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Sample Business Plan
with courtesy of The Small Business Knowledge Base (http://www.bizmove.com)
Here is an abbreviated example of a serious business proposal.
It is provided to give you a feeling for the style of writing that
is used in a business plan, and is not intended to be a comprehensive
guide of what should be covered in a good plan.
The humorous content is supplied only for the readers interest.
For optimum effectiveness, care should be taken to minimize the
humorous content in an actual proposal.
Table Of Contents
Statement of Funding Proceeds
Executive Summary
Description Of The Business
The Market
Marketing Strategy
Business Location
Licenses/Permits/Registrations
Insurance/Bonding/Employee Benefits
Management
Personnel
Financial Data
Appendix
Statement Of Funding Proceeds
Children’s World has developed a line of toys that are superior
to all other products that exist on the market today. In order to
service our identified target markets with these superior toys,
significant capital infusion is required.
Specifically, the required $15,000,000 will be allocated appropriately
to:
Marketing and Advertising $ 1,500,000
Salaries -0-
Facilities 50,000
Capital Equipment 450,000
Research and Development 1,000,000
Operational Expenses 2,000,000
Inventory 10,000,000
Total $15,000,000
Executive Summary
Children’s World is the major player in the global gift giving
industry. Originally founded as a sole proprietorship in 1930, the
marketing tactics employed by Children’s World had grown to
the level of being a family legend by 1940. Annual toy production
of Children’s World exceeded 86,000,000 units at this time,
and major expansion plans were developed. However, due to a slight
downturn in the global economy, these plans have been shelved as
projected profit levels have fallen to a near break even point in
1993.
To revitalize the company, a rigorous program of research and development
was undertaken in the early 1950's. The first major breakthrough
of which is ready for production. To be able to make maximum use
of our proprietary breakthrough technology, Children’s World
needs to upgrade its existing facilities, as well as reevaluate
the company's sleigh delivery system It is anticipated that a late
model Cessna Citation could be modified to meet the operating requirements
of Children’s World. In addition, several used cargo planes
will need to be acquired to facilitate the development of large
stockpiles of toys at strategic global locations. A central hub
system is being considered.
Additional manufacturing upgrades are planned to facilitate the
projected increases in manufacturing output. Some of the upgrades
include the replacement of manual lathes with automated CNC machines,
the installation of spray booths using the latest in electrostatic
technology, computerized conveyor and sorting systems, and an upgrade
in the Statistical Process Control (SPC) area of the Quality Assurance
Department.
As can be seen, Children’s World is now at a point where they
need to seek outside funding to refurbish/renovate their production
facilities, upgrade their global navigational equipment, establish
a more visible image, and to establish an extensive line of credit
to cover seasonal inventory expenses.
This loan will be backed by the full assets and inventory of the
Children’s World company. As the attached Balance Sheet indicates,
these assets have a current valuation of $5,000,000. In addition,
of the $15,000,000 requested, $10,450,000 will be spent on inventory
and capital equipment which will also be used as collateral for
the note. As the attached cash flows indicate, Children’s World
should be able to service the debt incurred by this loan application.
It is anticipated that the Return On Investment (ROI) thrown off
from this loan will be 200% adjusted on a yearly basis. Timing of
the loan and the market entry of the product will be critical, however,
with the maximum value occurring from a November entry.
Description Of The business
Our Mission at Children’s World is: "To provide toys and
games of exceptional quality, in a timely manner, priced at or below
our competition, to enhance the profits of our company."
Background
Children’s World is a sole proprietorship that was founded
in 1930. It is wholly owned by Mr. and Mrs. Sanford Theodore Clause.
For the past 50 years, Children’s World has experienced an
increase in the public awareness of our year end close-out (where
we give away surplus inventory). Because of this practice, the public
has begun to think of us on a seasonal basis as a philanthropic
organization.
To alleviate this problem, we have just completed the development
phase of a novel and proprietary product line that will once again
place Children’s World in the minds of the public on a daily
basis. By 1940, our operation had produced 86,000,000 toys, and
has operated profitably ever since. However, revenue projections
for fiscal year xxxx, without external funding for the introduction
of this new product line, is expected to be down to a break even
level ($1,100). With the funding for the renovations, advertising,
and new product line our profits are expected to reach $30,000,000.
Annual growth is projected to be 21% per year through the year 2100.
Concept
The "state of the art" of the industry today dictates
that toys are produced without ever being touched by human hands.
Our new revolutionary product line capitalizes on the fact that
our toys have traditionally been hand built by our local elf community.
Although our production methods are slow in comparison to other
manufacturers, our quality levels are high while our costs are kept
very modest.
This new product line incorporates a rare, refined essence (known
only to our advanced Research And Development Dept.) that causes
a strong attraction to be formed between the toy and the customer
who first sees the toy. This essence is well known in the animal
community. For instance, it is the reason why ducklings bond to
the first animal they see after emerging from their shell (commonly
called "imprinting"). These ducklings will not physically
allow themselves to be separated, to any significant distance, from
the "parent" animal for approximately six months.
After lengthy collaboration with the local duck community, and extensive
field testing (test population will not be disclosed), our top notch
R&D staff has been able to identify and synthesize the essence
and increase its strength. When incorporated into our line of toys,
this essence will create a bond between the recipient and the toy
that will last for one full year! During this time, like the ducklings,
the recipient who first sees the toy will not want to be separated
from the toy to any significant distance (typically less than fifteen
feet).
This instant "imprinting" at the time of viewing the toy
had initially placed our R&D staff in a considerable quandary.
To be effective and "imprint" on only the intended recipient,
the entire channel of distribution must not be able to see the product.
This enigma was eventually resolved by the decision to place the
product in an opaque wrapper, bag, etc. that could be given to the
intended recipient to be "opened". To prevent the early
opening of the wrapper/bag, we have developed several colorful prints
that can be placed on the opaque wrapper thereby lending it an attractive
external appearance.
Compared to competitors products, the use of the "essence"
will dramatically increase the recipients enjoyment of, and involvement
with, our product line. Other significant refinements that our R&D
staff has been able to develop are:
1. Gender Specific Essences. Using this innovation, a toy incorporating
a female gender essence will bond most strongly with female recipients,
and vice versa. This will help reduce the demand for pink and lavender
trucks, baseball mitts, etc., and will dramatically reduce our internal
manufacturing problems and inventory requirements.
2. Variable Time Factor Essences. This innovation will allow us
to produce toys that have a "short" imprint time (30 -
90 days) for use when we need to spur sales, or a longer imprint
time (up to 365 days) for a moderated sales level. We have found
through extensive research that 330 days is optimal in that it allows
for approximately one month of "de- imprinting" and subsequent
anticipation build up among the recipients. Naturally, this will
cause some friction among the family sub-units, but that can not
be avoided if we are to develop a maximum market penetration.
The Market
The Children’s World target market includes the pre-adolescent
to young adult groups on a global scale. Using data supplied by
the Bureau of the Census the total population of the world is estimated
at 5,700,000,000. Of this basis group, we have conservatively placed
our estimate of our total target market at slightly over 300 million
customers. At the present time our sales are hovering at the 250,000,000
unit mark (up from 86,000,000 in 1940) giving us an 83.3% market
share. We believe that the requested funding will allow us to increase
this market share to roughly 95% over the next two years. This would
increase our sales by an additional 35,000,000 units per year (see
Appendix A for source information and calculations).
Our primary focus (and most of our extensive field testing) is on
the 1-5 year old individual. Our products are gender specific, with
male vs. female sales forecasts mirroring the population demographics.
As our products gain acceptance within this market, we will move
to expand into the teenage markets as this time frame is known for
its friction between family sub-units. This will mask the effects
of the "de-imprinting" irritations, and will aid us in
minimizing any public disclosure (and competitor espionage) during
the early phase of our market introduction.
All Children’s World products are protected by the trademark
and copyright laws, however we will not seek patent protection for
the "essence" lines. Instead, we will keep these lines
as a trade secret, thus preventing public disclosure and the subsequent
possibility of legal entanglements from disgruntled parents, consumer
activists, etc.
Initial responses from our market test customers indicate that our
new lines are enjoying an excellent reaction. Inquiries from prospective
customers suggest that there is considerable demand for these toys.
Relationships with leading retailers, major accounts, and distributors
substantiate the fitness of Children’s World for considerable
growth and accomplishment.
Competition
Although Children’s World is a broad based manufacturing and
transportation company, competitive threats today come primarily
from other toy manufacturers. However, with 83.3% of the overall
market, the competition does not play a significant role on company
pricing/credit policies.
The major competitors that are facing Children’s World are
as follows:
Mattel, Inc. (Hawthorne, CA) Primarily a game manufacturer/marketer
with sales of over $50,000,000/year.
Roadmaster Corp. (Olney, IL) Manufacturer of juvenile riding toys
with sales of over $100,000,000/year.
Parker Brothers (Beverly, MA) Primarily a game manufacturer/marketer
with sales of over $250,000,000/year.
Flexible Flyer Co. (West Point, MS) Manufacturer of juvenile riding
toys with sales of over $50,000,000/year.
Tyco Toys, Inc. (Mount Laurel, NJ) Manufacturer of trucks/cars with
sales of over $100,000,000/year.
Hasbro, Inc. (Pawtucket, RI) Primarily a game manufacturer/marketer
with sales of over $50,000,000/year.
In spite of the competition in the toy industry, Children’s
World has continued to deliver a high quality, low cost product
that is unique to this industry. In addition, our research indicates
that our performance is superior to any other company on the market
today.
The gift market is heavily seasonal, with the preponderance of sales
coming late in the year. As stated in the "Background"
section of the Business Description above, Children’s World
has experienced an increase in the public awareness of our year
end close-out (where we give away surplus inventory). Because of
this practice, the public has begun to think of us on a seasonal
basis as a philanthropic organization.
It is our belief that we will be able to turn this mistaken perception
around with the funds that we are seeking via this proposal. After
all, in all comparisons Children’s World's products provide
more features and have superior performance than competitive products.
In most cases, the difference in the number of features is substantial.
A complete technical comparison is available upon request.
Marketing Strategy
The "state of the art" of the industry today dictates
that toys are produced without ever being touched by human hands.
Our new revolutionary product line capitalizes on the fact that
our toys have traditionally been hand built by our local elf community.
Although our production methods are slow in comparison to other
manufacturers, our quality levels are high while our costs are kept
very modest. In addition, the exciting new breakthroughs that we
have achieved in our R&D department (see the Description of
the Business section above) will further increase the sales and
usage of our products.
To get the most out of our marketing dollars, we have developed
the following strategy for promoting our products:
Pricing and Profitability. Our pricing is tied to our philosophy
of operating at a break even basis. However, because of both the
past losses incurred in the toy giveaways, and to pay for the capital
improvements outlined in this plan, we will increase our pricing
in order to retire the newly incurred debt. We are projecting a
first year net profit of $30,000,000 as the result of this project.
Selling Tactics. Consistent with previous years, preseason publicity
outlining new merchandising concepts is utilized extensively to
generate paid advertising participation from retailers and shopping
centers world wide. This has worked well, and we have no plans to
alter this strategy.
Distribution. Central pre-distribution hubs have now been established
in each country. This concept permits faster delivery, without the
need to return to the North Pole each time the sleigh needs restocking.
This is the most cost effective procedure implemented by Children’s
World in the last 50 years.
Advertising and Promotion. Cooperative advertising funds are available
to all participating retailers which leverages our national advertising
exposure 400%. Proof of advertising activity from the participating
merchant in the form of a paid invoice from the merchant and a tear
sheet from the print media is required for final payment.
Public Relations. This activity has outgrown our in-house capabilities.
Therefore, we have retained the services of an international public
relations firm, Good, Better and Best, Inc., to coordinate those
activities. The firm provides us their services at cost, as they
benefit measurably through their visibility and association with
Children’s World .
Business Relationships. Children’s World participates heavily
in trade shows during the Summer months. This activity permits us
to maximize our efforts and focus on the major retailers and buyers.
Promotional activity by retailers may need to be reviewed in the
near future, as seasonal promotion once targeted exclusively for
December, has been pushed backward to Thanksgiving, and on occasion
is now occurring as early as Halloween. This is a concern we are
reviewing with our public relations firm.
Credit Terms. Standard credit terms will be offered to wholesalers/retailers
(2% 10 net 30), while cash and checks will be accepted on the retail
level.
Business Location
The Children’s World production facilities wholly owned and
are located at 101 North Pole Lane, Arctic Circle, Earth. Due to
the nature of the toy industry, and its propensity for industrial
espionage, Children’s World decided at an early stage that
steps must be taken to isolate and camouflage their facilities.
To date, their efforts have been largely successful, although a
few close calls have been noted.
The facilities are debt free and are kept in good repair by the
local elf community. To accommodate the planned product line expansion,
only minor renovations (approximately $50,000) will be necessary
as stated in the "Statement of Funding Proceeds" section
above.
To safeguard both their new and existing product lines, Children’s
World respectfully declines to provide detailed information on this
subject heading.
Licenses/Permits/Registrations
All licenses, and permits required for the continued operation of
the company have been either secured, or renewed. Due to our location,
our company is not affected by zoning regulations.
All Children’s World products are already protected by the
appropriate trademark and copyright filings. Children’s World
will not seek patent protection for the "essence" lines,
however. Instead, we will keep these lines as a trade secret, thus
preventing public disclosure and the subsequent possibility of legal
entanglements from disgruntled parents, consumer activists, etc.
FAA certification and flight tests of all pilots and craft are both
current and comprehensive, and are on file with the proper authorities.
Insurance/Employee Benefits
Due to the unique nature of their work force and the isolation of
the environment, Children’s World does not have to provide
insurance for their employees. However, Children’s World does
have full property insurance as well as a general liability insurance
policy for $1,000,000 per the requirements of most retailers.
Employee benefits include unlimited supplies of aspirin, nasal decongestants,
as well as other cold related medicines. Regarding vacation leave,
Children’s World provides two weeks of paid vacation each year.
The company also their employees with equipment, lift passes, etc.
free of charge for skiing, snowmobiling, snowshoeing, etc. However,
no vacations are permitted during the months of October through
December due to production demands.
Management
How we started
Children’s World was founded in 1930 by Sanford Theodore Clause
who recognized the entrepreneurial opportunities presented by the
establishment of a charitable society. Through his efforts gift
giving became more fashionable, particularly around the time of
the Christian celebration of Christmas.
Management team
Our key management team consists of Mr. and Mrs. Clause whose backgrounds
consist of almost 60 years of manufacturing and marketing experience.
Our manufacturing team consists of over 300 well trained elf volunteers,
each with at least 200 years of manufacturing, engineering and design
experience.
A listing of our corporate organization is as follows:
Sanford T. Clause, President
Elizabeth M. Clause, Vice President, Henry J. Ticklebone, Director
of Finance, Abagail B. Greenleaf, Director of Marketing Princely
J. Rockafellow, Director of Sales, James A. Bronson, Director of
Engineering, Jillaney P. Quackenmeyer, Director Research & Development’
Jeremy C. McDougal, Director of Operations, Thistle P. Stickler,
Corporate Attorney.
As stated above, the strength of Children’s World management
team stems from the combined expertise in both management and technical
areas. This has produced outstanding results over the past 60 years.
The time honored leadership characteristics of Children’s World's
management team have resulted in broad and flexible goal setting
-to meet the ever changing demands of the quickly moving marketplace
requiring our products. This is evident when the team responds to
situations requiring new and innovative capabilities.
Personnel
The following are the summary job descriptions for the key officers
of the Children’s World organization:
Abagail B. Greenleaf, Director of Marketing ($100,000/year salary)
Manage market planning, advertising, public relations, sales promotion,
merchandising and facilitate staff services. Identifying new markets
and corporate scope and market research. Identify foreign markets.
Princely J. Rockafellow, Director of Sales ($100,000/year salary)
Manage field sales organization, territories and quotas. Manage
sales office activities including customer/product support/service.
Henry J. Ticklebone, Director of Finance ($150,000/year salary)
Management of working capital including receivables, inventory cash
and marketable securities. Financial forecasting, including capital
budget, cash budget, proforma financial statements, external financing
requirements, financial condition requirements.
James A. Bronson, Director of Engineering ($85,000/year salary)
Oversees product development including quality control, physical
distribution, product and packaging design, new product development
improvement, and improvements on existing products. Research and
development.
Jeremy C. McDougal, Director of Operations ($175,000/year salary)
Service, manufacturing, raw materials management and allocation.
Outside support
An outside Board of Advisors, including highly qualified business
and industry professionals/experts from the elfin community, will
assist our management team to make appropriate decisions and take
the most effective action; however, they will not be responsible
for management decisions.
At this time we do not forecast any need for extensive restructuring,
and/or large scale hiring campaigns. Our expansion campaign will
be able to be handled by our current staff of highly skilled employees.
Financial Data
Please see the attached financial projections including five years
of historical financials, as well as a three year cash flow and
income statement projection.
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