In: Accounting
Develop detail business outline for food preservation company.
I. Summarize your business concept, define your company, how you will generate revenue and profit. Describe your product/service, what distinguishes your company from others and how much money you will need from financers. II. Explain your mission, objectives, purpose and what you want to accomplish. III. What industry are you and type of structure. IV. Describe your product/service. V. Provide data about your target market and goals. VI. Summarize qualifications of management personnel. VII. Outline strategy for identifying and contacting customers, providing customer services, setting prices, advertisement. VIII. Describe how product will be developed, costs and problems. IX. Provide an example of your operating plan. Identify operating facilities needed, equipment and personnel requirements. X. Need a schedule for company growth, development, staffing and when products will be ready for the market. XI. What risks and problems do you foresee with your business? XII. Outline the details of your budget: projections of income, expenses, costs for start-up, operations, in a 3-5 years cash flow analysis. XIII. What kind of exit strategy will you provide for investors to buy back their investment? Reference: Thill and Bovee, 14th Edition, p 343.
Executive Summary
What's For Dinner? is an exciting, new business with a unique approach to helping people enjoy home cooked meals with their families. Customers will come to our Plano, TX location and prepare 12 meals that they pre-select from a menu in a party atmosphere. In two hours, they will have a month's worth of meals to put in their freezer.
By focusing on our competitive edge (no direct competitors in the Dallas/Ft. Worth area), our customers, and their needs, What's For Dinner? will increase sales to a point that exceeds $1.3M in three years.
What's For Dinner? is owned jointly by Alan and Kim Kirby as an S Corporation. Alan and Kim have 15 years of experience in the food service and entertainment industries, as a party planner and personal chef, respectively. They know the kinds of food preparation available in the Collin County area. With two teenaged children, have experienced the frustration of trying to feed a whole family healthy food both cheaply and quickly. Alan's existing contacts with local social and community groups, and Kim's ongoing relationships with food distributors, specialty grocers, and high-end clients will all help to generate high sales from early in the first year.
What's For Dinner offers several advantages to its target market:
The purpose of this plan is two-fold. The first is to acquire funding of $259,708. The second is to lay the foundations of the company's vision, philosophy, and strategy, to ensure that we know where we are going and how to get there.
Mission
What's For Dinner? is a specialized business that provides a variety of people with the opportunity to prepare health conscious, yet savory meals that can be frozen to take home and eat at a later time. The purpose of this process is to both optimize the time investment needed to prepare the quality of meals that What's For Dinner? will become known for, within the clients' current schedules, and also for them to practice the proper health conscious behavior that has become the target lifestyle of a health deficient society.
What's For Dinner? will provide a unique and distinctive service that will unite a party-like atmosphere with professional food preparation that will attract a growing repeat customer base. What's For Dinner? will allow families and busy professionals the ability to prepare a variety of meals quickly in a fun atmosphere, away from home, thus giving people more of what they are looking for - time.
Our goal is to be a self-sustaining corporate enterprise within 3 years from the company's inception to begin expanding our menu offerings within 3 months and its location offerings within 4 years. What's For Dinner? will employ 4 individuals full time within 3 years, and will hit net profit goals of $100,000 by the end of its second year of existence.
In short, we will be in the business of helping our customers to relieve their daily stresses of what to fix their families for dinner by providing them with a great menu choice of meals that they will prepare.
Keys to Success
The keys to success in this business are:
Objectives
The objectives for What's For Dinner? in the first three years of operation include:
Company Summary
What's For Dinner? is a unique business where customers come to our Plano, TX location and prepare twelve pre-chosen meals that will be taken home and frozen until they are ready to cook and serve. All of the planning, shopping, food preparation and containers are provided with no worries to the customer. The meals will be prepared in a party like atmosphere where customers will have separate workstations to prepare their meals and have a good time with friends, both new and old.
Our goal is to provide our customers with home cooked meals that their families will enjoy, while saving them time and effort and relieve stress from that age-old question of What's For Dinner?
The scheduling aspect of our company will be combination of a standard walk-up scheduling procedure, a phone messaging service and an intensive highly-interactive e-commerce website that will allow the customer to not only schedule parties but also to pay online, using standard secure technology.
Start-up Summary
The start-up expenses include:
The required start-up assets of $50,000 include:
Please note that the long-term assets above will be depreciated using G.A.A.P. approved straight-line depreciation method.
The purpose of this business plan is to secure $259,708 in funding. This loan appears in the long-term liability row of the attached Start-up Funding table.
The following chart and table summarize the start-up assumptions.
Services
What's For Dinner? will provide its customers with twelve home cooked meals that they will freeze until customers are ready to serve them. These meals will be chosen from a set menu designed weekly by us and the meals will be prepared in our location. All of the planning, shopping, food preparation, recipe directions and containers will be provided to help make it as easy as possible for our customers to enjoy their time at our establishment.
Our customers will prepare their meals in a fun, party-like atmosphere where they can relax, meet new friends or spend time with old friends while preparing dinners for their families for the next month.
The Key benefits our customers will receive from using What's For Dinner? are:
Our menus and portion sizes are tailored for the group and individual customers. Seniors get added benefits, with diabetic, low-cholesterol, and low-sodium choices. Families can increase portion sizes for a small fee to accommodate more children or guests.
Market Analysis Summary
The Dallas area's meal preparation market is untapped. As a matter of fact, there is no other business of this kind in the Dallas/Ft. Worth area. Though there are no exact replicas of our company there are some types of companies that we would have to consider to be indirect competitors. These include such companies and service professionals as caterers and those that will come to your home and prepare meals for you to freeze. What's For Dinner?, at this time, has few direct competitors, with exception to area restaurants and your basic home cooking. At the inception of What's For Dinner?, there will be no type of company like ours in the area, thus giving us the overwhelming competitive advantage of first entry.
The What's For Dinner? market is primarily in the Collin County area: Plano, Frisco, Allen and McKinney. We will be focusing on households in these areas that have more than one person. Primarily, those households whose income is over $50,000, with someone under the age of 18 living there. As a secondary target market, we will market to the elderly population in the aforementioned areas. Initially, the greater portion of our customers will be busy, working class people and the growing group of single-parent families, but it will be of great benefit now and in the future to market our services to the highest growing population demographic – senior citizens.
MARKET ANALYSIS | |||||||
YEAR 1 | YEAR 2 | YEAR 3 | YEAR 4 | YEAR 5 | |||
Potential Customers | Growth | CAGR | |||||
Households with children | 10% | 73,864 | 81,250 | 89,375 | 98,312 | 108,144 | 10.00% |
Households with no children | 10% | 58,404 | 64,244 | 70,668 | 77,735 | 85,509 | 10.00% |
Seniors | 12% | 25,852 | 28,954 | 32,428 | 36,319 | 40,677 | 12.00% |
Total | 10.33% | 158,120 | 174,448 | 192,471 | 212,366 | 234,330 | 10.33% |
Strategy and Implementation Summary
What's For Dinner? will gradually gain market share in the four focal geographic markets (Plano, Frisco, Allen and McKinney) by leveraging its competitive edges. These edges are superior attention to detail in the local food service market, a revolutionary food-servicing outlook and excellent nutritional meals at competitive price. These advantages have been unavailable in this market for some time. We will market our services with a targeted advertising campaign and networking.
Competitive Edge
What's For Dinner? will begin with a critical competitive edge: we have no direct competitors in the Dallas/Ft. Worth area. By being the first-mover and (for at least a while) the only service of our kind, we will have the initial market buzz that is normally reserved for the first company of its kind into a given market. Our positioning is very hard to match, but only if we maintain focus on our strategy, marketing, business development, and fulfillment of quality and customer service will we be able to continually grow and outpace the "copy-cat" businesses that are sure to follow our market lead. We are aware that the tendency to relax due to lack of competition could weaken our competitive edge. What's For Dinner? will be operated as if our direct competitors were conducting the same service business that we are in and we will be looking for additional enhancements to our operating procedures from day one.
In addition to our unique positioning, we offer the following advantages to our customers:
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Marketing Strategy
As a food service business, our main goal is to provide high quality food with excellent customer service. Our challenge as a new company is to quickly establish a reputation for such quality among our potential markets. With this in mind, the initial focus of our marketing strategy will be to get our name and reputation out to the public to create "buzz." Creating brand recognition for our new concept will be the first measurable milestone in our marketing strategy.
This will be one of the most important factors when measuring success within the first couple of months after inception. The basis for our ideology is simple; the more people that hear our name and become familiar with our services, the more people will use it. The marketing campaign will involve a targeted advertising campaign, different specials to entice the customers to try our business and a very intense networking campaign. All of these tactics will be used to help gain a loyal clientele aimed at fostering our happy customer base.
At start-up, we will begin a focused advertising campaign toward target segments in our geographical area. We will update our advertising campaign regularly to fill in gaps based on follow-up research: do people recognize our name? Do they know what we do? What is their impression of our services' costs and quality?Marketing campaigns will work via:
Coupled with the advertising campaign will be a systematic offering of discounted specials to attract more customers. This could be very important to potential customers because the cost of $175 for 12 meals is very appealing to families that have used our service before, but families may be skeptical to buy this much food and invest that much money in something they have never tried. For that reason, our business will offer periodic specials to families to help limit their fears and open their eyes to the wonderful atmosphere at What's For Dinner?
What's For Dinner? will also have a networking campaign that will start with the owner's contacts and friends attending our first months' meal prep parties. This will be the "word of mouth" campaign that will feature:
Sales Strategy
In the food service business, as in any customer service intensive business, sales revenue is our lifeblood. The way in which we present ourselves to our customers and deal with the public will determine the success of our business. The food service industry is facilitated by repeat business and referrals. In order to continuously compete against other food providers, we need to enhance our repeat customer service business by making this our main sales focus. We cannot expect to have a satisfied customer by selling them one month's of meals and then never seeing them again. We must make our sales strategy revolve around making the customer's experience with us the best it possibly can, and further, making every effort to get our current customer base to visit us again. It is much more expensive to get new customers than to keep the customers you already have. Our customers cannot stop eating, but they could stop using our services. We will be selling our service to our current customers each time they come, in order to have repeat business and new business through their word of mouth.
These are just a few of the ways we will sell to our customers to gain repeat business and word of mouth advertising:
The What's For Dinner? website will serve as a productive and consistent selling tool. Our website will be set up to explain what we offer and the many benefits customers will receive for using our meal prep services. The website will help "close the sale;" customers will be able to register for the meal prep party they would like to attend and accepting payments online. This will be our main source of registrations for parties. The ease of use allowed by the Internet will be key to driving our customer pipeline. Our sales and marketing campaigns will help focus our customer traffic through our website, so that people can see how easy it will be to interact with our company. This element of efficiency will also help enhance our bottom line by allowing for a 24 hour customer service mechanism without having to keep a customer rep staffed all the time.
1 Sales Forecast
Through our research of other businesses like ours in Seattle, WA and Omaha, NE, we found that all of them quickly increased their sales over their first year. All of these researched companies went from their first month of 100 customers on average to over 1,000 customers within their first year of business. One company opened in Seattle against two other competitors and now has over 2,000 customers with three different locations.
We are optimistic that What's For Dinner? will grow and prosper just as these other companies have, but we want to set reasonable forecasts for growth. We have therefore taken a conservative approach in preparing our Sales Forecast Table.
The following table and chart give a run-down on forecasted sales. We have forecasted that sales will increase each month with the exception of the summer months, when vacations and other seasonal activities may reduce purchases. Once we get our first few customers, our sales will increase through customer retention, and gaining new customers through networking. We expect sales to grow incrementally over the first year, reaching profitability by the fifth month of operation.
After the first year of operation, we expect sales to continue increasing, from 10% the first year up to 25% by the third year. As sales increase, we will make modifications to our facility and hire new employees to share in the work. Our proposed location allows room for expansion. Based on our research, and the size of our potential market, we expect to reach close to one million dollars in sales by the end of 2005.
Our direct costs of sales listed here are inventory used up in sales, including the meal ingredients and additional supplies, such as themed-party decorations, containers, napkins, and so on. Fixed operating expenses are listed in the Profit and Loss.
SALES FORECAST | |||
YEAR 1 | YEAR 2 | YEAR 3 | |
Sales | |||
Party Fees | $857,674 | $1,072,093 | $1,340,116 |
Other Fees | $24,505 | $30,631 | $38,289 |
TOTAL SALES | $882,179 | $1,102,724 | $1,378,405 |
Direct Cost of Sales | Year 1 | Year 2 | Year 3 |
Ingredients | $612,624 | $765,780 | $957,225 |
Other Supplies | $44,109 | $55,136 | $68,920 |
Subtotal Direct Cost of Sales | $656,733 | $820,917 | $1,026,146 |
Management Summary
The What's For Dinner? management team will initially consist of the founders/owners themselves, Alan and Kim Kirby. We do not anticipate the need to hire anyone else on a full time basis during the first year, because all of the services that a normal small business needs will be outsourced. These services include the e-commerce infrastructure, accounting, marketing, and legal services. We do plan to employ one part-time employee from the beginning to help with cleaning and dishwashing.
Alan and Kim have 15 years of experience in the food service and entertainment industries, as a party planner and personal chef, respectively. Until the second year, Kim will continue to work part-time as a personal chef for several couples in Plano, doing the prep work and menu planning for What's for Dinner? in the mornings. Alan will host the majority of the parties, after having prepared test batches of every menu item with Kim. The owners anticipate possibly hiring local high-school students as sous-chefs in years 2 and 3; Kim's experience with local restaurants has shown that these students can often do quite well, paid only minimally in exchange for professional restaurant and food preparation training. Alan's existing contacts with local social and community groups, and Kim's ongoing relationships with food distributors, specialty grocers, and high-end clients will all help to generate high sales from early in the first year.
Throughout the first two years we will conduct an aggressive cost analysis as to what our capabilities are as owners and with what activities we need assistance.
Personnel Plan
The following table summarizes our personnel expenditures for the first three years, with compensation increasing from $34K the first year to about $60K in the third. We believe this plan is a fair compromise between fairness and expedience, and meets the commitment of our mission statement. The detailed monthly personnel plan for the first year is included in the appendices.
PERSONNEL PLAN | |||
YEAR 1 | YEAR 2 | YEAR 3 | |
Alan Kirby | $24,000 | $30,000 | $40,000 |
Kim Kirby | $5,000 | $7,500 | $10,000 |
Part-time cleaner | $5,000 | $7,500 | $10,000 |
TOTAL PEOPLE | 3 | 3 | 3 |
Total Payroll | $34,000 | $45,000 | $60,000 |
Financial Plan
What's For Dinner expects strong sales, based on research into our target market, similar businesses in other parts of the country, lack of direct competition, and the experience, reputations, and know-how of its owners/managers. By steadily repaying our long-term loan and holding down costs, we will generate a net profit midway through the first year and increase net worth dramatically by year 3. Our major fixed expenses are payroll and rent.
Important Assumptions
The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendices.
Three of the more important underlying assumptions are:
GENERAL ASSUMPTIONS | |||
YEAR 1 | YEAR 2 | YEAR 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 7.00% | 7.00% | 7.00% |
Long-term Interest Rate | 7.00% | 7.00% | 7.00% |
Tax Rate |
24.00% | 24.00% | 24.00% |
Other | 0 |
0 |
$10,095 |
Projected Profit and Loss
What's For Dinner?'s projected profit and loss is shown in the following table, with sales increasing from $10K the first month to close to $1.4M by the third year. We will reach profitability in the middle of our first year.
We are projecting very conservatively regarding cost of sales and gross margin. Our costs of sales are based on grocery store prices, which will decrease once we are to consistently able to buy our food in larger quantities from a food distributor. This will significantly lower our cost of sales, and increase our gross margin more than in this projection. We prefer to project conservatively so that we make sure we have enough cash.
The Sales and Marketing Expenses vary from the food preparation industry norms. Our Sales and Marketing Expenses will be to consistently maintain our advertising and promotions, while our biggest marketing will be word of mouth from our customers. We are budgeting for a high level of service from our website hosting company and payment processor, since the website is a key component of our Sales and Marketing Strategies.
The detailed monthly projections are included in the appendices.
PRO FORMA PROFIT AND LOSS | |||
YEAR 1 | YEAR 2 | YEAR 3 | |
Sales | $882,179 | $1,102,724 | $1,378,405 |
Direct Cost of Sales | $656,733 | $820,917 | $1,026,146 |
Other Costs of Sales | $0 | $0 | $0 |
TOTAL COST OF SALES | $656,733 | $820,917 | $1,026,146 |
Gross Margin | $225,446 | $281,807 | $352,259 |
Gross Margin % | 25.56% | 25.56% | 25.56% |
Expenses | |||
Payroll | $34,000 | $45,000 | $60,000 |
Sales and Marketing and Other Expenses | $3,000 | $3,000 | $3,000 |
Depreciation | $4,200 | $4,200 | $4,200 |
Rent | $53,304 | $54,000 | $54,500 |
Utilities | $13,160 | $14,476 | $15,924 |
Office Supplies | $1,200 | $1,200 | $1,200 |
Insurance | $3,000 | $3,000 | $3,000 |
Payroll Taxes | $0 | $0 | $0 |
Accountant | $3,000 | $3,200 | $3,500 |
Lawyer | $1,000 | $1,100 | $1,100 |
Bank Charges | $180 | $180 | $180 |
Website Payment Fees | $600 | $700 | $800 |
Website Hosting & Support | $1,500 | $1,600 | $1,650 |
Repairs and Maintenance | $3,000 | $3,000 | $3,000 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $121,144 | $134,656 | $152,054 |
Profit Before Interest and Taxes | $104,302 | $147,151 | $200,205 |
EBITDA | $108,502 | $151,351 | $204,405 |
Interest Expense | $17,342 | $15,861 | $14,316 |
Taxes Incurred | $20,870 | $31,510 | $44,614 |
Net Profit | $66,089 | $99,780 | $141,276 |
Net Profit/Sales | 7.49% | 9.05% | 10.25% |
Projected Cash Flow
The following cash flow projections show the annual amounts only. Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly cash balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendices.
The balance sheet in the following table shows managed but
sufficient growth of net worth, and a sufficiently healthy
financial position. Our negative net worth, due to borrowed capital
for start-up, makes a significant increase by the second year, and
becomes positive in year three. It is common for start-up
businesses to have a negative net worth their first few years.
Projected Balance Sheet
PRO FORMA BALANCE SHEET | |||
YEAR 1 | YEAR 2 | YEAR 3 | |
Assets | |||
Current Assets | |||
Cash | $101,685 | $82,187 | $181,270 |
Inventory | $137,714 | $172,142 | $215,178 |
Other Current Assets | $8,000 | $8,000 | $8,000 |
TOTAL CURRENT ASSETS | $247,399 | $262,329 | $404,448 |
Long-term Assets | |||
Long-term Assets | $42,000 | $42,000 | $42,000 |
Accumulated Depreciation | $4,200 | $8,400 | $12,600 |
TOTAL LONG-TERM ASSETS | $37,800 | $33,600 | $29,400 |
TOTAL ASSETS | $285,199 | $295,929 | $433,848 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $148,189 | $81,220 | $99,942 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
SUBTOTAL CURRENT LIABILITIES | $148,189 | $81,220 | $99,942 |
Long-term Liabilities | $237,628 | $215,548 | $193,468 |
TOTAL LIABILITIES | $385,817 | $296,768 | $293,410 |
Paid-in Capital | $30,000 | $30,000 | $30,000 |
Retained Earnings | ($196,708) | ($130,619) | ($30,838) |
Earnings | $66,089 | $99,780 | $141,276 |
TOTAL CAPITAL | ($100,619) | ($838) | $140,438 |
TOTAL LIABILITIES AND CAPITAL | $285,199 | $295,929 | $433,848 |
Net Worth | ($100,619) | ($838) | $140,438 |