EXECUTIVE SUMMARY

Modern Corporate Furniture will be a furniture house which will supply the most recent and modern furniture products to corporate houses, small businesses and home offices with its main focus remaining on selling its products to big corporate houses. It will be a very good market in the cit of Visakhapatnam y because many big corporate houses have started investing into the city and Visakhapatnam has only a few good and modern furniture houses which will meet the needs of these big corporate houses. Hence the competition will also be less. To start with Modern Furniture will employ professional and hard working carpenters to manufacture its products and will also employ people to sell its products to its customers. Modern corporate furniture will procure all its raw materials which will be of the best quality from authorized dealers and suppliers and will not compromise in the quality of the product which will be supplied to the customers. It will manufacture its products outside the city premises to reduce its overall working costs like that of transportation, location, labour etc, and will be locat near its ed supplier¶s premises. It will take all the responsibilities like helping the corporate entities in selecting the type of furniture suitable to their requirements, which will occupy less space and look elegant. After the product has been supplied in case it has been found defective which may be due to manufacturers negligence or mistake replacement of the same will be done at no extra cost. This wil be one of the main attractions along with l quality product supply. We also expect to earn profits in a very short time span. In all, this plan is a healthy company with good growth prospects, looking to manage its growth in the near future.

EXPECTED GROWTH
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Objectives:

Mission:

Keys to Success:

Modern Corporate

Company Summary:

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high uality office furniture, plus a growing portion of high-end home offices. users who care about elegant office space. Our customers are in all levels of business that can afford very

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Company Profile:
Modern Corporate Furniture will be a furniture house which will supply the most recent and modern furniture products to corporate houses, small businesses and home offices with its main focus remaining on selling its products to big corporate houses. It will be a very good market in the ciy of Visakhapatnam t because many big corporate houses have started investing into the city and Visakhapatnam has only a few good and modern furniture houses which will meet the needs of these big corporate houses. Hence the competition will also be less. T start with Modern Furniture will employ professional and hard working o carpenters to manufacture its products and will also employ people to sell its products to its customers. Modern corporate furniture will procure all its raw materials which will be of the best quality from authorized dealers and suppliers and will not compromise in the quality of the product which will be supplied to the customers. It will manufacture its products outside the city premises to reduce its overall working costs like that of transportation, location, labour etc, and will be locat near its ed supplier¶s premises.

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orporate Furniture will be a corporation which will be owned entirely by S VENKATA VAIBHAV.

5000000 4000000 3000000 2000000 1000000 0 2008 2009 2010

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EXPECTED GROWTH
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Expected Performance year Sales Gross Margin Gross Margin % Operating Expenses Profit 2008 2000000 1100000 55% 900000 700000 2009 3000000 1800000 60% 1300000 1100000 2010 5000000 3000000 60% 2800000 1700000

Products:
Modern Corporate urniture will offer a very high uality office furniture designed to effectively incorporate computer machinery into the executive office or home office. he ey to the line is an ergonomically effective desk that still looks like an executive desk, looks very good in a high-end home office, but is intended to accommodate the personal computer.

Product Description:
1. Our main line will be computer desk in several versions. his will be an elegant piece of office furniture designed to look good in executive office or home office, and at the same time be ideal for real use of the computer. he two critical elements of ergonomics -- keyboard height and angle and monitor height and angle -- are completely adjustable. Cable runs and shelving add to the utility of the executive computer, without sacrificing elegance.

stands, and bookcases.

Competitive Comparison:
ithin our niche we may two significant competitors, City Computer urniture and Andhra furniture. City is

a bigger company but like us, operating mainly in our same niche, whose marketing is better than its product uality. Andhra is a subsidiary of Enaadu urniture, a major furniture manufacturer. In general, however, our competition will not be in our niche.

e will have to compete against generali ed

furniture manufacturers, cheaper computer-related furniture, and the mainstream merchandise in the

major furniture channels and office supply stores. It won¶t be that people choose our competitors instead of our product, it is that they choose lesser uality, mainstream materials instead of the higher uality furniture we offer.

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e also make complementary pieces to fill out the office suite, including file cabinets, printer

e also make custom designs to fit exact measurements.

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Sales Literature:
Sales literature is attached as an appendix to the plan. or 2008 we plan to develop a company catalog, which would include some other products for the same

target customers. he focus will be the executive office catalog, with furniture, lamps, other accessories.

Company Location:
Modern urniture will be located near Sagar

of Special Economic Zone near it availability of facilities like transportation, electricity, and roads will not be a big problem. he employees will not face the problem of transportation because frequency of local buses to the city and into sagar nagar is high.

Sourcing:
Our sagar nagar manufacturing unit in Visakhapatnam has a distinct advantage for local wood.

buy higher quality wood, teak ,oak and other miscellaneous raw materials required at lower costs than either of our competitors because of their locational disadvantages (one near Ankapalley, one in Vijayanagaram). Since we will be dealing with big corporate players cost will not be a big concern because they will require quality and will not back off for cost reasons.

e will work with three to four wood suppliers, all local. Visakha woods supplies most of our teak and oak,

and a bit of cherry and some other specialty woods. his company has been in business for as long as 20 years, and has will give us good service and good prices. his will be a good, stable supplier. Andhra

oods will also supply Products and will act as a good second source, particularly for cherry and

started its business recently because it will supply wood materials at lower cost. Being a new company it will definitely not give lower quality products.

e also work with a number of specialty manufacturers for furniture fittings, drawer accessories, glass,

shelving accessories, and related purchases. Although we will not be a major player compared to the major furniture manufacturers, we will be one of the biggest buyers of the custom materials we need. Most of our suppliers are selling through channels to hobbyists and carpenters, so they treat us as a major account.

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e have also decided to give a chance to Venkateshwara urniture Villa although it has

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Technology:

elements of fine furniture.

communications. or example, our latest models will assume the desktop digital scanner as a frequent accessory, and audio for use in creating presentations, email attachments, etc. Our assembly patents are an important competitive edge.

drawback -- having to assemble the product -- into a feature. Our customer surveys confirm that customers take the interlocking assembly system as an enhancement to the sense of quality.

Future Products:
In 2009 we will introduce the new line based on the executive laptop computer, with docking station to connect to a network. he new furniture will have a different configuration to assume easy access to the docking station, and better use of the space that doesn't have to be dedicated the the CPU case.

e are also going to accommodate larger monitors, the 17" and 21" si es that are becoming much more

common, particularly in our high-end market. As we do, we will also be watching for the new technology providing wall-mounted flat screens, the liquid plasma and similar technologies.

Market Analysis Summary:
Our target market will be an entity which will want to have very fine furniture with the latest in technology, combined with an old fashioned sense of fine woods and fine woodworking. hese can be in the corporate towers, small or medium business, or in a home office. he common bond is the appreciation of quality, and the lack of price constraints.

Market Segmentation:

be setting up their offices in the coming year and will be needing a wide range of furnitures and they will have only one option regarding purchase of furniture and that is to buy from good local suppliers.Because their reputation will be under stake they will only opt for the best quality and

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Corporate ouses: our market research indicates that about 400-500 potential companies will

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e depend on our dominance of the latest in technology of ergonomics, combined with classic design e must remain on top of new technologies in display, input and output, and

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will never think twice to put a hefty money on it. ence these corporate houses will be our first target market and we will try our level best to get orders from them. his will help us in twoways:

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Small business owners: our customer surveys indicate a strong market among the owners of businesses with fewer than 100 employees. here are about a 1000 such businesses in this city, most of them with concentrated ownership that makes the owners potential customers.

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Home offices: the home office business has proliferated during the 2000s, and we also have home offices for people employed outside the home. his is a big market, some 10000 home offices, growing faster than other markets.

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e can earn a lot from these big corporate entities because cost is not a very big issue

for them being a company of multinational repute. e can improve our brand image by bagging orders from these big players.

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MARKET ANALYSIS (pie)

Potential Customers Big Corporates Small business owners ome offices 50-100% 3% 19.5-30% 0 5000 5520 25 5200 5798 100 5400 6133 180 5700 6620 300 6000 7200 10% 500 550 605 700 850 Growth 2005 2006 2007 2008 2009(estimated)

15%

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Others

Target Market Segment Strategy:
Our segment definition is of itself strategic.

intended for use with personal computers, but, rather, only those who are most demanding.

definitely out to address the needs of the high-end buyer, who is willing to pay more for quality. In our particular market, we also seek the buyer who appreciates two attributes: the quality of furniture workmanship and the excellence of design, with an understanding of technology and ergonomics built in.

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e are not intending to satisfy all users of office furniture e are

Market Needs:

special needs of personal computing, when combined with office furniture -- keyboards at correct height, monitors at correct height, proper channels for cables, and other amenities. Our target customer wants to have all of that plus fine furniture. here is a need for quality, reassurance of wood and good workmanship. e don't just sell office furniture, we sell office environment and design, plus workmanship.

Market Trends:
Our market has has the potential to grow and recogni e the disparity between most of the standard office furniture sold through channels, and our own products. he development of the high-end office worker, office owners, and baby-boomer executive is an important

trend for us.

e now have people who are using computers who also appreciate the old-fashioned

workmanship of good furniture.

Market Gro

th:

According to [source omitted], the market for office furniture is growing at 20 percent per year, and is projected to increase. he market for PC-related office furniture is growing even faster, at 30 percent per year, and is projected to top $7 billion by the year 2010(In I DIA alone). Most important is the growth in home offices with personal computer equipment. As the cost of the computer goes down, steadily, the number of home offices goes up. According to [omitted], this is about

offices, and 15 percent of that was spent on furniture. It should also be noted that along with personal furniture needs also furnitures for office usage is growing at a higher rate. Also influx of the giants like Infosys, Satyam,

ipro, CS, Reliance Infocomm and other reputed firms has ot only these corporates require good quality furniture for

created a very good potential for this business.

their office use but they also prefer indigenous producers over foreign ones.

Industry Analysis:
he office furniture industry has undergone a great deal of change in this decade. he growth of the office

superstores made a few large brands dominant. hey produce relatively inexpensive furniture that makes compromises in order to stay at the low price level.

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3lacs right now, growing at 15 percent per year.

ouseholds spent $0.02 billion last year to equip home

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e understand that our target market needs more than just office furniture. he need grew out of the

Makers of higher quality furniture are in general shuffling for niches to hide in. Although Modern Corporate urniture will essentially be developing around a niche, many of the more traditional furniture makers are

looking for niches, trying to deal with declining sales as the main volume goes elsewhere.

Industry Participants:

sales through major retail chain stores:Durian,Godrej, Delux and concentrating efforts as well in the major club discount stores.

eel Kamal. hese same four are also

he growth of the office superstores made a few large brands dominant. Designs are similar and quite

competitive, costs and cost control is critical, and channel management and channel marketing are the keys to these business' continued success. In mainstream office furniture, the rise of the office store channel has siphoned a lot of volume from the older and more traditional manufacturers. he channels that sold the more traditional lines are also

companies.

here are also some traditional manufacturers still making desks as part of furniture lines focused mainly

on home furnishings. Some of these have looked at times at our niche, and are competing for the same dollars.

Distribution Patterns:
he four main manufacturers are selling direct to the office superstores and buying discount clubs. his

accounts for the main volume of distribution. he office furniture customer seems to be growing steadily more comfortable with the retail buy in the chain store.

he major corporate purchases are still made directly with manufacturers. Although this is still a major

channel for some of the more traditional manufacturers, it is essentially closed to new competition. he direct channel is dominated by two manufacturers and two distributors. he distributors will occasionally take on a new line -- happily, this will help Modern urniture -- but the main growth is in retail. Published research indicates that 51% of the total sales volume in the market goes through the retail channel, most of that major national chains. Another 23% goes through the direct sales channel, although in this case direct sales includes sales by distributors who are buying from multiple manufacturers. Most of the remainder, 18%, is sold directly to buyers by catalogs.

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suffering.

hat's left are smaller brands, smaller companies, and divisions of more traditional furniture

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he main volume in the industry is now concentrated in four main brands, all of which compete for retail

Competition and Buying Patterns:
In the mainstream business, channels are critical to volume. he manufacturers with impact in the national sales are going to win display space in the store, and most buyers seem content to pick their product off the store floor. Price is critical, because the channels take significant margins. Buyers are willing to settle for laminated quality and serviceable design. In direct sales to corporations, price and volume is critical. he corporate buyer wants trouble-free buying in volume, at a great price. Reliable delivery is as important as reliable quality. In the high-end specialty market, particularly in our niche, features are very important. Our target customer is not making selections based on price. he ergonomics, design, accommodation of the

are also seeing that assembly is critical to packing, but our customer doesn't accept any assembly

presents a greater feel of quality than if it hadn't required assembly at all.

Main Competitors:
City Computer Furniture

his Company has been operating since the middle 1980s, and grew up with computer-related furniture. It

was one of the first, certainly the first we are aware of, to develop personal computer desks and market through advertising in computer magazines. oday they are about twice our size. hey have a very nicely done catalog and good relationships with two distributors. Strengths: good marketing, strong advertising budget, relationships with distributors, strong direct sales.

eaknesses: the product is more standardized, and of lesser quality, with less sense of design and

materials and workmanship. Andhra Furniture Andhra urniture is a division of Enaadu urniture, the second largest manufacturers of mainstream home furnishings. Enaadu bought Andhra three years ago and is focusing on our niche.

quality product, and an excellent sense of design, but little movement in channels or catalogs. Strengths: financial backing, product quality.

eaknesses: Andhra has not seemed to understand our niche, where to find the buyers, how to market

as a specialty niche instead of the more traditional furniture channels.

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problems.

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computer features within the high-quality feel of good wood, is much more important than mere price.

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Strategy and Implementation Summary:
We will be focusing on special kind of customers, the company which needs very high quality office furniture customized to work beautifully with modern technology including personal computers, scanners, internet connections, and other high-tech items. Our customer might be larger corporations, small or medium business, or a home office with or without a home-office business. What is important to the customer is elegance, fine workmanship, ease of use, ergonomics, and practicality. Our marketing strategy assumes that we need to go into specialty channels to address our target customer's needs. he tie-in with the high-end quality catalogs like Sharper Image is perfect, because these catalogs cater to our kind of customers. We position as the highest quality, offering status and prestige levels of purchase. he product strategy is also based on quality, in this case the intersection of technical understanding with

very high quality woodworking and professional materials, and workmanship.

Our most important competitive edge is our assembly strategy, which is based on interlocking wood pieces of such high quality that assembly is not only a pleasure for our customers, it is actually a feature that enhances the sense of quality.

Strategy Pyramids:
Our main strategy at Modern Corporate urniture is to position ourselves at the top of the quality scale, featuring our combination of superb technology and fine old-fashioned woodworking, for the buyer who wants the best quality regardless of price. actics underneath that strategy include research and development related to new designs and new technology, choosing the right channels of distribution, and communicating our quality position to the market. Programs are mainly those listed in the milestones table, including new design programs, new equipment to keep up with design, channel development, channel marketing programs, our direct sales, and our continued presence in high-end catalog channels and new presence in the web.

Value Proposition:
Modern Corporate urniture gives the discriminating personal computer user, who cares about design and quality furniture and quality of working environment, a combination of highest quality furniture and latest technology, at a relatively high price.

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Competitive Edge:
Our competitive edge is our dominance of high-technology ergonomics and traditional high-quality furniture workmanship. Although there are many computer furniture manufacturers, and many computer lovers, few have brought the two crafts together as we have.

Marketing Strategy:
Our product is positioned very carefully: this is high-quality office furniture combining workmanship and ergonomics for the customer who understands quality, is a user of high technology equipment, and is willing to spend money on the best. Unlike the mainstream products, we do not use laminates or cheap manufacturing technology. Our marketing strategy is based mainly on making the right information available to the right target customer. We can't afford to sell people on our expensive products, because most don't have the budget. What we really do is make sure that those who have the budget and appreciate the product know that it exists, and know where to find it.

company offers exquisite workmanship and design combined with state-of-the-arts ergonomics and technology. Unlike the City line, our urniture makes no design compromises for standardization.

Pricing Strategy:
We will maintain our pricing position as a premier provider. We are the best product available, for the most discriminating consumer. We intend to maintain our separation from the price competition at the lower end of the business. Our plan calls for no significant changes in pricing.

Promotion Strategy:
Our most important vehicle for sales promotion is the direct mail catalog published by the specialty retailer. Our advertising budget of 5lacs goes mainly for space in the specialty catalog. We also participate in major industry events, including the urniture shows and Industrial show. Our total budget for events is 2lacs, plus about half of the 1lacs travel budget.

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he marketing has to convey the sense of quality in every picture, every promotion, and every publication.

We can't afford to appear in second-rate catalogs with poor illustrations that make the product look less than it is. We also need to leverage our presence using high-quality catalogs and specialty distributors.

Positioning Statements:
or discriminating personal computer users who want to integrate their PCs with fine furniture, our

we will also promote our products with an in-house catalog including our own products plus related merchandise of interest to the same target market.

Sales Strategy:
Our strategy focuses first on maintaining the identity with the high-end buyer who appreciates the best available quality, but is also very demanding regarding newly changing furniture fashion. We've already identified few of the customers who are about to enter into the city and will notify them using a combination of direct mail catalogs and direct sales to distributors. At the start we will focus on growing presence in the high-end direct mail catalog that finds our specialty customer. We will work with Sharper Image and Broadview more and we expect to gain position in the major airline catalogs as well. Specialty retail is a new channel that could become important for us. Our work with distributors has been promising. We hope to continue the relationship with distributors selling directly to larger corporations, even though this takes working capital to support receivables.

Sales Forecast:
Our sales forecast assumes no change in costs or prices, which is a reasonable assumption for the next few years. or first aim is to build our brand . We are expecting to increase sales growth from the first year. he growth forecast is in line with our next year, and is relatively high for our industry because we are developing new channels. In 2009 and 2010 we expect growth closer to 50% per year, to a projected total of more than 1crore in 2010. We are projecting significant change in the product line, or in the proportion between different lines. he key to our growth is the growth of the new channels, with the main desk. Our seasonality, as shown in the chart, is still a factor in the business. We tend to sell much better in Spring and all, and sales drop in the summer.

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Monthly Sales

Sales orecast Unit Sales Executive desk (Country Wood) Executive desk ( eak) Other furniture (oak) Other furniture (cherry) Other otal Unit Sales

Unit Prices Executive desk (Country Wood) Executive desk ( eak) Other furniture (oak) Other furniture (cherry) Other

Sales Executive desk (Country Wood) Executive desk ( eak) Other furniture (Oak) Other furniture (Cherry) Other otal Sales 313500 54250 90000 70000 58000-580000 585750-1000000 525000 52500 100000 100000 105000-1050000 1257500-2202500 900000 52500 100000 100000 205000-2050000 1357500-3202500

Direct Unit Costs Executive desk (Country Wood) Executive desk ( eak) Other furniture ( Oak) Other furniture (Cherry)

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2008 209 31 45 7 116 408

2009 350 30 50 10 210 659

2010 600 30 50 10 410 1100

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2008 1500 1750 2000 10000 500-5000

2009 1500 1750 2000 10000 500-5000

2010 1500 1750 2000 10000 500-5000

2008 1000 1200 500 6000

2009 1100 1200 500 6000

2010 1200 1200 500 6000

Other

300-3000

300-3000

300-3000

Direct Cost of Sales Executive desk (Country Wood) Executive desk ( eak) Other furniture(oak) Other furniture(cherry) Other Subtotal Direct Cost of Sales

2008 209000 37200 22500 42000 34800-348000 345000-658700

2009 385000 36000 25000 60000 63000-630000 569000-1136000

2010 720000 36000 25000 60000 123000-1230000 964000-2071000

Specific sales programs:
1. Catalog sales: develop placement with one additional catalog catering to the high-end office executive, paying of course for space and positioning. he budget is 1lacs for this program, due March 15, with Jan responsible.

2. Distributor sales: we need to develop at least new distributor, spending for co-promotion as required, and making direct sales calls. he specific responsibility is Jan's, and due date is May 15, with a budget of 1.5lacs.

3. Direct sales: we will do a mailing of a new in-house catalog, developed by the marketing department, to add to our direct telephone sales. Jan will be responsible, without a budget or a deadline because the catalog is a marketing program.

Strategic Alliances:

he accompanying table shows specific milestones, with responsibilities assigned, dates, and (in most

cases) budgets. We are focusing in this plan on a few key milestones that should be accomplished. Milestone Start Date 5/15/2008 4/1/2008 End Date 6/15/2008 5/15/2008 Budget 54,000 85,000 Department Ads Ads

hird catalog

placement Second catalog

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First catalog

3/1/2008 3/15/2008 3/15/2008 1/31/2008

4/15/2008 3/30/2008 4/30/2008 2/28/2008

125,000 100000 25,000 0

Ads

ew distributor ew distributor

Our in-house catalog plan In-house catalog design In-house catalog mailing Local show State show trade show Industrial show

4/1/2008

5/1/2008

10000

5/1/2008 1/1/2008 5/15/2008 5/15/2008 1/15/2008 1/15/2008

6/1/2008 5/15/2008 10/15/2008 10/15/2008 5/15/2008 5/15/2008

5000 10,000 25000 20,000 20,000 60000

Events Events

show Summer rade Show

5/15/2008

10/15/2008

20000 559000

otals

Management Summary:
We are a small company owned and operated by a single person. Mr. S Venkata Vaibhav will hold the authority. Management style reflects the participation of the owners. he company respects its community of coworkers and will treat all workers well and will also attempt to develop and nurture the company as community. We will not be very hierarchical. We will appoint people on temporary basis and there will be only few workers who will be permanent ( ote that it will be valid only for the 1 Year). We will appoint only those people who will be professional carpenters and who will have sufficient knowledge regarding technological functioning of the machines.

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Personnel Plan:
The personnel table assumes slow growth in employees, and 10% per annum pay raises. We already have a strong benefits policy (with fully-paid medical, dental, and life insurance) and very low turnover. Salaries will be in line with market pay for the locale area, although our benefits are above standard market level, so we ultimately pay a bit more for our people than what might be considered standard in our market. owever on average a lower wage location than most of the more developed industry areas. As we grow, we expect to see steady increases in our personnel to match the increases in sales. Personnel Plan Production Personnel Workshop managers Assembly Other Subtotal 2008 30,000 21,600 0 51,600 2009 50,000 30,000 0 80,000 2010 75,000 60,000 50,000 185,000

Sales and Marketing Personnel Marketing managers Other Subtotal 37,000 0 37,000 65,000 0 65,000 72,000 0 72,000

General and Administrative Personnel Owner Other Subtotal 48,000 0 48,000 75,000 0 75,000 100,000 0 100,000

Other Personnel

n

Design Other Subtotal

3,000 0 3,000

15,000 0 15,000

25,000 0 25,000

Total People Total Payroll

0 139,600

0 235,000

0 382,000

Financials Briefing:

Although we do not intend to take loans for our day to day operations, we will initially approach a nationalized bank like (SBI) for our infrastructural development. SBI will be a preferred bank although it being a public sector bank because it will be charging only 11.85% as interest rate for a period of 5-10years(the time period will be depending on the owners ability to pay). Private banks have been blacklisted although they take less time to sanction loan because of their stringent rules and higher interest rates. We will be taking a loan of 30 lacs from the bank to meet our infrastructural development costs and for other official purposes and this loan amount will not be used for day to day operations of the business. As an owner Mr.S VE KATA VAIB AV will be investing a sum of 25lacs. The amount which will be coming from the owner will be utilized for overall day to day working of the organization. The company will be taking a land of 10000 sft near Sagar agar Industrial Area, Visakhapatnam on a

lease for a period of 5years initially. And this will be increased on the basis of company¶s requirements. The land will be allocated to us directly by the Govt. of Andhra Pradesh and hence their will be no litigations and the govt. will also be approving for any future expansion of our manufacturing plant (but only upto 8000sft). The investment for land will cost only 5lacs as it is present in the industrial area.

Important Assumptions:
The accompanying table lists our main assumptions for developing our financial projections. The most sensitive assumption is the collection days. We would like to improve collection days to take pressure off of our working capital, but our increasing sales through channels makes the collection time a cost of doing business.

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p

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We also expect to see a decline in our inventory turnover ratio, another unfortunate side effect of increasing sales through channel. We find ourselves having to buy earlier and hold more finished goods in order to deal with sales through the channel. General Assumptions 2008 Plan Month Current Interest Rate Long-term Interest Rate Sales on Credit % Other 1 10.00% 12.00% 50.00% 0 2009 2 10.00% 12.00% 50.00% 0 2010 3 10.00% 12.00% 50.00% 0

Key Financial Indicators:
The following chart shows expected changes in key financial indicators: sales, gross margin, operating expenses, collection days, and inventory turnover. The growth in sales will be very hard to manage. We expect our gross margin to be a bit lower, because our projections show a slight decline as we go into new product areas and face new competition. The projections for collection days and inventory turnover show that we are already expecting a decline in these indicators, because of increasing sales through channels.

Benc 8 7 6 5 4 3 2 1 0 Sales Gross Margin %

arks

2007 2008

2009
2010

2011

perating E penses

Collection ays

Inventory urnover

Break-even Analysis:
Our break-even analysis is based on running costs, the "burn-rate" costs we incur to keep the business running, not on theoretical fixed costs that would be relevant only if we were closing. Between payroll, electricity, utilities, and basic marketing costs, we think Rs.50000 is a good estimate of fixed costs. Our assumptions on average unit sales and average per-unit costs depend on averaging. We don't really need to calculate an exact average, this is close enough to help us understand what a real break-even point might be. The essential insight here is that our sales level seems to be running comfortably above break-even.

Break-even Analysis: Monthly Units Break-even Monthly Revenue Break-even 67 80,000

Assumptions: Average Per-Unit Revenue Average Per-Unit Variable Cost Estimated Monthly Fixed Cost 1,200.00 600.00 50,000

Projected Profit and Loss:
Although it will look like false for a company to make profits from the first year itself but it the other way around for our company because it involves less loan amount from the banks and the big companies will be making advance payments which will ease off pressure from us and they will also not make delayed payments. It has to be noted that only small business houses and others may make delayed payments and not the big companies. Therefore We do expect a significant profitability from the commencement year itself, and in the future, because we will have learned how to deal with the increasing sales levels of selling through channels. Despite the lower profitability levels in the start, we expect to pass 5% in 2008, and remain at that level through 2010. Our higher sales volume will lower our cost of goods and increased our gross margin. This increase in gross margin is important to profitability.

Pro Forma Profit and Loss:
2008 Sales Direct Costs of Goods Production Payroll Other 2000000 900000 720000 100000 -----------Cost of Goods Sold Gross Margin Gross Margin % Operating Expenses: 900000 490000 55% 2009 3000000 1300000 800000 140000 -----------1200000 720000 60% 2010 5000000 2800000 1000000 200000 -----------1400000 840000 60%

Sales and Marketing Expenses: Sales and Marketing Payroll Miscellaneous Advertising/Promotion Events Public Relations Travel 150000 10000 200000 175000 20000 50000 -----------Total Sales and Marketing Expenses Sales and Marketing % General and Administrative Expenses: General and Administrative Payroll Sales and Marketing and Other Expenses Depreciation Leased Equipment Utilities Insurance Rent Other Other General and Administrative Expenses -----------Total General and Administrative Expenses General and Administrative % Other Expenses: Other Payroll 12000 24000 30000 19.10% 20% 20% 289,000 -----------321000 -----------370000 0 10000 0 20000 5000 100000 10000 0 0 11000 0 20000 5000 100000 15000 0 0 15000 0 30000 5000 100000 20000 0 144000 170000 200000 605000 200000 20000 200000 175000 25000 80000 -----------700000 300000 20000 300000 175000 25000 100000 -----------920000

40%

50%

50%

Contract/Consultants

0 ------------

0 -----------15,000 1% -----------1400000 1700000 300000 400000 1300000 18%

0 -----------25,000 0.9% -----------2700000 2300000 360000 600000 1700000 17%

Total Other Expenses Other %

10000 0.86% ------------

Total Operating Expenses Profit Before Interest and Taxes Interest Expense Taxes Incurred et Profit et Profit/Sales

900000 1100000 280000 280000 700000 16%

Projected Cash Flow:

Although we expect to be more profitable in 2008, due to our new strategy implementation programs and other commencement programs we may have drains on the cash flow. We will be requiring to invest Rs.300000 in new assembly and manufacturing equipment, and another Rs.200000 in miscellaneous short-term assets, including office equipment. Because of our increased sales through channels, and necessary increase in inventory levels, we need to increase working capital. We plan to extend our credit line to cover as much as Rs.1000000 in short-term credit, backed by receivables and inventory. Our maximum extension looks like Rs.700000 at the end of the year, and it is barely covered by an estimated Rs.800000 in receivables and inventory that same month.

q q

Pro Forma Cash Flow 2008 2009 2010

Cash Received Cash from Operations: Cash Sales Cash from Receivables Subtotal Cash from Operations 1000000 1400000 2100000 700000 300000 900000 500000 1300000 800000

Additional Cash Received ew Current Borrowing 300000 0 200000 500000 500000 0 0 500000 400000 0 0 400000

Sales of Long-term Assets ew Investment Received

Subtotal Cash Received

Expenditures Expenditures from

r r

2008

2009

2010

Operations: Cash Spending Accounts Payable Subtotal Spent on Operations 1000000 1500000 2200000 600000 400000 900000 600000 1300000 900000

Additional Cash Spent Income Tax Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Long-term Assets Dividends Subtotal Cash Spent 150000 0 850000 200000 0 1300000 200000 0 1550000 100000 200000 150000 300000 500000 800000

300000

400000

400000

et Cash Flow

700000

1300000

1700000

Projected Balance Sheet:

Our projected balance sheet shows an increase in net worth to more than Rs.1700000 in 2010, at which point we expect to be making 17% profit on sales of 50lacs. With the present financial projections we will be careful in supporting our working capital credit line, and we are growing assets both because we want to -- new equipment -- and because we have to grow receivables and inventory to support growth in sales through channels.

Pro Forma Balance Sheet

Assets Current Assets Cash Accounts Receivable Inventory 2008 800000 600000 1000000 2009 1000000 700000 1500000 2010 1500000 900000 2000000

s

Other Current Assets Total Current Assets Long-term Assets Long-term Assets Depreciation(10%) Total Long-term Assets Total Assets

100000 2500000

150000 3350000

200000 4600000

800000 80000 880000 3380000

1000000 100000 1100000 4450000

1500000 150000 1650000 6250000

Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities 2008 100000 500000 70000 670000 2009 200000 900000 100000 1200000 2010 400000 1400000 150000 1950000

Total Liabilities

670000

1200000

1950000

Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital et Worth

2500000 700000 700000 3900000 4570000 3900000

2500000 700000 1300000 4500000 5700000 4500000

2500000 1000000 1700000 5200000 7250000 5200000

t

Business Ratios:

Gross margin is projected to decline below 60%, return on assets getting to about 17%, and return on equity at 35% or better. Debt and liquidity ratios also look tough, with debt to net worth running at more than 1.4 to one. The projections, if we make them, are manageable.

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