The Freshener Company Limited Marketing and Financial Analysis - Example

Business Plan Table of Contents Table of Contents 1 The Freshener Company Limited 2 1.1 Objectives 2 1.2 Mission 2 1.3 Success milestones 2 2. Company summary 2 2.1 Ownership 3 2.2 Start-up Summary 3 3. Products 4 4. Marketing analysis 4 4.1 Market target segments 4 4.2 Market segmentation strategy 5 4.3 Industry Analysis 6 4.3.1 Competition and buying trends 6 5. Strategy and strategy implementation 6 5.1. Competitive edge 6 5.2. Marketing strategy 6 5.3 Our sales strategy 8 5.3.1Sales Forecast 8 5.4 Milestones 9 6. Management,operation and production plan 10 6.1 Personnel plan 10 7. Financial plan 10 7.1 vital assumptions 11 7.2. Break even analysis 11 7.3. Pro-foma Cash Flow 11 7.4. Projected profit and loss 12 7.5 Projected balance sheet 13 The Freshener Company Limited The Freshener Company limited is a startup company to be involved in the production and distribution of designer products including designer perfumes, deodorants, sprays and air fresheners. The products will be offered at bargain prices. Financing for the new startup will come from owner’s contribution as well as a loan to be advanced from national bank. Freshener Company limited is a limited liability company with the majority shareholder being Ted Jones. It is expected that with an aggressive marketing plan, the company will experience steady growth as its products become more popular. 1.1 Objectives 1. Providing a wide range of freshness products at reasonable prices 2. Achieving a modest profit margins by the end of first year of operation 3. To be involved in corporate social responsibility 1.2 Mission We will provide a variety of interesting freshness products at bargain prices while offering high quality customer service. We will treat our employees fairly and adhere to all legal requirements while ensuring customers get value for their money at all times 1.3 Success milestones 1. Development of appropriate channels of distribution 2. Pricing the products competitively 3. Minimizing production costs 4. Providing customers with a wide range of products 5. Ensuring a 100% customer satisfaction 2. Company summary Freshener Company will provide a wide range of high quality freshness products. In this regard, we have finished the construction of our production plant and have also established distribution and refilling points in various cities including Sydney and Melbourne. 2.1 Ownership Freshener company Limited is a private company with the majority shareholder being Ted Jones with 45% ownership, Martin bakers with 25% ownership, Johannes Gupet with 20% ownership and Joel Stevenson with 10% ownership. 2.2 Start-up Summary We have invested over $1 million in establishing the plant and leasing distribution and refill points. As stated above, start-up costs are expected to come from the owners as well as the loan from National Bank. M Miscellaneous expenses to be incurred include consultancy fees, marketing and advertising legal fees and designer fees for store layouts. Start Up Funding Start- up expenses being funded $500,000 Start-up assets being funded $1,000,000 Total funding requirements $1,500,000 Assets Non-cash assets from start-up $1,000,000 Cash requirements from start-up $500,000 Cash contribution from members $1,000,000 Loan from bank $500,000 Total assets $1,500,000 Liabilities and capital Liabilities Current borrowings $0 Long-term liabilities Bank loan $500,000 Total liabilities $500,000 Capital Planned investment Ted Jones $450,000 Martin bakers $250,000 Johannes Gupet $200,000 Joel Stevenson $100,000 Total capital $1,000,000 Total liabilities and capital $1,500,000 3. Products Freshener Company limited will produce and distribute a variety of designer freshness products including designer perfumes, deodorants, sprays and air fresheners. We will also employ a dedicated staff who will be committed to offer excellent customer service. All the products that we will be offering in the market will be manufactured from our plant in Sydney. Though we will offer superior quality products, we will be able to sell them at very low prices by keeping our production costs low. The products have been produced bearing in mind that people require freshness in various places including offices, homes, toilets as well as their bodies. Hence, we realized the need to provide these products as a collection from one company instead of customers having to source them from different sources. Furthermore, we intend to have a refilling option for our customers which will lower the cost as opposed to purchasing new ones. Furthermore, our products will be provided in different types and measures depending on demand, customer tastes and preferences. 4. Marketing analysis It is expected that sales will increase steadily as our products become popular since customers will realize they can purchase a collection of freshness products from the same company at relatively low prices. Our aim is to offer pricing that encourages quantity buying while attracting customers on fixed budgets. We will mainly target the ageing people, professionals as well as the lower income portion of the population who are not only price conscious but look for value for their money. Furthermore, they do not have time to go around the shopping malls looking for these products differently 4.1 Market target segments The company’s potential customers and the target markets are shown in the chart below. We intend to provide affordable freshness products alternative to households with income less than $30,000, for the elderly with fixed income and the student population that operate on strict budgets. Towns and cities are expected to be our largest market segment and are expected to achieve an annual growth rate of 12.5%. This is the market that consist the students and the professionals. This is our target market. Target market analysis Year 1 Year 2 Year 3 Year 4 Year 5 Potential customers Growth CAGR Students 12.5% $3,000,000 $3,375,000 3,796,875 4,271,500 4,805,500 12.5% Working class 12.5% $4,000,000 $4,500,000 $5,062,500 $5,695,300 6,407,200 12.5% The elderly 12.5% $2,000,000 2,250,000 2,531,250 2,847,650 3,203,600 12.5% Others 12.5% $1,000,000 1,125,000 1,265,625 1,423,800 1,601,800 12.5% Total 12.5% $10,000,000 11,250,000 12,656,250 14,238,250 16,018,000 12.5% 4.2 Market segmentation strategy The company aims at focusing on price conscious customers interested in value and quality. In this regard, we will offer our target markets with cheap but quality products. Furthermore, the refilling option will be vital in succeeding in the target market. 4.3 Industry Analysis Economic situation is ever becoming hard and hence the need to provide solutions that will make life easier. In this regard, the company will provide a collection of freshness products under one roof at cheap prices. In addition, the refilling option is intended to make our products even cheaper. 4.3.1 Competition and buying trends In the contemporary market, customers look for quality, fair pricing and convenient location. The market is characterized by very tough competition and hence quality of products, pricing, location of products and customer service are seen as vital for success. 5. Strategy and strategy implementation Our strategy is mainly pegged on providing a wide range of freshness products in a single collection. Our promise lies in the quality of our products, our location, the customers we will attract and as well as the marketing atmosphere we create. In this regard, we will provide customer service able to provide an atmosphere which creates positive shopping experience for the customers. Another strategy is that of providing a collection of products hence saving time that our customers would use going around malls to look for different products. We will avail the products in convenient places. This will include promotion and advertising these products to the companies and homes, therefore, covering the target market and selling them. For the purpose of attaining a competitive advantage, forming alliances with organizations, institutions and companies will enable my products to sell and gain popularity (Moye, 2004). Another reason for forming the alliances is to be able to network with other companies and hence convince them to purchase the products to be used in their offices, cloak rooms and even in their halls. 5.1. Competitive edge Our competitive edge mainly lies in being able to offer a collection of products under one roof. Furthermore, our ability to form alliances with various companies will go a long way in giving us a competitive edge. In addition, we will offer a refilling option to our customers thus making our products cheaper than those of our competitors. In conclusion, we will be able to offer cheaper prices than our competitors by putting in place measures that reduce production cost while maintaining high quality standards. 5.2. Marketing strategy We intend to benchmark our sales promotion objectives as well as mass selling. Our marketing efforts will be focused on consumers who want a variety of freshness products yet are sensitive to price and quality. In this regard, our marketing strategy will revolve around sales promotion including events and displays as well as personal sales including friendly atmosphere and quality customer service. Market structure The market is composed of big companies who distribute their products to large wholesalers and supermarkets who sell them to end users. This is the market structure we will follow. However, we will also introduce a number of distribution points and refill points in high density areas as cities. Market trends and drivers The market is becoming more globalized with the market adopting digital marketing forums such as internet selling. The markets are also driven by economic situation. In line with this, the company intends to open an online trading platform where large traders and individual traders can source our products in accordance to their needs and economic situations. The competition and market analysis The competition is stiff within this industry despite there being a number of barriers to entry. These barriers include; i) Economies of scale –this implies that the more a firm produces, the more the average costs fall. This coupled with huge initial capital outlay makes I hard for new entrants. ii) Brand loyalty –high level of brand loyalty is exhibited in the market making it expensive for new firms to create their own brand loyalty iii) Patents –there exist legal barriers preventing new firms from using particular technologies which may make entry of new firms difficult Owing to the above barriers to entry, the market is controlled by few but large firms. Our major competitors will be i) Consumer products-operating from Sydney, this is a large company that controls 30% of the market share. Its brand of products is called the fair brand. ii) Oreal –Oreal is a large multinational company dealing with a wide range of products. The Oreal brand controls about 42% market shares. iii) Lovely products- the company operates from Melbourne and is the producer of the lovely products. Though relatively new, the company has grown to control 10% of the market share. 5.3 Our sales strategy Our employees will be competitively paid and they can be given bonuses depending on profits and customer satisfaction levels. Potential sales will be met in a timely manner while long-term sales people customer relationships be given precedence over sales. 5.3.1Sales Forecast The company’s forecasted sales for the first year of operation are given below; sales are expected to increase at annual rate of 12.5%. This steady growth is expected to be experienced throughout the first year of operation despite being a new business. The growth is even expected to increase in future as the brand becomes more popular. Given our aggressive market approach, we intend to increase our market share Monthly sales forecast: Month Sales Forecast January $300,000 February $300,000 March $400,000 April $600,000 May $1,000,000 June $1,000,000 July $1,000,000 August $1,050,000 September $1,050,000 October $1,100,000 November $1,100,000 December $1,100,000 Yearly sales forecast in dollars Sales forecast figures Year1 Year 2 Year 3 Sales $10,000,000 $11,250,000 $12,656,250 Direct cost of sales 5,500,000 $6,300,000 $7,200,000 Expected gross profit $4,500,000 4,950,000 $5,456,250 5.4 Milestones This is the responsibility breakdown in the store startup. The business startup project is headed by Ted Jones who is also involved in securing funds. Other shareholders are charged with such responsibilities as securing sites, personnel plan and accounting functions. Milestone Start date End date Budget Manager Department Business Plan 1/10/2015 1/1/2015 $2,000 Ted Jones Major shareholder Secure Start Up Funding 5/1/2015 30/1/2015 $3,000 Ted Jones Major Shareholder Site selection 1/12/2014 25/12/2015 $3,000 Martin bakers Managing Director Personnel plan 25/12/2014 5/1/2015 $1,500 Johannes Gupet Director Accounting Plan 22/12/2014 22/1/2015 $3,000 Joel Stevenson Director Total $12,500 6. Management,operation and production plan Our management system will be based on a number of principles including structuring work with enough room for creativity, fair and equitable pay in line with industry trends, the right people in the right place and incentives for encouraging quality personnel to stay. Ted and Martin who are the board chairman and the managing director have vast experience in managerial matters having worked in senior positions at Wesfarmers before starting Freshener Company limited. Joel Stevenson has worked at Oreal as the finance director bringing in relevant experience. In addition, all the other people in management positions bring with them extensive finance and marketing knowledge to the new company. They all have the necessary experience, knowledge and contacts that will make the company a success. 6.1 Personnel plan The following table outlines the personnel plan. To start with, we will start with 50 full time employees and 100 part time employees. Employees will mainly be paid at hourly rates with salary increment being affected on a yearly basis with full time employees being entitled to benefits. The following table provides a summary of personnel plan; Year 1 Year 2 Year 3 Managing Director $30,000 $35,000 $40,000 Management level employees $20,000 $24,000 $28,000 Supervisory level employees $17,500 $20,000 $24,000 Production level employees $15,000 $18,000 $22,000 Other employees $10,000 $13,000 $17,000 Operation and production plan 7. Financial plan The financial plan is based on a number of assumptions including; -we will experience moderate growth and hence steady cashflows -Marketing costs will average 15% of revenue -Residual profits will be reinvested into the business 7.1 vital assumptions Owing to the fact that half of our employees are part timers, they will not enjoy benefits hence making the personnel load lighter. In addition, we will be able to obtain credit at low interest rates due to the directors’ relationship with the bank. Opportunity for further development It is hoped that after the company has gained momentum, we can venture into the toiletries industry where we can start producing the whole range of toiletry products including bleaches , toilet papers etc. Exit strategy The four investors have the eventual goal of selling the company. This will happen after the company has significantly grown and is highly profitable. The idea is to grow the company to a level where one of our competitors see it as a good fit for their long-term strategy and then sell it to them at high profits. 7.2. Break even analysis On the basis of average prices, we have been able to compute a break even analysis. This has been computed as shown below; Monthly revenue break-even $300,000 Assumptions: Average percent variable cost 60% Estimated monthly Fixed Cost $100,000 7.3. Pro-foma Cash Flow Freshener company limited is a medium risk concern that has steady cash flows . we assume that all accounts payables are paid every end of the month and goods are sold in cash. Pro-foma Cash Flow Year 1 Year 2 Year 3 Cashflows from operations Cash sales Total cashflows from operations $10,000,000 $10,000,000 $11,250,000 $11,250,000 $12,656,250 $12,656,250 Additional cash receipts Bank Loan $500,000 $1,000,000 0 0 0 0 Total cash received $11,500,000 $11,250,000 $12,656,250 Expenditure Expenditure from operations Cash spending Cash payments Total operations on expenditure $6,000,000 $2,000,000 $8,000,000 $6,750,000 $2,500,000 $9,000,000 $7,593,750 $3,000,000 $10,593,750 Additional cash spending Loan repayment $200,000 $200,000 $200,000 Subtotal cash spending $8,200,000 $9,200,000 $10,953,750 Net cash flow $11,500,000 $11,250,000 $12,656,250 Cash balance $3,300,000 $3,050,000 $1,702,500 7.4. Projected profit and loss It is expected that advertising costs will decline in the next five years. This is because we will have found the methods that work well for our company and hence take advantage of them. By knowing our target markets, we will be able to avoid making losses in our first year of operation. Our projected profit and loss statement is shown below; Year 1 Year 2 Year 3 Sales $10,000,000 $11,250,000 $12,656,250 Cost of sales 5,500,000 $6,300,000 $7,200,000 Gross profit $4,500,000 $4,950,000 $5,456,250 Expenses Salaries and wages Sales and marketing and other expenses $200,000,000 $700,000 $2,500,000 $650,000 $3,000,000 $593,750 Net profit $1,800,000 $1,800,000 $1,862,500 7.5 Projected balance sheet The projected balance sheet for Freshener Company limited is shown below; Year 1 Year 2 Year 3 Assets Current assets Cash Inventories Other current assets Total current assets $3,300,000 $700,000 $200,000 $4,200,000 $3,050,000 $850,000 120,000 4,020,000 $1,702,500 $1,200,000 $200,000 $3,102,500 Long-term assets Long-term assets Accumulated depreciation Total long-term assets $7,000,000 ($700,000) $6,300,000 $6,300,000 ($630,000) $5,670,000 $8,000,000 ($800,000) $7,200,000 Total assets $10,500,000 $9,690,000 $10,302,500 Liabilities and capital Current liabilities Accounts payable Current borrowing Other current liabilities Total current liabilities $1,200,000 $50,000 $150,000 $1,400,000 $1,500,000 $30,000 $200,000 1,730,000 $2,000,000 $80,000 $100,000 $2,180,000 Long-term liabilities Bank loans Other long-term liabilities Total liabilities $500,000 $5,800,000 $300,000 3,060,000 $100,000 1,557,300 Paid-in-capital Retained earnings Total capital $1,000,000 $1,800,000 $1,000,000 $3,600,000 $1,000,000 $5,46,5250 Total liabilities and capital $10,500,000 $9,690,000 $10,302,500 Read More