces ($2.00) Total Direct Costs ($7.41) Contribution per item $7.60 Total Forecasted Overheads 235,350.00 Break Even Units 30,967 Ice Cones and Scoops   Avg. Selling Price $4.00 Ice Cream Scoops 1 ($1.14) cup/cone ($0.25) Total Direct Costs ($1.39) Contribution per item $2.62 Total Forecasted Overheads 235,350.00 Break Even Units 89,828 Cakes   Avg. Selling Price $45.00 Cost of Ingredients ($20.00) electricity ($2.00) Manpower ($2.00) Total Direct cost $24.00 Contribution per item $21.00 Total Forecasted Overheads 235,350.00 Break Even Units 11,207 Desserts   Avg. Selling Price $35.00 Cost of Ingredients ($16.00) electricity ($2.00) Manpower ($2.00) Total Direct cost ($20.00) Contribution per item $15.00 Total Forecasted Overheads 235,350.00 Break Even Units 15,690 Beverages   Avg. Selling Price $3.00 Cost of Ingredients ($1.50) Manpower ($0.25) Total Direct cost ($1.75) Contribution per item $1.25 Total Forecasted Overheads 235,350.00 Break Even Units 188,280 Appendix IX Competitor Brands in the Ice Cream Market Packed Commercial Ice Cream Brands a. Creamsicle b. Breyers c. Drumstick d. Fudgesicle e. Nestlé f. Parlour g. Haagen-Dazs h. Polar i. Real Dairy j. Québon k. Klondike l. Revello m. Viennetta Specialized Ice-creams and Ice Cream Palours a. Chapmen’s b. Cows c. Dairy Queen d. Baskin Robins e. Cold Stone Creamery Read More