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Business Plan

Executive Summary

The business profile


Business name: The business name will trade under the registered name of
Canterbury Renovations
Business location: Canterbury Renovations will specialise in the renovation
of domestic kitchens, bathrooms and laundries. The business is expected to
expand in two or three years to include residential construction.
The business emphasis will be the delivery of high quality products and
services, the reinvestment of profits into business growth and the
development of a strong business identity.

Case Example
As the proprietors, we have a combined building background with a flair for
interior design. Our research found a number of suitable premises available,
with one shop currently available for rent and outgoings of $14,000 per
annum.
The initial funding will be $85,000. This comprises of $40,000 provided by the
proprietors and a $45,000 overdraft, secured through the provision of a
mortgage on our home. We expect to achieve a turnover of $300,000 in the
first year, which yields a gross profit of $50,000 after an owner salary is paid.
This will pay overhead expenses such as rent, interest and advertising.

In the second year, we expect the annual turnover to be $450,000, and to


employ two additional staff.
This growth is predicted to occur as a result of a strong marketing strategy
and the development of a reputation for supplying excellent products and
services. The manufacturing works may be required to relocate to an
industrial site in the future and this would require additional finance.

Mission Statement
The core activity of Canterbury Renovations will be the renovation of kitchens,
bathrooms and laundries. The business will provide a complete service,
including free designs and quotes, supply and installation of equipment and
fittings, all associated building services, after sales maintenance and a sevenyear guarantee covering workmanship.

Business Products and Services

Canterbury Renovations is a new business with no existing clients, projects or


history. We provide timber, tiles, paint and plaster with our renovations
services. Our products will also include built-in appliances such as ovens,
microwaves, cook tops and dishwashers, which will suit each individual
project.
Although these products are available through other businesses, we offer
them as part of a service rather than a stand-alone product. One company in
the western suburbs also offers these appliances as part of their renovations
package, but they do not service the eastern suburbs.
Our main competitor Balwyn Kitchens does not supply equipment when
installing new kitchens.

Premises

Definition
To run a business, you need to have premises. It may be a home office, a mobile
service, a business centre office or a shop, and the location should appeal to
customers. Compare the premises to your competitors premises and consider the
marketing advantages

Canterbury Renovations will establish a showroom in the eastern suburbs to


allow demonstration work of products and provide a space for discussion,
planning and the signing of contracts. However, such discussions can
similarly take place at the home of prospective clients.
The premises will also allow for storage space and some manufacturing work
will take place at our residence, which has council approval as a home-based
business premises.

SWOT Analysis
Definition
A SWOT (strengths, weaknesses, opportunities and threats) analysis can
provide a lot of useful information for a business. It can give direction to the
business and its marketing strategies. The results need to be concise,
relevant and interesting. The report should give an understanding of the
business aims, and key issues and objectives should flow from it easily.
Some factors to consider for this analysis include:

unique characteristics of the business

amount of money available

existing client base

suppliers and distributors

price structure

profit margins

Case Example
Strengths

Weaknesses

technical competence of the

lack of management skills

proprietors

no track record in business

total agreement between

no current plan for

proprietors on their objectives

management succession in the

financial resources

short term

good network of contacts for

inefficient equipment

potential clients, suppliers and

proprietors have limited

tradespersons

security with which to raise

business is located within the

finance for future growth

target market

business is principally
dependent on one person
during the formative stages

Opportunities

Threats

rapidly growing market

poor reputation of the industry

poor reputation of existing

potential for economic

renovation businesses

downturns

large number of old yet

existence of competitors

valuable homes

increasing cost of materials

availability of casual staff and

retaining suitable staff and

tradespersons

availability of display and

reliable subcontractors

manufacturing premises within

possible government
regulation

the area

geographically diverse market

high disposable income within

an increased number of Do It

the target market

Yourself (DIY) renovations,

potential for future expansion

inspired by magazines and

of the business

television programs

Key issues
Drawn from the SWOT analysis, the significant issues for Canterbury Kitchens
are:

inexperience and lack of brand awareness

sufficient funds for projections but limited resources for growth

keeping projects affordable if materials costs increase unexpectedly

need to gain knowledge in recruiting and managing staff

Key opportunities
Key opportunities include:

providing good customer service that will increase market perceptions


and earn word of mouth advertising

popularity of renovations in the area

utilising technology to promote business and keep staff contact

good networking allows good service and joint promotional activity

Personnel Planning

Definition
You will need to consider business size, service level and hours or operation
to determine the staff you will employ. It is also important to establish what
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skills and experience they should have, the possibility of training, recruiting,
replacing and the roles your staff will take.

Case Example
We have industry experience, but need training and experience in managing
staff. Canterbury Renovations has a team of dedicated and qualified staff and
we will provide training in the areas of our preferred service technique and
business style.
A set of guidelines has been written for all staff outlining expected behaviours
such as cleaning, punctuality and customer courtesy. We also intend to
employ a professional writer to create an Operations manual.
Deficiencies will be identified and addressed through a training strategy.
The priority areas for staff training will be:

building and production techniques

using new products

using new machinery

marketing skills

selling

communication skills

customer service

estimating and pricing

Staff will wear a work shirt with the business logo to identify them and present
a uniformed team approach. Eventually, we will provide vehicles will the
business name printed on the side.
As the proprietors, we will attend the 'Planning and Starting a Business'
course at the Box Hill College of TAFE. We also intend to join the Master

Builders Association and attend a number of relevant industry courses, trade


shows and subscribe to relevant business magazines.

Financial Forecasts
Definition
Financial forecasting means making a set of financial projections that will
provide the figures to support the written information in your business plan.
This section will also include your break even analysis.
You need to provide fairly detailed forecasts for at least the first 12 months of
your operations. Give careful thought to the initial capital requirements.
Undercapitalization can have serious repercussions- if you underestimate the
establishment and initial operating costs; there is a far greater chance of
failure.

Case Example
*GST has been included where relevant.

Pre-business costs
Travel
Accommodation
Entertainment
Phone, fax, letters, copying
Legal fees
Accounting Fees
Consultants
Business planning
Market Research
Publications
Translations
Samples
Valuation fees
Total:

Initial costs
Wages
Opening stock

Credit card establishment fee


Initial promotion
Leasing costs:
Legal costs
Stamp duty
Rent in advance
Bond
Promotional premium
Loans establishment costs
Electricity, gas and phone costs:
Connections
Security deposits
Stationary and office supplies
Computer software:
Installation
Training
Statutory charges:
Licences
Permits
Registrations
Subscriptions to publications
Association membership fees
Insurance premiums:
Property damage
Public risk
Vehicle damage
Theft
Personal disability
Professional indemnity
Painting and artwork
Total initial costs:

Capital costs
Purchase price of business
Franchise fee
Training
Office equipment
Desks
Chairs

Safe
Computers, printers
Fax, phone system
Vehicles
Plant and machinery:
Purchase price/deposit
Delivery
Repairs
Installation/commissioning
Shop fittings:
Counters
Racks, shelving
Storage
Decorations
Security System
Business Structure:
Registration
Professional fees
Trademark/design/patents:
Registrations
Patent solicitor fees
Reference materials:
Land
Building costs:
Shop front
Partitions
Electrical wiring and fittings
Floor coverings
Toilets, plumbing and drainage
Painting
Signage
Total capital costs:

Operating Costs
Rent
Outgoings
Wages
Staff amenities
Advertising
Replenish stock
Maintenance and
repairs
Wrappings
Electricity and gas
Postage
Waste disposal
WorkCover
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Group tax
Sales tax
Payroll tax
Hire purchase
payments
Bank charges
Capital repayments
Interests
Bank charges
Lease payments
Commissions
Subcontractors
Royalties
Freight
Motor vehicle expenses
Entertainment
Travel and
accommodation
Postage
Subscriptions
Insurance premiums
Accounting fees
Legal fees
Total operating costs
for the first three
months:

Possible direct/renovation costs for the first year


Subcontractors
Materials
Wages
Work Cover
Group tax/payroll tax
Maintenance and repairs
Waste disposal
Commissions
Royalties

$103,300
$84,300
$50,400

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Freight
Subtotal: $12,000
Total:

$250,000

Possible overhead expenses for the first year


Rent
Outgoings
Interests
Motor vehicle expenses
Advertising and promotion
Bank charges
Hire purchase payments
Lease payments
Insurance payments
Accounting fees
PAYG TAX
Legal fees
Staff amenities
Electricity and gas
Postage
Entertainment
Travel and accommodation
Subscriptions

$14,400
$1600
$2250
$9600
$12,000

Subtotal: $10,800
Total:

$50,650

Add up the first year overhead expenses = $50,650


Add pre-business and initial costs = $12,000
Total overheads for the first business year = $62,650

Initial funding of the business


As the proprietors, we have $20,000 of our own money to invest in the
business, supplemented by a $20,000 long term interest free loan from our
parents. The closing balance in the projected cash flow (Attachment 2) shows
that, in addition to this, some $41,000 will be required over the first year.

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We also had preliminary discussions with our bank manager and, subject to
the provision of a documented business plan and the provision of a mortgage
over our home, we will be provided with an overdraft of $45,000.
An overdraft was agreed to be the most suitable arrangement for our first year
as financial requirements will vary substantially from month to month and
there will be no profits with which to repay capital. After the first year, trading
levels will be more predictable and finance arrangements will be reviewed.

Break even analysis


The average mark up on direct/renovation costs is 25%. For example, a
$10,000 job will have a direct cost of $8000. Therefore the gross profit will be
$2000 (20% of the value of the job).
The projected overheads for the first year will be $62,650. To break even, the
business will have to achieve sales of which 80% pays for the
direct/renovation costs and 20% pays for the overheads of $62,650.
If sales x 20% = $62,650 then the sales required to reach break-even would
be $62,650, multiplied by five ($313, 250).
Therefore, the break even point of sales in the first year will be $313,250. This
will not be achieved in the first year. However, in the second year the profit
margin of 18% of the projected sales of $450,000 ($81,000 gross profit) will
cover the overheads of about $73,150 and produce a net profit of $8350.

Costing
Definition
Show how you have established the price of your products and services.

Case Example
Canterbury Renovations will be involved in the following activities:

purchase and supply of equipment

purchase and conversion of raw or partially finished materials

provision of manufacturing and onsite labour

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provision of subcontract work

The following assumptions are made when preparing quotations:


Direct costs
Overhead expenses
Business profit
Total

$368,500
$73,150
$8350
$81,500
+81,500
$450,000

Annual turnover in the second year

Therefore, to cover profit overheads, the average mark up on all direct costs,
equipment, materials, labour and subcontractors' costs will be 25%.
Accordingly, quotations will be prepared on the following basis for a typical job
of, for example, $10,000:
Item

Direct Cost $

Mark up %

Mark up $

Equipment

2,500

15

375

Material

1500

35

525

Labour

2300

30

690

Subcontractors

1700

25

425

Total

$8000

(avg.) 25%

(approx.) $2000

Hourly labour rates will be calculated as follows:


Costs
Hourly rate (according to award or

$
$18.00

workplace agreement)
Add on costs (e.g. WorkCover 5%)
Medical costs
Superannuation 6%
Payroll tax
Sick pay allowance
Annual leave allowance ($18x52/48)-

$0.90
$1.00
$1.08
(N/A)
$2.00
$1.50

$18
Tools allowance
Total
Allowance for non-productive time,

$1.00
$25.48
$2.55

eg. industrial action, maintenance,


travelling, tool maintenance, training,
injuries etc, eg. 10%

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Total

$28.03

Therefore, the hourly rate for estimating work will be charged at $28.00 + 25%
mark up = $36.50 per hour.

Records
Definition
Provide details of the management information systems that will keep your
business running. Outline the types of records you will keep whilst operating
the business.

Case Example
Canterbury Renovations will maintain sufficient business records to
demonstrate the financial position of the business on a monthly basis.
Financial records will compare profitability with projected profit/loss and cash
flow statements. Records will also be kept for each job to show its progress
and cost in labour, materials and subcontractors. These will be regularly
compared with estimates for that job.
The following specific records will be kept:

cash book

receipt book

invoices, received and sent

bank deposits and statements

petty cash expenditure

wage, Work Cover, superannuation and long service leave records

employee details

capital assets register

materials purchased and allocated to each job or temporarily as


floating stock

contact details of all enquirers, existing clients, suppliers and


subcontractors

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individual job records showing progress

job estimates

Supporting documents
Definition
Including certain documents will support the statements you have made
throughout your plan. You should include figures for projected cash flows and
profit and loss, as well as a statement of financial position.
If applicable, you should also attach copies of your references, qualifications,
licences, permits, partnership agreement, research data, current promotional
literature and locality map.

Case Example
The following documents have been prepared as a support to the business
plan for Canterbury Renovations.
Projected profit/loss for the first year
Projected cash flow for the first year
Projected profit/loss for the second year
Projected cash flow for the second year
Statement of financial position

Appropriate appendices
F:\About_com http--www_virtualrestaurant_com-sample.htm
http://www.smallbiz.nsw.gov.au/smallbusiness/Starting+in+Business/Business
+Planning
http://en.wikipedia.org/wiki/Business_plan

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http://www.businessplans.org/mission.html
http://www.cairns.qld.gov.au/cairns/council/operational_plan.html
http://www.business.gov.au/Business+Entry+Point/Business+Topics/Market+r
esearch+statistics/How+do+I+write+a+marketing+plan.htm

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