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Growing an Entrepreneurial Business - Example

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The Company is a start-up business that majorly specializes in importation of cake equipment and vending machines. We will enter the vending industry with first to market, innovative, high quality vending machines. We will establish our own vending routes in Abu Dhabi, UAE…
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Growing an Entrepreneurial Business
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Innovation Executive Summary 0 Introduction The Company is a start-up business that majorly specializes in importation of cake equipment and vending machines. We will enter the vending industry with first to market, innovative, high quality vending machines. We will establish our own vending routes in Abu Dhabi, UAE because of the most of the potential customers are situated in most part of the town. We also plan to join in the over $300 billion food & beverage industry by providing innovative and high-quality equipment. With the formation of one strategic alliance with one of the national brand names in each of our vending lines, we believe to easily surpass our financial projections. 1.2 The Company The company’s mission is to be the first to introduce innovative, quality restaurant equipment and vending machines to UAE market. Through excellent relationships and close customer contact, we will be able to meet our customer’s needs where we can. The Company is a privately-owned Dubai company and has an office and a small warehouse in Abu Dhabi, UAE Two of the four company’s investors have full operational responsibility. The founders of the company have industry and entrepreneurial experience 1.3 The Products The Company will have three product lines in various markets it serves. Our vending products line will include cake maker machine, cakes box and Extra design box. In future, our restaurant equipment products will be espresso makers, toasters, and fresh juice squeezers. Most of our products, such as Extra design box are innovative machines that have advantages and functions not found in the current common vending machines, therefore providing The Company a competitive advantage over more existing competitors. We plan to enhance our existing product line in the future. The company’s immediate plans are to take account of a greater model of Sandwich Express that will provide various varieties of sandwiches, and a more different product line, such as pizza. Other products are in the tentative 1.4 Financial Considerations The Company has an initial start-up cost of nearly $150,000 of which $120,000 will come from a seven year bank loan.  Short-term loan will save us with an additional $2,500 and the rest will be sourced from investment capital. Why invest in the company The cake industry has undergone a lot of transformation for the last few years which has made the product to have mass consumption. One should invest in the company due to the following reasons • There is a good Present/Future demand • There is a Potential Export-Import Market • Payback Period and Project Costs are relative 2.0 Business Description The business is a privately-owned company and has an office and a small warehouse in Abu Dhabi, UAE 2.1 Mission The Company mission is to be the front-runner in introducing innovative, quality restaurant equipment and cake vending machines to the market. Through excellent relationships and close customer contact, we will meet our customers’ needs of where we can. The Company will secure adequate profits from free cash flow from operations, to finance future growth and sustain its stability. We will be socially responsible to our community by keeping a friendly, familial work environment. 2.2 Objectives The Company’ objectives in our first year of doing business are: Sell over 400 cake and vending machines. Place directly 10 vending and cake machines, that we will operate, in the Abu Dhabi Attain sales of $500,000 in our restaurant equipment line. For the following five years our growth objectives are: Grow our vending and cake machine and equipment business by 25% every year. Grow profits by 25% in the company’s directly operated vending machines. 3.0 Product Description The Company has three machines and three lines of restaurant equipment. Our products are: 1. The main is the cake maker machine- This machine that prepares up to 140 pre-packaged cakes. Every time an order is placed, the machine sends a cake from the refrigerator to the toaster, toasts the cake for a set time, and at a determined temperature. In approximately 60 seconds, a fresh, delicious, hot cake is served. In addition, if someone needs a cup of coffee, it will be easy to prepare and it will not take any effort from the consumers since the new technology makes having a cake with good tests available on machines without any worry. The machine also takes into consideration the amount of ingredients. 2. The cakes box-the machine offers suitable price so the consumer will be able to buy it regularly 3. Extra design box- It is relatively lower than the cakes box 3.1Competitive Comparison Cake maker machine and the cakes box will be first to market. At present, the market only offers a sandwich, or other hot meals, that must then be microwaved. We will be the first in the market to provide a vending and a cake machine that both toasts the cake, and then provides it hot to the customer. The products of our machine will have a qualitative advantage as compared to microwaved products as well. As for drinks, the market only provides canned or bottled juices for a customer to buy. Our cake machine will literally provide a fresh cup each and every end. Our company’s qualitative advantage over other machines is the fact that easy to prepare cake and it will not take any effort from the consumers since the new technology makes a cake with good tests without any worry. The machine also takes into consideration the amount of ingredients. Currently, there are various similar multi-line machines on the market. As a way of protecting ourselves from our competitors, we will provide the customer with quality product at lower prices below the normal market rates. Our machines also have unique packaging that will favorably compete with the products in the current market. In addition, we will also be first to sell automated line of toasters. At the moment, the toasters on the market need the food service worker to monitor manually the cooking process, whereas ours toast and dispenses automatically, making the service workers to attend other customer service tasks. The company’s espresso cake makers will compete with the current espresso makers in the market. Our machines will also offer the pre-packaged cake pod which will reduce the costs to the end user. We will also offer an aggressive pricing strategy as a way of curbing the competition 3.2 Sourcing The Company imports its machines from Spain at relatively cheap prices. 3.3 Technology The mission of our company is to present innovative and unique products to the market. In order to achieve this, we will look for the latest food preparation technology in the vending and equipment business. As first entrants into the market, currently we enjoy a technological advantage over other competitors 3.5 Future Products To improve our current line, we are considering a bigger model of Cake Express that offers a larger variety of snacks, and various product lines, i.e. pizza. We are also looking for supplier relationships with large nationally-branded sandwich and juice manufacturers, to modify our machines to their products. This would make the Company to sell machines to national firms and let them to brand the machines with their existing product lines. As the company increases its presence in the equipment industry, we will endlessly look for products to expand our current line. A major component of this will be the response from our customer base. 4.0 Market Analysis Revenue from UAE selling consumable goods was $24 billion in 2009, an increase of 5% in 2008, according to the Automatic Merchandiser magazines State of the Vending Industry Report in August 2010. This figure comprises of both products and machines. Small companies selling goods less than $1 million amounted to 5.8% of the entire market and had anticipated sales for 2009 of $1.3 billion. Most of the vending operators are categorized into small category. Within the industry, cold beverages and snacks are the major product segments, which represent 30% and 25% of the industry, respectively. The two segments are leading in the industry. According to the Automatic Merchandiser, the food category grew at a rate of 7%, last year. In 2013, cold storage machines grew at a remarkable of 45%, with this growth coming at the cost of shelf-stable products. Wider cultural and economic trends are also impacting the industry positively. Away from home food sales have become a greater part of entire food sales in the UAE since the 50s. Technomic, a Dubai-based research firm, reports an increase in demand for takeaway foods as the percentage of households with two parent drops, alongside with the reduction of the three regular sit down meals per day. There is a change in consumer preferences in relation to taste, nutrition, convenience, price, and technology. These changes are in favor of the vending industry, which now has the opportunity to identify these trends and improve their markets. This is a healthy and large industry in our economy, and suppliers to this industry are likely to be the beneficiaries of this growth. 4.1 Market Segmentation The Company will market its product to three different market segments: 1. End Users- Operators who owns vending routes and wish to grow their product selections. This category includes big institutional food service companies that take part in vending operations as their total food service business. 2. Distributors- those companies that supplies machines operators for their operations. 3. Branded Juice Companies and Branded Sandwich Manufacturers - working closely with these companies ensures that we will customize our machines so as to meet their requirements and to make them to "brand" our machines with their products. We have two markets for our equipment business: 1. Hotels and Restaurants - End users who directly benefit from the purchased equipment. 2. Equipment Supply Companies- Large supply houses that offers various equipment to food & beverage industry The chart below shows the market analysis for various segments 4.2 Competition and Buying Patterns Food & beverage and vending industries are both highly competitive. Reliability, Price, customer service and Return On Investment (ROI) are some of the factors effecting a buying decision. There are several big name brand companies offering vending machines in the market. Our focus will be to create a niche market for our innovative machines and to compete with bigger more recognizable names. By the virtue of being the first entrant to the market, we have a distinctive opportunity to position ourselves and our machines. Consumer buying behaviors are fairly constant across the year. 4.3 Distribution Patterns In this vending industry, distribution normally runs through a distributor who will carry a brand of machine for sale in a certain geographic area. In some cases, manufacturers sell directly to end users or operators. Another way making a distribution is to be a supplier to a nationwide branded company. Same distribution patterns are adopted in the food & beverage industry. 4.4Target Market Segment Strategy The initial strategy of our company is to offer all our products to the entire market segment. Our focus will be on both the end user and the distributor primarily, as the strategy to get accounts with the nationwide branded companies will take some time to materialize. We will target our three ways. First, we have started a small advertising system in industry trade publications that highlights several benefits and features of our products. Secondly, we will join the National Automatic Merchandiser Association (NAMA) introduce ourselves together with our products to end users and distributors; we will also take part in Dubai regional show in their national show next year. Finally, we will adopt custom-made relationships with contacts created at these shows and with others area. For sales of equipment, our focus will be on on end users and distributors in the Southern regions. As the market share increases, we will expand geographically. 4.4.1 Market Needs The major market needs to be addressed will be revenue. All our machines will act to expand current sales for operators, and in several cases will create entirely new markets. For those operators that already supply vending cakes, a high end sandwich will make this operator to expand the sales without affecting existing sales. As for the case of the cake , a gourmet cup of vended cake will be a complete complement to fresh cup of orange juice. By crafting a new untapped market, the operator will have the opportunity of expanding revenue streams beyond their current accounts. Price is another significant need that we will fill with our multi-line machines and our equipment. As we compete with our current supplies who are already established in the market, our products will priced relatively competitive so as to attract customers. 4.4.2 Market Trends Growth rates in both the restaurant and the vending industries remain strong. This growth is powered by the changes in the workforce and workplace that causes workers to consume more of their meals away from home. It is anticipated that away from home food sales will increase by over 53%, in some years to come. The demand for higher quality food is growing as more and more consumers eat away from home. Merchants are now selling complete packaged frozen meals in their machines. Profit margins are expected to increase as best prices are placed on high-quality branded products. The industry is affected by demographic trends. A huge group of young adults, who generally grew up on fast food, have developed as a result of economic force. The perceptions of this group on technology, fast food, and vending, will positively impact the vending business. Moreover, overall immigration trends and population growth rates, above all, will also have an incredible economic effect on the vending industry. Most of the growth in these areas will be in Southeast of Abu Dhabi, where The Company is positioned to capitalize on these trends. 4.4.3 Market Growth Research indicates that there will be an industry growth rate of nearly 4.8% over the next five years, equivalent to the overall growth of the UAE economy. 4.5 PEST Analysis Some of the factors that might affect the company include: Political Factors Represent the extent and the way the government influences the business. These factors include, tax policy, tariffs, trade restrictions labor law, and even environmental law. Economic Factors These are unique areas to the economy and are influenced directly by the economy, areas such as the interest rate, economic growth, inflation rate or exchange rates. All these areas can have a great influence in the company. Social Factors They mainly refer to demographic factors, comprising of factors such as population growth rate, age distribution, cultural aspects and health consciousness. Technological Factors Technological factors refer to the rate of technological change, automation, incentives and R&D activity. These factors greatly influence areas such as the quality, minimum efficient production level, costs and even outsourcing decisions. Legal Factors These are the laws connected directly to company and its area of activity, including antitrust law, consumer law, health and safety law and anti-discrimination law. 4.6 SWOT Analysis Strengths Weaknesses Pricing Power Unique products An innovative Strong management Work Inefficiencies High Staff Turnover Outdated Technology Customer Service Weak Supply Chain Opportunities Threats New products Emerging markets Fragmented markets Innovation Government regulations Bad economy Mature markets Political risks 5.0 Competitor Analysis Food & beverage and vending industries are both highly competitive. Reliability, Price, customer service and Return On Investment (ROI) are some of the factors effecting a buying decision. There are several big name brand companies offering vending machines in the market. Our focus will be to create a niche market for our innovative machines and to compete with bigger more recognizable names. By the virtue of being the first entrant to the market, we have a distinctive opportunity to position ourselves and our machines. 6.0 Marketing Plan 6.1 Promotion Strategy The Company will participate every year in Dubai organized trade shows. We will also attend various distributor open houses, local and regional trade shows so as to promote our product lines. With time we will increase our advertising budget to allow us higher quality and more exposure on the trade publications. We are also positioned on the Internet so as to allow our company more exposure and easier communication with our clients. 6.2 Distribution Strategy The Company will go for distribution agreements with big local, regional and national distributors. We will make our sales directly to the operators until these agreements are in place. We are also striking relationships with regionally and nationally-branded organizations to supply them with machines. 6.3 Marketing Programs Our most important marketing program is our annual participation at the Dubai trade show. We have the opportunity to introduce our machines to major distributors and end users. We will make a follow up with the contacts through follow-up phone calls and a mailing campaign. We will ascertain how the number of these contacts and track the volume of every account. 6.4 Sales Strategy The Company will identify regional and national operators, large and medium-sized, distributors, and manufacturers as the main targets. Our main focus and efforts will be on the major decision makers at every company. We will also consider our customers as key sources of industry information and make new leads from them. 6.5 Website Marketing Strategy Our website marketing strategy will attempt to create awareness for the website therefore directing potential customers to the site for more information in relation to the entire line of espressos and cake s that we offer. We will make proposals to search engines like Google! So as to ensure that when a potential customer types in "gourmet cake " or any related such key word that The Company’ site is on top of the list of hits. In addition to search engine submissions, all of The Company’ promotional material must have the URL for the website, encouraging others to visit the site. 7-Location & Layout The business is located in Abu Dhabi, UAE along Dhadhi Street in twins tower Layout PROPOSED BUSINESS LAYOUT THE COMPANY POLICE Dhadhi street MUSEUM 8.0 Management Summary The Company is a privately-owned company and has an office and a small warehouse in Abu Dhabi, UAE. The work is organized in form of functions, and is carried out in a logical and formal organized structure. The working environment is characterized by respect, hard work, and a formal structure. 8.1 Organizational Structure The Company is organized into three functional areas: 1. Sales and marketing. 2. Finance and administration. 3. Route development and service. 8.2 Management Team Jean Johns Partner and co-founder of The Company Brings a diverse sales, marketing, and promotion skills into the business Has vast experience in promotions and productions skills Single, 27 years old. Graduate of the Art Institute of Philadelphia Mauricio Ordonez- Partner and co-founder of The Company Has a law degree from Colombia, Has experience in both public and private enterprises Has vast entrepreneurial experience, having developed hotels, restaurants, and distribution companies Married with two children and is 50 years old. Charles Mulligan Has vast experience in the hospital management business. Has an MBA from Drexel University, Has experience in operational and financial management Has experience in contract negotiations, marketing, and distribution. Single, 39 years old. 8.3 Personnel Plan The Company will start with only two employees, Jean and Charles. We will enter into contract with Ordonez, through his affiliate company. Remuneration for the staff will be low at the beginning, but will present a 15% and a 20% increase in the two years. 8.4 Financial Plan The Company will meet its future capital requirements through its free cash flow generated from its operations. This will demand that we must be tempered, disciplined, and cautious in our growth and our operations 9.0 Financial Plan The Company will meet its future needs for capital through the free cash flow generated from its operations. This will require us to be disciplined, tempered, and prudent in our operations and our growth. 9.1 Important Assumptions The financial plan is dependent upon some important financial assumptions as below 1. The growth trends of the industry will continue as they have been for the last five years. 2. Inflation rate will be at 4% for the next three years. 3. We will access the required capital to meet our financial needs for the first five months Pro Forma Profit and Loss Year 1 Year 2 Year 3 Sales $2,861,450 $3,525,392 $4,366,149 Direct Cost of Sales $1,607,240 $1,986,549 $2,455,374 Other $0 $0 $0 Total Cost of Sales $1,617,240 $1,996,549 $2,465,374 Gross Margin $1,244,210 $1,537,844 $1,900,775 Gross Margin % 43.63% 43.63% 43.63% Expenses Payroll $153,060 $250,944 $323,298 Sales and Marketing and Other Expenses $51,600 $59,174 $68,279 Depreciation $25,905 $30,984 $3,111 Repairs & Maintenance $6,000 $6,180 $6,365 Commissions $99,801 $119,761 $143,713 Loan Repayments $29,136 $29,136 $29,136 Raw Materials $7,736 $9,670 $12,088 Freight $64,290 $77,148 $92,577 Office Supplies $2,400 $2,472 $2,546 Postage $1,020 $1,051 $1,082 Telephone $9,000 $9,270 $9,548 Utilities $3,000 $3,090 $3,183 Insurance $3,600 $3,708 $3,819 Rent $15,972 $25,000 $35,000 Payroll Taxes $15,306 $25,094 $32,330 Other $0 $0 $0 Total Operating Expenses $487,825 $652,681 $766,075 Profit Before Interest and Taxes $756,385 $885,162 $1,134,699 EBITDA $782,290 $916,146 $1,137,810 Interest Expense $15,057 $15,790 $14,966 Taxes Incurred $185,909 $217,343 $284,599 Net Profit $555,419 $652,029 $835,135 Net Profit/Sales 19.48% 18.50% 19.1 Appendix Sales Forecast Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Sale Cake maker 0% 4 4 6 6 8 8 8 10 10 10 15 15 Cakes box 0% 4 4 6 6 8 8 8 10 10 10 15 15 Extra design box 0% 10 10 15 15 20 20 20 25 25 25 30 30 Toasters 0% 5 5 8 8 10 10 10 12 12 12 15 15 Espresso Makers 0% 5 5 8 8 10 10 10 12 12 12 15 15 Juice Squeezer 0% 5 5 8 8 10 10 10 12 12 12 15 15 Total Unit Sales 33 33 51 51 66 66 66 81 81 81 105 105 Unit Prices Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Cake maker $6,500.00 $6,500.00 $6,500.00 $6,500.00 $6,500.00 $6,500.00 $6,500.00 $6,500.00 $6,500.00 $6,500.00 $6,500.00 $6,500.00 Cake box $9,500.00 $9,500.00 $9,500.00 $9,500.00 $9,500.00 $9,500.00 $9,500.00 $9,500.00 $9,500.00 $9,500.00 $9,500.00 $9,500.00 Extra design box $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 Toasters $3,275.00 $3,275.00 $3,275.00 $3,275.00 $3,275.00 $3,275.00 $3,275.00 $3,275.00 $3,275.00 $3,275.00 $3,275.00 $3,275.00 Espresso Makers $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 Juice Squeezer $4,200.00 $4,200.00 $4,200.00 $4,200.00 $4,200.00 $4,200.00 $4,200.00 $4,200.00 $4,200.00 $4,200.00 $4,200.00 $4,200.00 Sales Cake maker $26,000 $26,000 $39,000 $39,000 $52,000 $52,000 $52,000 $65,000 $65,000 $65,000 $97,500 $97,500 Cake box $38,000 $38,000 $57,000 $57,000 $76,000 $76,000 $76,000 $95,000 $95,000 $95,000 $142,500 $142,500 Extra design box $10,000 $10,000 $15,000 $15,000 $20,000 $20,000 $20,000 $25,000 $25,000 $25,000 $30,000 $30,000 Toasters $16,375 $16,375 $26,200 $26,200 $32,750 $32,750 $32,750 $39,300 $39,300 $39,300 $49,125 $49,125 Espresso Makers $1,250 $1,250 $2,000 $2,000 $2,500 $2,500 $2,500 $3,000 $3,000 $3,000 $3,750 $3,750 Juice Squeezer $21,000 $21,000 $33,600 $33,600 $42,000 $42,000 $42,000 $50,400 $50,400 $50,400 $63,000 $63,000 Total Sales $112,625 $112,625 $172,800 $172,800 $225,250 $225,250 $225,250 $277,700 $277,700 $277,700 $385,875 $385,875 Direct Unit Costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 OJ Machines 0.00% $4,700.00 $4,700.00 $4,700.00 $4,700.00 $4,700.00 $4,700.00 $4,700.00 $4,700.00 $4,700.00 $4,700.00 $4,700.00 $4,700.00 Sandwich Express 0.00% $7,000.00 $6,300.00 $6,300.00 $6,300.00 $6,300.00 $6,300.00 $6,300.00 $6,300.00 $6,300.00 $6,300.00 $6,300.00 $6,300.00 Multi-line Machines 0.00% $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 Toasters 0.00% $1,650.00 $1,650.00 $1,650.00 $1,650.00 $1,650.00 $1,650.00 $1,650.00 $1,650.00 $1,650.00 $1,650.00 $1,650.00 $1,650.00 Espresso Makers 0.00% $160.00 $160.00 $160.00 $160.00 $160.00 $160.00 $160.00 $160.00 $160.00 $160.00 $160.00 $160.00 Juice Squeezer 0.00% $960.00 $960.00 $960.00 $960.00 $960.00 $960.00 $960.00 $960.00 $960.00 $960.00 $960.00 $960.00 Direct Cost OJ Machines $18,800 $18,800 $28,200 $28,200 $37,600 $37,600 $37,600 $47,000 $47,000 $47,000 $70,500 $70,500 Sandwich Express $28,000 $25,200 $37,800 $37,800 $50,400 $50,400 $50,400 $63,000 $63,000 $63,000 $94,500 $94,500 MliMachines $5,000 $5,000 $7,500 $7,500 $10,000 $10,000 $10,000 $12,500 $12,500 $12,500 $15,000 $15,000 Tosters $8,250 $8,250 $13,200 $13,200 $16,500 $16,500 $16,500 $19,800 $19,800 $19,800 $24,750 $24,750 Espresso Makers $800 $800 $1,280 $1,280 $1,600 $1,600 $1,600 $1,920 $1,920 $1,920 $2,400 $2,400 Juice Squeezer $4,800 $4,800 $7,680 $7,680 $9,600 $9,600 $9,600 $11,520 $11,520 $11,520 $14,400 $14,400 Subtotal Direct Cost $65,650 $62,850 $95,660 $95,660 $125,700 $125,700 $125,700 $155,740 $155,740 $155,740 $221,550 $ Layout schematic Product Schematic Layout References Hess, E. (2011). Growing an Entrepreneurial Business: Concepts & Cases. Stanford University : Stanford University Press. Kaufmann, H.-R. (2014). Handbook of Research on Consumerism in Business and Marketing: Concepts and Practices: Concepts and Practices. IGI Global. Kraten, M. (2010). Business Planning and Entrepreneurship: An Accounting Approach. NY: Business Expert Press. Melodi Botha, F. F.-W. (2006). Tourism Entrepreneurs. Juta : Juta and Company Ltd,. Read More
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