ABC Dry Cleaners and Laundry Service Business Opportunities - Term Paper Example

Business Plan – ABC Dry Cleaners Executive Summary Business Concept ABC Dry Cleaners and Laundry Service is being formulated to offer the consumer an exemplary level of service, whilst addressing the strains of modern life and work life balance with an underpinning focus on the environment. The decision to pursue ethical/green dry cleaning is ultimately to capitalize on both the group member interest in environmental issues plus the growth in the sector per se coupled with the magnitude of public interest and awareness being nurtured by big business in other industries, for example, Wal Mart. Our proposal is to offer a considerably ‘greener’ alternative in the form of a hydrocarbon solvent, with a view that we can emulate the success that firms in the several states of United States and Europe have had by following a strategy from an ethical standpoint. Hydrocarbon alternatives have 90% fewer emissions into the environment, greater efficiency, and thus positive benefits for employees, and consumers alike. Traditional dry cleaners offer a service that, on close scrutiny, doesn’t bear up to levels of expectation. Clothes, although clean, are returned in a malodorous condition, materials damaged in the long term, and with the added ‘bonus’ that Perchloroethylene is a skin irritant for some people. Perc has been banned in some areas of the United States and is well documented as being environmentally unfriendly in the form of solvent disposal, air pollution, and being hazardous and carcinogenic to employees. The paying public has thus far been conditioned to this offering and it is our view that a positive, aggressive public awareness campaign would firmly propel us to the forefront of the market, and hence first mover advantage too. Company Overview: Description of ABC Dry Cleaners: ABC Dry Cleaners is being formulated to offer the consumer an exemplary level of service, whilst addressing the strains of modern life and work life balance with an underpinning focus on the environment. The proposal is to offer a considerably more ‘green’ alternative to regular dry cleaning. This would be done in the form of a hydrocarbon solvent, emulated from the success of firms in the United States and Europe that are following this strategy from an ethical standpoint. This is because, hydrocarbon alternatives have 90 per cent fewer emissions into the environment, are more efficient, therefore, beneficial for employees, and consumers alike. Distinctive Skills, Uniqueness and Protection Key Personnel ABC Dry Cleaners is a firm that will be started with $25,000. All decision making will be centralised and formulating long term strategies and goals will to. Likewise, everyone will be trained in all aspects of the dry cleaning industry so that they may participate actively in the future development of any staff introduced to the business. This will be of immense importance during the early development stages especially in the context of controlling costs. Uniqueness The offering of an alternative environmentally friendly way of dry cleaning. The less abrasive process means that the clothes are not harmed as much as under conventional dry cleaning techniques. Our unique pick up and delivery service and late hour on-site drop off. Competitive business to business arrangements in the future Assisting the re-addressing of work life balance Mission, Vision and Objectives Mission Statement Building a community committed to a cleaner future, in partnership with our customers and the environment through Learning, Innovation, Freedom to choose, and Exemplary service the L.I.F.E choice! Vision Statement Creating a business that is unique by forming a mutual consumer partnership in making a collective environmental difference. Objectives Year One To market our product, to create and establish consumer awareness of our service by creating awareness of the environmentally friendly techniques that are used when processing. To attract and retain consumers through effective customer service techniques, for example, the unique pick up and delivery service to business and offices, the creation of loyalty cards and after hours on-site drop off box. Ensure that consumer expectations are met and surpassed through focused, ongoing training of our staff. Therefore, the creation of professionals, and experts in our field. To facilitate considerable impact in the market with the view to at least breaking even or a modest profit to support our growth strategy for the following years. Year Two With the establishment of market expertise, consumer loyalty and word of mouth marketing our focus would look towards opening more outlets in the region of Aurora and Arvada area. Consolidate our first mover advantage by raising a capital injection from the Development Authorities. The additional finance received would facilitate expansion and the creation of a “hub and spoke” style operation to service the whole of the Denver. This in turn, would give us the ability to capitalize on the benefits of economies of scale we would achieve. Year 3 and beyond At this stage we will be looking towards reinforcing our brand, and strengthening our corporate position Ultimately with our complete range of products in place plus a complete package from start to finish we will be driving toward franchising the operation. To be the leading local dry cleaning/laundry company in the area. Industry Analysis Industry Description, Scope and Trends Our initial foray into the market uncovered a distinct opportunity within the United States. Dependence on traditional dry cleaning methods i.e. Perc, is highly prevalent in 95 per cent of both independent and national cleaners. Perc has been the industry solvent of choice for 75 years, maintaining its position as the most efficient cleaning agent against all challengers. However, more recent technological advances in substitutes have thrust the market into some confusion. Perc has been proven to be a carcinogenic, and an air and ground polluter. Currently, the dry cleaning and laundry market is dominated by independent firms. There are several firms that are present in the current US markets and based in Colorado include s firms like Amy’s Green Dry Cleaning, Pristine Green Cleaners. Overall, the number of independents has decreased to a great extent. On the whole, the dry cleaning and laundry industry is a very mature market that is currently relatively difficult to succeed in, for many reasons such as: EC Solvent Emissions Directive which enforces to minimize the levels of Volatile Organic Compounds (VOC’s) emitted. Supermarkets, such as Morrison’s, are introducing their own dry cleaning outlets or services in-store. Introduction of home dry cleaning kits. Despite some of the concerns raised above, many of them are either overstated or do not directly effect our organization, in fact some actually aid us. The EC solvent emissions directive will support our idea of an environmentally friendlier way of dry cleaning clothes. Marketing Strategy Major Customer Profile Our focus are consumers who care for the sustainability of the environment and when given a choice, would opt for the product or service that does not harm the environment over those which do, under the assumption that the price points are the same and the product works just as well if not better than traditional cleaners. Market Segmentation and Targeting Market research allowed us to divide the market into segments through the use of primary data which was obtained through a market survey using questionnaires (Appendix 7). Based on this broad classification we further fragmented our research into segments of ‘green’ consumers according to the extent to which they were found to be conscious of the environment. The survey revealed the following segments: Indifferents: This segment consisted of people caught up in their everyday lives, not essentially going out of their way to look out for what affects the environment adversely. Wanderers: This was the group unsure of its personal ideals and moved from one stance to another on environmental issues and the overall significance of sustainability Selectives: were found to be largest groups of green consumers in our survey. These consumers are typically green in only one aspect of their lives. A selector may be keen on recycling products but sees no contradiction in leading an otherwise consumption orientated life. Enthusiasts: would be green in some aspects of their lives. Recognizing the importance of the environment they are ready to make sacrifices in order to do what they perceive is the 'right thing'. However they could be laid back in actively seeking out the information that they need to understand what the 'right thing' actually is. Committed: are the greenest of all of the above explained segments. Their personal viewpoint regarding the usage of products and services makes sustainability of the environment a priority in every aspect of their lives. Our target market was chosen based on the results of our survey, from which, the greenest of the five segments; the ‘selectives’, ‘enthusiasts’ and the ‘committed’ were chosen. Our target market would further be narrowed to the group of consumers who are primarily: Above the age of 25. Employed or business owners. Earn approximately $10,000 p.a. or above. Moderately interested, very interested or actively involved in the environment. Make ethical purchases at least monthly or yearly. Dry clean their clothes at least monthly or yearly. Give priority to convenience in their lives. Would happily consider using a dry cleaning service that offers pickup and delivery service from the office and home. Would happily consider an environmentally friendly way to dry clean their clothes for the same price they pay to their non-green dry cleaners. Operations Human Resources: Our needs as a small business will differ from that of a large organization. We intend to have an informal structure with employees, however, this will be backed by proper procedure. This formal structure is necessary should circumstances arise that are beyond the capabilities of the informal structure, and also to give confidence to all the parties involved that the company is being managed in accordance with employment law and best practice. At ABC Dry cleaning, we will be concerned with the development of both, the individuals and the organization in which they operate. We acknowledge that due to our flat structure a ‘soft’ approach to human resource management will be appropriate as the partners will themselves be working alongside employees on a daily basis. To maintain a healthy balance, interaction between management and employees will be constant. However, an employee is not reaching the standard required is likely to have a larger detrimental effect to our businesses in comparison to a medium or large organisation. Financial Projections a. Start up costs: Particulars Cost   $ Spotting Tables(*1) 1300 Machines(*1) 8,000 Dryers(*1) 1,200 Ironing board(*1) 900 Plastic bagging machine(*1) 600 Compressor(*1) 900 Furniture and fixtures 2,000 Electrical insulation 300 Computers, printers etc 600 Tills/e-Pos systems 900 LPG van 800 Sign boards 900 Website hosting cost 200 Registration cost 25 Insurance cost 500 Advertisements 2,000 water connection 100 Electricity connection 100 Toll free number activation 20 Internet access activation 20 Copy right Logo 30 Legal Expenses 200 Initial Purchase of Solvents 200 Particulars Basis for Financial Calculations     Staff Salary Salaries will increase by 10% every year.   The wages for each employee is as shown below:   Office staff, Customer service representative($6.00 each hour for 8 hrs. for 3 people)   Assistant top driver and cleaning staff ($5.00 each hour for 8 hrs. for 3 people) Office Expenses Expenses will increase by 10% every year. Depreciation Depreciation is done using reducing balance method.   Depreciation rates as follows:   Plant and Machinery 14%   Office equipments 15%   IT and vans Straight Line depreciation Dividends The shareholders will receive a dividend of 20% for the first year, after which it would be 30% Tax VAT will be charged at 17.5%.   Corporate Tax will be applies at 19% and 30% as per US regulations Advertisements The first six months of the business would increase the advertisement expenses by 10%   Then on there will be a annual increase of 5% Consumable It is assumed that consumables(electricity and water) costs 10% of sales Bad Debts Would be 5% of sales Contingency Reserve A 30% reserve would be made Raw Materials used 1% of sales. Exit Strategy We are very confident that there is sufficient need in the market for our business; however, we are also aware of the fact that in business there are no assurances. Therefore, if for any reason the company does not live up to expectations there are some viable options to which the business could follow: If it is proven that the laundry business has greater potential, consideration for switching the business completely to laundry will be made. This will fit within the confines of the present structure of the business; however, moves would be made to operate from cheaper premises. We would, however, be pursue this in line with our ethical stance. To pay all debts that are owed, and exit the business as soon as possible incurring as little loss as possible. 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