Children's Educational Toys Business Plan

Executive Summary
ToyLearn is an exciting start-up company that has developed a line of educational
tools for children that are fun and engaging. The company has been founded by the
via via group and is registered from local Government authorities. ToyLearn will
be profitable by the end of year one and will have a steep increase in sales for the
first several years.

ToyLearn is initially offering three different educational toys. The first is

NumberToy, a fun toy that teaches children number skills. The second product is
LetterToy which as the name hints, helps children quickly conquer the alphabet.
The third product is PhonicToy, a device that resembles a mini PC and teaches
phonic and math skills. While all the products are educational tools that develop
core skills within the youngster users, they are fun to play with, thereby
encouraging tots to use them often. New products are currently in development by
the in-house department.

ToyLearn has identified three keys to success that are instrumental in the
sustainability of the business. Number one is the need to develop creative,
educational, engaging toys. The second key is to adopt strict financial controls. The
last last key to success is the need to listen to customer, effectively creating a
feedback mechanism for product improvement.

ToyLearn has identified two customer segments that it will go after. The first
group is individual customers. These are parents or grandparents who are
purchasing the product for their child.
1.1 Objectives

 Create a profitable company.

 Develop innovative, educational toys.

 Improve the learning curve for children through the use of interactive toys.

1.2 Mission

It is ToyLearn's mission to make the highest quality educational toys available. The more
children that learn basic functions from our toys, the more successful we are.

1.3 Keys to Success

 Develop creative, educational, engaging toys.

 Adopt strict financial and budgetary controls.

 Listen carefully to the customers’ needs.

Company Summary
ToyLearn is a start-up company that has developed three types of educational toys. The
products are called toys because they are fun and engaging to use. They are educational
because they teach constructive skills to the users. ToyLearn will initially distribute the
products within the Bangladesh, with future global distribution being considered.

2.1 Company Ownership

ToyLearn is a privately formed by Via Via group.

2.2 Start-up Summary

The following items will be needed for the start-up of the business:

 Office supplies and equipment for three employees including desks, computers,
cubicle dividers.

 Assorted equipment for prototyping such as electric circuit boards, molded plastics,
speakers, and L.E.D. lights.

 Fax machine, telephones, and printers.

Start up Expenses:

Legal $10000

Logo $5000

Rent $10000

Payroll $15000

Insurance $2000

Computer $100000

R&D $80000

Others $20000

Total Start up $2,42,000

Expenses
Start up Assets
Cash Required $40,00,000

Start up Inventory $225,000

Others current Assets $50,000
Long-term assets $500,000
Total Long term Assets $4,850,000
Total Required $50,00,000

Liabilities and owners capital

Accounts payable $1,50,000

Notes Payable $8,00,000

Others Currents $50,000

Long term liability $10,00,000

Total liabilities $1925,000

Capital $30,00,000

Total Capital and $50,00,000

Liability

Market Analysis Summary

The market for educational toys can be divided into two distinct segments:

 Individual consumers: this group is parents or grandparents who are

purchasing the toy for a specific child.
 Wholesale purchasers: this segment is schools, daycare centers, etc.,
commercial businesses that are buying the product for their clients to use.
ToyLearn has decided to sell direct to the consumer instead of using the traditional
layered distribution system that uses wholesalers to sell to retailers. While this
creates more work for ToyLearn in terms of generating sales, it provides better
margins.

Market Segmentation

As mentioned in the previous section ToyLearn has segmented the market into two
distinct customers, individuals and businesses.

 Individuals: this segment is people buying a single product for their child or

someone that they know. The demographics for this segment is a household
income of >$50,000, have high aspirations for their children in terms of
education and development and want to get started as soon as possible.
 Businesses: this group is buying the toys for children who are the business'
clients. These organizations typically are either day care based, or school based
such as nursery school or preschool. The number of children that they care for
generally ranges from seven to 25.

 Industry Analysis

The toy industry is characterized by many different toy manufacturers. Within the
larger toy industry, there is a niche of educational toy manufacturers. This niche is
fairly new (within the last five years) as the convergence of toys and educational
tools becomes more legitimized. For years there was no awareness that a toy could
have educational value, it was assumed that a toy was a mindless way of occupying
a child's time and attention, giving the parent a break. Only recently has there been
studies published that clearly show the ability to design a toy that captivates a
child's attention while teaching them constructive skills.
Competition and Buying Patterns

The small niche educational toy industry is comprised of several small industry, primarily
regional manufacturers. Toy maker imports by paying only 5% custom duty. Bangladesh
spends every year 5000cr taka for import toy. So here is more than 100 producers who
made the local product in Bangladesh.

Strategy and Implementation Summary

ToyLearn will leverage its two competitive edges (educational and engineering
expertise) to produce educational toys that are fun to use and at the same time
successful at building important skills for youngsters. By recognizing and
exploiting its core competencies, ToyLearn will quickly gain market share as well
as develop a reputation for making effective teaching toys.

Marketing Strategy

The marketing strategy will emphasize the fact that ToyLearn's products are truly
educational devices that are fun. This is an important message because parents will
want their children to play with this type of toy. The element of "toy" in the
product is used to keep the children engaged in the product, something often
difficult to do with most educational devices.

The marketing strategy will recognize and account for the fact that there are two
distinct customer groups that must be attracted. To capture the awareness of both
groups, ToyLearn recognizes that the groups are very different regardless that they
are buying the same product.ToyLearn will use advertisements and direct mailings.
The advertisements will be placed in magazines or journals chosen specifically
recognizing who the target audience is. Magazines will be used for the individuals
market and a combination of magazines and journals will be used for the
businesses segment.
Sales Forecast

The first year is forecasted to have a fairly slow sales forecast because of the fact
that ToyLearn is a start-up organization. Growth for year two and year three should
be fairly steep. After year four and five it is forecasted that growth will continue,
but at a more sustainable rate than during the second and third year.

Production Budget per Unit

Number Toy Letter Toy Phonic Toy

Budgetary unit 5000 5,000 5000
$ $ $
Material 10 10 10
Labor 60 60 60
Variable overhead 5 5 5
Marginal cost 75 75 75
Fixed cost 10 10 10
Total production cost 85 85 85
Mark-up 50% 42.5 42.5 42.5
Total unit cost 128 128 128

The Sales Budget

Budgeted Sales in Unit 384 taka selling price

Sales for the next five years

year 1 2 3 4 5
Budgeted 15000 17000 20000 22000 25000
sales in
unit
Selling 128*3=384 128*3=384 128*3=384 128*3=384 128*3=384
Price
Sales 57,60,000 65,28,000 86,70,000 84,48,000 96,00,000
Revenue
Estimated cost for 1 to 5 years

Variable 31,05,000 35,70,000 42,00,000 46,20,000 52,50,000

cost

Fixed cost 695,600 695,600 695,600 695,600 695,600

Variable 4,70,600 3,77,800 4,22,800 3,52,800 4,97,800

overhead

Total 3,825,000 4,335,000 5,100,000 5,610,000 6,375,000

production
cost

Net Profit 16,89,400 19,27,400 32,64,400 26,32,400 30,52,400

Analysis of Net Present Value from 0 Year to 5 Year

Year Annual cash Discount Net Present Cumulative

flow Factor 10% Value NPV
$ $ $ $
0 -50,00,000 1.000 -50,00,000 -50,00,000
1 1689,400 0.909 15,35,665 -34,64,335
2 19,27,400 0.826 15,92,032 -18,72,303
3 32,64,400 0.751 24,51,565 579,262
4 26,32,400 0.683 17,97,930 2377192
5 30,52,400 0.621 18,95,540 42,72,732
Total 42,72,732
 So, NPV of the project is positive and suggesting that the investment is worthwhile
using at 10% discount rate.

Breakeven Analysis

Breakeven –point = Fixed cost ∕ Selling Price - Variable cost.

Year Fixed cost ∕ Point or

Selling price –variable cost =contribution unit
1 to 5 695,600 384-225=159 4375

Pro forma profit and loss

Year 1 Year 2 Year 3 Year 4 Year 5

Sales Revenue 57,60,000 65,28,000 86,70,000 84,48,000 96,00,000

Direct cost of (3,105,000) (3,570,000) (4,200,000) (4,620,000) (5,250,000)
sales
Gross profit 2,655,000 29, 58,000 44, 70,000 38, 28,000 43, 50,000
Expenses
Payroll 350,000 375,000 400,000 440,000 480,000
Sales and 1, 00,000 120000 140000 150000 180000
marketing
Depreciation 100,000 100,000 100,000 100,000 100,000
Rent 100,000 100,000 100,000 100,000 100,000
Utilities 12,000 12,000 12,000 12,000 12,000
Insurance 3,600 3,600 3,600 3,600 3,600
Total 6, 65,600 710,000 7, 55,600 805,600 8, 75,600
Operating
Expenses
Profit before 19, 89,400 22, 47,400 37, 14,400 30, 22,400 34, 74,400
interest and
tax
Interest 1, 00,000 1, 00,000 1, 00,000 1, 00,000 1, 00,000
Expenses
Taxes Incurred 2, 00,000 220,000 350,000 290,000 322,000
Net profit 16,89,400 19,27,400 32,64,400 26,32,400 30,52,400

Projected Balance Sheet

The following table will indicate the Projected Balance Sheet.

Year1 Year 2 Year 3 Year 4 Year 5

Assets

Current Assets

Cash

Accounts Receivable

Others current Assets

Total Current Assets

Long –term Assets

Accumulated
Depreciation

Total Long Term Assets

Total Assets

Liability and Capital

Current liabilities

Accounts Payable
Current Borrowing

Other Current liabilities

SUBTOTAL
CURRENT
LAIBILITIES

Long-term Laibilities

TOTAL LAIBILITIES

Paid in capital

Earnings

TOTAL CAPITAL

TOTAL LAIBILITY
AND CAPITAL