Quantum Spinners Limited Opportunity and Entry Strategies - Example

BUSINESS PLAN FOR QUANTUM SPINNERS LIMITED (Student Name) (Course No.) (Lecturer) (University) (Date) Executive Summary Quantum Spinners Limited is a state of art industry that will deal with the production of all types of uniforms for schools, college uniforms, and games kits. Upon establishment, the industry will be under the Council of Textile & Fashion Industries of Australia (TFIA). To make sure that the business entry is recognized, it will ensure that learning institutions are aware of its quality product through media advertising and read shows (Abrams, 2003). Opportunity and Entry Strategies Quantum Spinners Limited aims at achieving both the short-term and long-term goals. This will be put into practice by ensuring that the product is of high standards, and are affordable. The Target Market The industry targets school going children, sports club, college and university students who need appropriate dressing code. Competitive Advantages The business will ensure that it capitalizes on the competitors weaknesses to win a large percentage of the customers. The initial stage of the business wishes to serve a market share of 30%. The Management Team The business organization structure will be short and cost effective with various management team such as Managers and other employees for various departments in place. Financial Plan The business will acquire its material and equipment by purchase from specific distributors and good financial management plan developed for business success. Table of Contents Executive Summary 2 1.0 Background Information 4 1.1 Business Description 4 1.2 Form of Ownership / Business Status 5 1.3 Type of Business 5 1.4 Objectives 5 2.0MARKET FEASIBILITY 5 2.1 Market Share 6 2.2 Growth rate 6 2.3 Customer Analysis 6 2.4 Competition 6 2.5 Product / Services Strategy 7 2.6 Pricing Strategy 7 2.7 Barriers to Entry 7 3.0 TECHNICAL FEASIBILITY 8 3.1 Operation Plan 8 3.2 Production Facilities and Capacity 8 3.3 Raw Materials Required Per Month 8 3.4 Production Strategy 8 3.5 Regulation Affecting Operation 9 4.1 Pre-Operational Costs 10 4.2 Working Capital Requirement (Year 1) 10 4.3 Proforma Income Statement (Appendix) 11 4.5 Break Even Analysis 11 4.5.1 Total Contribution Margin 11 4.5.2 Contribution Margin percentage 11 4.6 Break-even levels 12 4.7 Break-even revenue 12 4.7.1 Contribution Ratio % 12 4.7.2 Break even turn over 13 4.8 Break Even Units 13 4.9 Desired Financing 14 4.10 Profitability 14 4.11 Return on equity 14 4.12 Return on Investments 15 5.0 HUMAN RESOURCE FEASIBILITY 15 5.1 Organization Structure 15 5.2 Management Team and Qualifications 16 5.3 Training and Capacity Building 20 5.4 Promotions 20 5.6 Conclusion 21 5.7 References 22 Appendix 23 1.0 Background Information 1.1 Business Description The name of the business is QUANTUM SPINNERS LIMITED. The main objective of the industry is to produce high-quality products using state of the art technology to produce quality and affordable clothing for the customers. The location of the industry is yet to be decided by the owners, but the proposed location is near the supply of raw material such as cotton and wool (Covello & Hazelgren, 2006). The rise in some schools going children, and sports clubs that require proper and affordable outfits is rising in Australia (Pinson, 2008). 1.2 Form of Ownership / Business Status The plans is to start the new business as an entrepreneur meaning that owner is the sole manager of the business and will manage all the finances and eliminate cases of delay in decision making since there will be no consultations in making business decisions. (Ogunkoya & Shodiya, 2013). 1.3 Type of Business The business will include manufacturing part whereby it will have to make all types of uniforms as designed by various institutions. The use of highly qualified experienced and competed human resource plus modern machines and facilities will ensure the production of high-quality goods under a state of art technology. 1.4 Objectives Short-term objectives a) Making / maximizing profits b) Acquire customers c) Customer satisfaction Long-term objectives a) Job creation through Employment. b) Expansion of the business. 2.0 MARKET FEASIBILITY One of the major targets of Quantum Spinners Limited is to dominate the market by producing quality clothing. 2.1 Market Share The research conducted by the business indicates that the business can have a market share of 30% against other competitors. The aim of the business is to increase this market share from 30% to 48% within the first year. 2.2 Growth rate Statistics shows that the business still have a growth potential of about 10% and in future it is expected to cover the largest area or market share possible despite stiff competition from the other related firms. 2.3 Customer Analysis The customers that are expected to buy the products and are currently ordering from other industries are considered as follows; A. Institutional / corporate customers: - These are the business’ major customers and are approximate to take 60% of the products. B. Individual customers to take 25% of the sales. C. Commercial customers to be about 12% of the total customers. D. Other customers 2.4 Competition Although the business is expected to grow rapidly, it will be facing stiff competition from other related firms that have been enjoying a monopoly in the region. The state of art machinery will ensure the delivery of products of high quality and standards that will attract customers. The business unique target markets are schools because in the region there is no other business that distributes uniforms to schools (Nikabadi et al., 2013). 2.5 Product / Services Strategy Following the main point of the business of enhancing the market and maximizing sales, the business is targeting to offer goods of high quality which will be achieved through the following ways: - Using current technology in producing its goods and offering quality services. Using materials of high quality to make durable and valuable goods. Employing trained people to produce better and high-quality products. The business intends to offer produce varieties of textile products to enable customers have varieties products. Total compliance to the government legal requirements. 2.6 Pricing Strategy The pricing strategy will ensure that all the cost of production, transport, and general operation are met, and profit is realized in the long run. 2.7 Barriers to Entry The business target is to get maximum sales possible when it became operational. To achieve this, various sales strategies applicable will include: Appropriate working hours: - All the business sales outlets will open at 0630hrs and closed at 2000hrs on working days. This will make sure that goods are available to customers whenever they need them. The production is expected to run 24hrs to ensure that goods be produced adequately and are available to customers. Cost reduction by define percentage to outcompete other firms. Use of sales representatives to capture the market. Selling at hire purchase Offering discounts to Customers. Product promotion in the market through advertisements in media sources. Distribution strategy that will ensure an adequate supply of the products in the market. (Porembka, Carnes & Georgetown University, 2013). 3.0 TECHNICAL FEASIBILITY 3.1 Operation Plan The plant will operate for six days a week and one day will be set for maintenance. Public Holidays will be well taken care of as workers will have time to relax on such days. 3.2 Production Facilities and Capacity Quantum Spinners Limited plans to have advanced equipment’s, which will work efficiently for a long period. The table below shows such facilities and their costs for a start. The business will operate upon acquisition of legal license from the state organ. 3.3 Raw Materials Required Per Month A grand total of $ 149,500 is required to purchase equipments and an amount of $ 122,000 for the purchase of raw materials per month. Before the production process starts, a survey has to be conducted to access the preference and likes of the customers available in the market. The table below shows the raw materials required per month and their estimated costs. 3.4 Production Strategy Quantum Spinners Limited will be dealing with production of all categories students clothes. The staff will take part in organized workshops to improve on skill. (Burns, Bryant & Mullet, 2011). Moreover, audits will be conducted to ensure the required qilaity and standards are maintained. 3.5 Regulation Affecting Operation The investors will have to meet all the state requirements before starting the operation process, such as Public Health Act, Factory Act, and Trade Licensing Act, etc. these statutory requirements will ensure the eligibility of the company and its full compliant to operate within the land. The factory act will ensure for occupational health and safety of the workers and ensure they are provided with personal protective equipment’s while at work (United States., and Stern, et al. 1990). 4.0 FINANCIAL FEASIBILITY This is to cover all the investments required for the proposed business and analysis to determine the viability and technical feasibility of the business (Walter, Katsuni's & Carosio, 2009). A proposed capitalization of $1,000,000 is required for the running of Quantum Spinners Limited. This is to be financed by owner’s equity of $ 400,000 and a bank loan of $60,000 as the source of capital.The pre-operational requirement costs required for the start of Quantum Spinners Limited sums to an amount of $51,200, and the business expects to generate a total profit of $ 652,386 in the first quarter of its operation. The business is expected to break even at $2,486,000, $2,983,200, and $3,578,480 for the first three years of its operation respectively. The return on equity for the first three years is approximated to be at 48.3%, 62.36%, and 56.71% respectively. Return of investments is to be at 65.2%, 74.38%, and 85.4% for the first three consequent years of its operation. 4.1 Pre-Operational Costs NO. DESCRIPTION AMOUNT ($) 1 Transport 10,000 2 Market research 15,000 3 Registration 4,200 4 License and permit 5,000 5 Installation 16,500 6 Photocopying 500 TOTAL COST 51,200 4.2 Working Capital Requirement (Year 1) NO. DESCRIPTIONS AMOUNT ($) 1 Stock of raw materials 271,500 2 Stock of finished goods 293,000 3 Debtors 110,000 4 Cash 125,000 TOTAL WORKING CAPITAL $800,000 4.3 Proforma Income Statement (Appendix) 4.5 Break Even Analysis 4.5.1 Total Contribution Margin Contribution margin = sales – total variable costs Year 1=3,950,000-294,414 = $3,655,586 Year 2 = Contribution margin = 4,740,000 - 402,551 =$ 4,337,449 Year 3 = Contribution margin = 5,688,000 - 532,156 = $ 5,155,844 4.5.2 Contribution Margin percentage Contribution Margin% = Contribution Margin X 100% Sales For the 1st Year = 3,655,586 x100% 3,950,000 =92.5% For the 2nd Year =4,337,499 x 100% 4,740,000 =91.5% For, the 3rd Year = 5,155,844 x 100% 5,688,000 = 90.6% Total fixed costs NO DESCRIPTIONS YEAR 1 YEAR 2 YEAR 3 1 Wages 1,354,200 1,354,200 1,354,200 2 Rent 60,000 60,000 60,000 3 Insurance 5,000 5,000 5,000 4 Interests on loans 120,000 120,000 120,000 TOTAL COSTS 1,539,200 1,539,200 1,539,200 Total fixed sales are: YEAR 1 = $1,539,200 YEAR 2 = $1,539,200 YEAR 3 = $1,539,200 4.6 Break-even levels Break-even levels = Fixed costs Contribution margin % Year 1 = 1,539,200 92.5% =1,539,200 x 100 92.5 = $1,664,000 Year 2 = 1,539,200 91.5% = 1,539,200 x 100 91.5 = $1,682,185 Year 3 = 1,539,200 90.6% = 1,539,200 x 100 90.6 = $1,698,896 4.7 Break-even revenue Break even revenue = Total sale – Cost of sales Year 1 = $3,950,000 – $1,464,000 = $2,486,000 Year 2 = $4,740,000 – $1,756,800 =$ 2,983,200 Year 3 = $5,688,000 – $2,108,160, = $ 3,578,840 4.7.1 Contribution Ratio % Contribution Ratio % = Contribution x 100 Total sales Year 1 = 2,486,000 x 100 3,950,000 = 62.94% Year 2 = 2,983,200 x 100 4,740,000 = 62.94% Year 3 = 3,578,840 x 100 5,688,000 = 62.92% 4.7.2 Break even turn over Break even turn over = Fixed costs Contribution ratio % Year 1 = 1,539,200 62.94% = 1,539,200 x 100 62.94 = $ 2,445,504 Year 2 = 1,539,200 62.94% = 1,539,200 x 100 62.94 = $ 2,445,504 Year 3 = 1,539,200 62.92% = 1,539,200 x 100 62.92 = $ 2,430,388 4.8 Break Even Units Break Even units = Contribution margin Fixed Costs Year 1 = 3,655,586 1,539,200 = 2.375 Year 2 = 4,337,449 1,539,200 = 2.82 Year 3 = 5,155,844 1,539,200 = 3.35 4.9 Desired Financing ITEM AMOUNT ($) Pre-operational costs 51,200 Working capital 800,000 Fixed assets 148,800 TOTAL DESIRED FINANCING 1,000,000 Capitalization ITEM AMOUNT ($) Total Investments 1,000,000 Owners contribution 400,000 Borrowed funds 600,000 4.10 Profitability Gross profit percentage Gross profit percentage = Gross profit x 100 Sales Year 1 = 2,486,000 x 100 3,950,000 = 62.94 % Year 2 = 2,983,200 x 100 4,740,000 = 62.94% Year 3 = 3,578,840 x 100 5,688,000 = 62.92% 4.11 Return on equity Return on equity = Net profit after tax x 100 Owner’s equity Year1 = 652,386 x 100 1,350,000 = 48.3% Year 2 =1,041,499 x 100 1,670,000 =62.36% Year 3 = 1,507,484 x 100 2,658,000 =56.71% 4.12 Return on Investments Return on investment = Net profit after tax x 100 Total investments Year 1 = 652,386 x 100 1,000,000 = 65.2% Year 2 = 1,041,000 x 100 1,400,000 = 74.38% Year 3 = 2,586,000 x 100 3,028,000 = 85.4% 5.0 HUMAN RESOURCE FEASIBILITY 5.1 Organization Structure The following is the organization structure for Quantum Spinners Limited. Each personnel/ staff will have various responsibilities and roles allocated to them. Team leaders will closely supervise production team at various lines of production. The management team will decide on salaries and allowances after monitoring the market trend, and further calculations made on the company income level. Quantum Spinners Limited will be well equipped regarding man power, for which will consider planning of the required number to ensure every operation is in order. The human resource department is mandated to ensure every personnel has attained the required qualification to the production of the goods. In the business, overhead type of organization structure is to be used. Recruiting, training and promotion of employees is to be done by the business manager. 5.2 Management Team and Qualifications MANAGER Responsibilities Planning for the business on both long-term and short-term ventures. Setting / implementing the business policies. Making top decisions of the business. Recruiting new staff and allocating job stations. Mounding good public and industrial relationship. Formulating the salary scales. Qualifications A diploma holder in business management. Experience of at least two years. ASSISTANT MANAGER (1) Qualifications Should have at least a diploma in business administration. Should have a relevant experience in a recognized firm for two years. Responsibilities Assess the competence of the junior workers. Ensure that workers adhere to the line of the duty. Supervising the production process. He is to do all the duties delegated to him by the manager. ACCOUNTANT (1) Qualifications Should have at least a certificate in any accounting courses. Duties Keep the business accounts records. Issue stock Keep other business records. SECRETARY. (1) Qualifications Knowledgeable in office organization and management Academic qualification and computer literate. Good communication skills. Should be quick, competent and careful in undertaking business duties. Duties Undertaking typing services. Filing business documents. Receiving and answering business calls. Correspondence services PURCHASES / SUPPLIES OFFICER (1) Qualifications Should have at least a certificate in supplies management. Should have a minimum experience of one year in the purchases and supplies department in a well-recognized firm. Should be a responsible, efficient and trust worth person. Responsibilities Taking control and management of the store. Keeping business records for purchases and supplies. Ordering for the supply of raw materials. Stock control. CRAFTSMEN / WOMEN (10) Qualifications Should have at least a certificate in the relevant field. Should have at least two years working experience. Should be self-motivating and hard working. Duties Taking measurements, marking and cutting the materials. Product quality check and assurance. Parking the already made clothes. Undertaking minor and major repairs brought to them by the customers. CLEANERS (3) Qualifications Should be medically fit. Should be hard working. Duties General cleanliness Gardening Loading and offloading the products / raw materials. SALE PERSONS (4) Qualifications Should have at least a certificate in sales and marketing. Must have at least two years working experience from a recognized firm. Should be able to communicate fluently in English. Should be trust worth. Duties Sale of products. Bridging the gap between the customers and the business. Receiving cash sales. Conduct sales promotions and advertisement of products. DRIVERS (2) Qualifications Have clean driving license. At least three-year experience in driving. Good communicate skills Responsibilities Transporting raw materials to the business premises. Transporting products to the distribution areas. Carrying staff to and from the premises when need arises e.g. when attending a vocational training seminar. Sometimes assisting in sales promotions. SECURITY GUARDS (3) Qualifications Should be medically fit. Should be between 30 – 45 years of age. Should have five years’ experience in a recognized firm. Duties Open the gate for the right person and at the right time. Ensure security in the business premises. Providing security to products on transit (escort) Ensure that no body goes out with the business property without permission. CASUALS (11) These are temporary employees on hire. They will be hired only during peak seasons when sales are high. His or her qualifications will depend on the work available per day (8 hours). 5.3 Training and Capacity Building The staff will be sponsored to seminars that will ensure their skills are upgraded to meet the consumers’ expectations. 5.4 Promotions Factors considered for the promotion qualification will be done according to education level, discipline, efficiency at work and qualification to fill the position described. Motivating the employees will come through rewards on best performance, vacations and salary increments. 5.5 Company Growth Strategy With only a few competitors, which have monopolized the market and hence pressurized customers by increasing the prices, the business will be selling its products at reasonable prices. The growth strategy considers the fact that; Professionalism and management skills. Reliable sources for acquiring raw materials. Intensive marketing around institutions as fast hand customers. 5.6 Conclusion Clothing is one of the basic human wants that need to be met. Quantum Spinners Limited is an art of state industry that, when established will try to meet this critical human want by producing quality and fashionable clothes to the students of Australia and later spreading wings to other parts of the world after a full establishment. The industry can capture the market by supplying affordable clothing to every age and class of school going person (Burns, Bryant & Mullet, 2011). It is my great hope that the industry meets all the set objectives and succeeds in meeting the market demand for clothes and uniforms. 5.7 References Abrams, R. M. (2003). The successful business plan: Secrets & Strategies. Palo Alto, Calif: The Planning Shop. Burns, L. D., Bryant, N. O., & Mullet, K. K. (2011). The business of Fashion: Designing, manufacturing, and marketing. New York, New York: Fairchild Books; London, England: Bloomsbury Cebeci, U. (July 01, 2009). Fuzzy AHP-based decision support system for selecting ERP systems in the textile industry by using a balanced scorecard. Expert Systems with Applications, 36, 5, 8900-8909. Covello, J. A., & Hazelgren, B. J. (2006). The complete book of business plans Simple steps to writing powerful business plans. Naperville, Ill: Sourcebooks. Divita, L. R., Cassill, N. L., & Ludwig, D. A. (January 01, 2012). Strategic Partnerships in the U.S. Textile and Apparel Industry. Lee, J. (2011). The right-brain business plan: A creative, visual map for success. Novato, Calif: New World Library. Maiyo, R. C., & Imo, B. E. (February 01, 2012). The Kenyan textile industry in a liberalized economy: an analysis of performance and challenges. Journal of Emerging Trends in Economics and Management Sciences, 3, 1, 111-115. Pinson, L. (2008). Anatomy of a business plan: A step-by-step guide to building the business and securing your company's future. Tustin, CA: Out of Your Mind & into the Marketplace. Singletary, E. P., & Winchester, S. C. J. (January 01, 1998). Beyond Mass Production: Strategic Management Models for Competitive Manufacturing Transformation in the US Textile Industry. Journal of the Textile Institute, 89, 1, 4-15. Taslak, S. (March 19, 2004). Factors are restricting the success of strategic decisions: Evidence from the Turkish textile industry. European Business Review, 16, 2, 152-164. Appendix 1. Proforma income statement for the year ending 31st Dec, Year 1. ITEM AMOUNT ($) Sales Cost of goods Gross profit 5,688,000 2,108,160 3,578,840 Expenses Wages Rent Water Telephone Electricity Advertising Stationery Postage Transport Insurance Interests on loans Repairs 1,354,200 60,000 8,640 10,368 7,200 28,800 1,440 1,368 172,800 5,000 120,000 14,400 Net profit before tax Tax 1,794,624 287,140 NET PROFIT AFTER TAX $1,507,484 Projected cash flow (year 1) YEAR THREE MONTHS 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER Beginning balance Add cash sales Debtors CASH RECEIPTS 1,816,199 2,622,400 255,120 4,693,719 2,126,976 2,946,880 306,144 5,380,000 2,385,000 3,336,256 367,310 6,088,626 2,538,228 4,803,500 440,850 7,782,578 CASH PAYMENTS Purchases Creditors Wages Rent Water Telephone Electricity Transport Stationery Postage Interests Repair Advertising Taxes Depreciation\ 1,368,576 39,720 338,550 15,000 4,440 4,200 3,732 96,240 1,248 1,440 30,000 20,760 50,840 690,995 -------- 1,642,300 47,664 338,550 15,000 5,330 5,040 4,480 115,488 1,500 1,730 30,000 24,910 62,200 700,800 -------- 1,970,750 57,100 338,550 15,000 6,390 6,048 5,375 138,585 1,800 2,080 30,000 29,890 74,650 874,180 ------- 2,365,000 68,650 338,550 15,000 7,672 7,260 6,450 166,300 2,160 2,490 30,000 35,870 89,580 1,045,212 -------- TOTAL CASH PAYMENTS 2,566,741 2,994,992 3,550,398 4,180,194 NET CASH FLOW 2,126,976 2,385,000 2,538,288 3,602,384 ACCUMULATED CASH FLOW $10,254,653 $12,639,661 $15,177,889 $18,780,273 3. Proforma Balance Sheet Proforma balance sheet as at 31st Dec, Year 1 DESCRIPTIONS AMOUNT ($) ASSETS Current assets Cash Debtors Stock of finished goods Stock of raw materials Total Current Assets 245,000 215,600 575,260 532,140 1,568,000 Fixed assets Machinery and equipment Furniture Fittings Office equipment Total Fixed Assets 253,820 78,400 34,300 25,480 1,960,000 TOTAL ASSETS $3,528,000 LIABILITIES Current liabilities Creditors Long-term liabilities Bank loans – American Bank - SHBC Owner’s equity 510,000 240,000 120,000 2,658,000 TOTAL LIABILITIES AND EQUITY 3,528,000 TOTAL FINANCED BY $3,528,000 LIABILITIES Current liabilities Creditors Long-term liabilities Bank loans – American Bank - SHBC Owner’s equity 510,000 240,000 120,000 2,658,000 TOTAL LIABILITIES AND EQUITY 3,528,000 TOTAL FINANCED BY $3,528,000 Production Facilities and Capacity EQUIPMENT QUANTITY UNIT COST (KSH) TOTAL COST ($) Sewing machines 20 4,500 90,000. Over lock machines 1 6,000 6,000 Knitting machines 2 8,500 17,000 Iron boxes 10 450 4,500 Ironing tables 2 5,000 10,000 Tape measures 10 40 400 Knitting needles. 10 Pairs 200 2,000 Sewing needles 50 Pairs 300 15,000 Thimbles 20 30 600 Pairs of scissors 20 Pairs 200 4,000 GRAND TOTAL 149,500 Raw materials required per month description specification quantity unit cost ($) total cost ($) Tailoring materials Cotton Polyester Linen Lining ply 400 meters 200 meters 200 meters 100 meters 100 100 100 80 40,000 20,000 20,000 8,000 Zippers XL L Medium 10 Kg 10 Kg 10 Kg 100 100 100 1,000 1,000 1,000 Buttons Mixed 20 Kg 50 1,000 Knitting straps Blue Yellow Green White 100 rolls 30 rolls 100 rolls 20 rolls 100 100 100 100 10,000 3,000 10,000 2,000 Sewing straps Mixed colors 100 rolls 50 5,000 GRAND TOTAL $ 122,000 Read More