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Business Plan for Bakery - Specialty

1.0 Executive Summary


Sulabee Bakery is a new organic bakery specializing in gluten, wheat and dairy free products. Within the last three years there has been significant increases in demand for these bakery products. This can be explained to a large degree by the fact that up until recently Americans have had food allergies that have been undiagnosed. It has been only in the last few years that medical doctors have begun to diagnosis food allergies correctly. What was once an unknown problem that affected so many people with no recourse has become a manageable ailment that is easily dealt with through modification of diets. This is very positive for both those people that are affected as well as bakeries such as Sulabee that specialize in these products. The Products Sulabee offers a wide range of exciting products. The first group is spelt breads, muffins, and pastries. Spelt is used as there are far fewer people that are allergic to this grain. Yeast allergies are also common and Sulabee offers a menu of yeast free breads. Dairy free muffins and pastries are offered for vegans. Lastly, egg free breads, muffins, and pastries are offered. Customers Sulabee will focus on three distinct customer segments. The first group is the Allergy group. This segment is growing at 15% a year with 32,000 potential customers. The second niche is the Doctor group. This segment is also growing at 15% with 14,200 potential people. The last group is the Dieters group. This segment is typically making modifications to their diet based on their desire to lose weight. This niche also is growing at 15% with 48,000 possible customers. Management Team Recognizing the importance of human capital, Sulabee has assembled a strong management team. The team is led by Dunni Sharp. Dunni comes to Sulabee with 10 years of baking experience. In addition to her industry specific experience, Dunni has had 2 years of management experience. Kola Atere brings financial skills to Sulabee after a 15 year ACA career. Taiwo Akin will lead the marketing efforts having participated in her own PR firm. Lastly, Lucy Hamilton will be on the team as an assistant baker with over five years of experience.

Sulabee is an exciting opportunity that combines, fresh baked goods with spelt, yeast free, dairy free, and egg free products, addressing the recent need for these new products. Demand for these products is expected to grow exponentially as medical doctors become more and more aware of food allergies Americans are afflicted with. Profitability is forecasted to occur by month three. Profits of N806 and N47,000 will be generated in years one and three respectively. Through a combination of a strong management team, a solid business model, and exciting, market demanded products will allow Sulabee to quickly gain market penetration and cash richness.

Highlights

1.1 Objectives

1. To establish a working storefront for Sulabee bakery. 2. To develop the strong presence in the community needed to support sales goals.
3. To develop a full menu by the end of the second quarter.

1.2 Mission
Sulabee Bakery aims to be a cornerstone in the community creating a neighborhood atmosphere where customers feel comfortable and become instant regulars. We are sensitive to the often over-looked population of allergy sufferers and cater to their needs for healthy, delicious baked goods. We seek fair and responsible profit, enough to keep the company financially healthy for the long term and to fairly compensate owners and investors for their money and risk.

2.0 Company Summary

Sulabee Bakery will be located in downtown [Name omitted] in a historical building. This downtown district is a very popular destination because of the historical architecture for weekenders and tourists. It is also a prime location for all the employees of the surrounding downtown businesses. The bakery sells nonwheat and other health specific breads, sweets and pastries to the surrounding community every Tuesday through Sunday.

2.1 Company Ownership


Currently Sulabee Bakery is a sole proprietorship owned by Dunni Sharp. Eventually, as the company becomes established, Sulabee Bakery will apply to be incorporated.

2.2 Start-up Summary


The primary expense to establish the Sulabee Bakery is the mortgage loan estimated at N175,000 to purchase the vacant space on [Name omitted] street. The building was previously used as a bakery and we plan to buy the used equipment along with the space. This cost is also calculated into the loan estimate. Dunni Sharp intends to invest N7,500 of her savings to cover the other cost of start-up. These costs include: Advertising brochures. Bakery ingredients. Insurance. Bakery accessories, i.e. paper bags, cartons, etc.

Start-up

Start-up Requirements Start-up Expenses Legal Stationery etc. Brochures Consultants Insurance Mortgage Research and development Bakery Ingredients Other Total Start-up Expenses Start-up Assets Needed Cash Balance on Starting Date Other Current Assets Total Current Assets Long-term Assets Total Assets Total Requirements Funding Investment Untitled Dunni Sharp N0 N7,500 N12,092 N0 N12,092 N175,000 N187,092 N192,500 N0 N0 N2,500 N0 N150 N1,258 N0 N500 N1,000 N5,408

Other Total Investment Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Current Liabilities Long-term Liabilities Total Liabilities Loss at Start-up Total Capital Total Capital and Liabilities
3.0 Products
Sulabee Bakery provides non-gluten baked goods and pastries to diet-conscious and wheat-allergic

N0 N7,500

N0 N0 N12,000 N12,000 N173,000 N185,000 (N5,408) N2,092 N187,092

consumers. Special considerations are made for all common food allergies such as dairy, yeast, wheat, and eggs. Example of goods: Spelt breads, muffins and pastries Spelt flour is the most common wheat-alternative flour as it has the same characteristics as wheat which provides similar taste, consistency and behaviors creating goods that are just as good as any wheat baked good. Yeast-free breads Many people have an allergy to yeast, or have been warned by their doctors not to eat it. We provide a line of yeast-free breads.

Dairy-free muffins and pastries Most breads do not require any dairy products, so they are not a consideration. Muffins and pastries most often require butter. To avoid this, we use a soy substitute. Egg-free breads, muffins and pastries Eggs are most common in muffins and pastries. Applesauce can be used as a substitute as it provides the same amount of moisture that is required.

4.0 Market Analysis Summary


Our target market includes people who are health conscious and/or have common food allergies. This is a niche market since most bakeries do not cater to these needs with the exception of high-fiber diets.

4.1 Market Segmentation


Our target market consists of three groups: The Allergy Group According to Health Magazine, one out of five people suffer from a common food allergy, however many bakeries do not cater to their needs. The Doctor Diet Group For health reasons, many people are warned off certain foods by their doctors because of high cholesterol and blood pressure. Currently the main killer in the U.S. is heart disease according the American Heart Association. Many Americans aged 50+ are going on special diets to prevent heart disease. The Diet Craze Group According to Self Magazine, the year 2000 saw 20 new diet fads that discouraged certain foods such as wheat and dairy. The best selling book on the New York Time list for health was the "Blood Type Diet" which encourages readers to eat only non-gluten flours such as spelt, and to avoid dairy. While this target market is quite large, it is ever fluctuating since most people who diet yo-yo between different diets (Self Magazine September 2000).

Market Analysis (Pie)

Market Analysis Potential Customers The Allergy Group The Doctor Group The Dieters Group Total Growth 2002 2003 2004 2005 2006 CAGR

15%

32,000

36,800

42,320

48,668

55,968

15.00%

15%

19,200

22,080

25,392

29,201

33,581

15.00%

15% 15.00%

48,000 99,200

55,200 114,080

63,480 131,192

73,002 150,871

83,952 173,501

15.00% 15.00%

4.2 Target Market Segment Strategy


In our target market, we will mainly focus on the "allergy group" since they are the most prevalent and steady of customers. We expect that the "doctor diet group" and the '"diet craze" group will make up a smaller portion of our customers. We have not listed "regular customers" as a target group since the customers who do not fit into any of our groups are too varied to segment. We are specifically filling the needs of the "allergy group" so we expect the most business from this group.

4.3 Industry Analysis

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Sulabee bakery competes in the Food Services Industry. In addition to competing with other organic and non-wheat bakeries, it competes with all restaurants, delis, bakeries and supermarkets for a share of its customers's food dollar. Sulabee is most concerned with competitors who differentiate their products and services with a healthy, organic focus. Because this group is so large, Sulabee has chosen to limit its analysis to other gluten-free bakeries.

4.3.1 Competition and Buying Patterns


Currently there are two bakeries in town that provide non-wheat goods. Great Harvest Bread Company Strengths: Makes spelt bread, muffins and cookies every Monday, Wednesday and Friday. Wellestablished bakery in town. Sells breads in local grocery stores. Weaknesses: Does not provide a wide selection of non-wheat goods. Furthermore the texture and flavor of their spelt goods is very dense and flavorless. They use whole spelt bread which makes a denser, crumby consistency bread. We use white spelt in our spelt breads and other goods which has a texture and flavor similar to wheat. The Sweet Life Patisserie Strengths: Makes spelt bread, muffins and brownies every day. Will make custom-ordered non-gluten cakes. Weaknesses: Does not produce a wide selection or large quantity of non-wheat goods. Their main focus is wheat goods.

5.0 Strategy and Implementation Summary


Our strategy focuses on serving a niche market with quality goods. We are determined to become a part of the community - an establishment that becomes as much of the community as a church or local grocery store. To achieve these goals, we will provide the following: Friendly, neighborhood-feel atmosphere. Quality baked goods for everyone to enjoy at a fair price. Special diet menus in relation to the advice of local healthcare providers.

5.1 Competitive Edge

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Our competitive edge is our quality of goods. We use only organic flours of the highest quality that create incredible non-gluten goods that can't be matched anywhere else in town. We also focus mainly on nongluten goods. The other bakeries in town focus on wheat goods and sometimes, as an afterthought, use alternative flours.

5.2 Sales Strategy

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Our strategy focuses on building a customer base by providing good customer experience. With the addition of the coffee bar and lunch menu in early spring, we hope to have customers make the bakery their one-stop destination for breakfast or lunch. In the summer, when we open the outdoor patio, more and more customers will make the bakery a destination for their lunches more often since the atmosphere will be so pleasing. We would also like to work closely with local doctors and elder care homes to bring in customers with health problems. We are already in negotiations with Dr. Goodman's office to insure referrals to the bakery for his patients.

5.2.1 Sales Forecast


Our sales forecast assumes the following changes:

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Bread sales in the summer months will be slightly higher since more people will be having BBQs and picnics requiring items such as hamburger and hotdog buns. Bread and pastry sales will be higher in November and December because of the food-oriented holidays. Coffee sales will be higher in winter months, and for summer months sales of sodas and iced beverages will increase.

Sales Monthly

Click to Enlarge Sales Forecast Sales Breads Coffee/Beverages Lunch Items (Soups & Sandwiches) Pastries/Sweets Total Sales Direct Cost of Sales Breads Coffee/Beverages Lunch Items (Soups & Sandwiches) Pastries/Sweets Subtotal Direct Cost of Sales
5.3 Milestones

2002 N75,900 N36,400 N80,000 N59,400 N251,700 2002 N22,770 N10,920 N32,000 N23,760 N89,450

2003 N96,000 N48,000 N96,000 N84,000 N324,000 2003 N28,800 N14,400 N38,400 N33,600 N115,200

2004 N120,000 N60,000 N120,000 N100,000 N400,000 2004 N36,000 N18,000 N48,000 N40,000 N142,000 [back to top]

The table below displays the milestones that Sulabee Bakery would like to accomplish in the first three years. Emphasis in the first year will be on advertising to make the Sulabee Bakery an established business in town.

Milestones Milestone First Advertising Campaign Full-Service Coffee Bar Integration Establishing a Lunch Menu Outdoor Cafe Seating Totals
6.0 Management Summary

Start Date 12/1/2001

End Date 3/1/2002

Budget N5,000

Manager Taiwo Akin

Department Marketing

2/1/2002

02/29/02

N5,000 Dunni Sharp

Bakery

3/1/2002 5/1/2002

3/30/2002 9/30/2002

N1,000 Dunni Sharp N10,000 Dunni Sharp N21,000

Bakery Bakery

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Dunni Sharp is the founder of Sulabee Bakery. She brings to the bakery her experience as a baker and as an entrepreneur. She has worked as a baker for over 10 years including two years as an apprentice in a well-known Paris patisserie. As a teenager she helped her parents at the family's general store, both in sales and marketing. For her last two years at her family's store, she was the general employee manager. Her duties at the bakery will include employee hiring and training, head baker and store management. Kola Atere has run his own successful ACA consulting firm for 15 years. His duties will include the bookkeeping, inventory management and stock fulfillment. Taiwo Akin runs her own PR company and will be assisting the Sulabee Bakery in its marketing campaigns on a part-time basis. Lucy Hamilton has worked as a baker for over five years and will be the assistant baker. Her responsibilities will also include the management of the bakery shopping list.

6.1 Personnel Plan

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Once the bakery becomes established and the cash flow is steady, we would like to hire one person for counter help and another assistant baker. The table below illustrates the needs of the current employees, plus the integration of two more employees within three months of operation. The new hirings will coincide with the opening of a lunch menu and coffee bar which will most certainly require more help.

Personnel Plan 2002 Dunni Sharp - Head Baker Lucy Hamilton Taiwo Akin - Parttime Counter Help - Full Time Assistant Baker Part time Donovan Hamilton Bookkeeper Total People Total Payroll N24,000 N21,000 N9,000 N18,000 N9,000 N24,000 6 N105,000 2003 N26,400 N23,100 N9,900 N19,800 N9,900 N26,400 6 N115,500 2004 N29,040 N25,410 N10,890 N21,780 N10,890 N29,040 6 N127,050

7.0 Financial Plan


The following sections will outline important financial assumptions.

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7.1 Important Assumptions

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The current economic climate in the U.S. appears to be on the brink of recession. However, we do not believe that if the country does enter a recession that our business will be unduly affected. Since our products are ones that help contribute to and maintain good health, we believe that people will continue to buy our products over traditional wheat bread. We are operating in a niche market, and in addition, the

price of our breads and sweets although slightly higher than traditional bakeries they are not positioned as expensive, luxury items.

General Assumptions 2002 Plan Month Current Interest Rate Long-term Interest Rate Tax Rate Other
7.2 Break-even Analysis

2003 2 9.00% 8.50% 25.00% 0

2004 3 9.00% 8.50% 25.42% 0 [back to top]

1 9.00% 8.50% 25.42% 0

Our Break-Even Analysis assumes that our average per-unit revenue is N3.00. Our lowest price for any good would be N0.75 (cookies) and our highest would be N5.50 (sandwiches), so N3.00 is a fair estimate of the average per-unit revenue. The running costs of production are fairly low since we manufacture all of our goods at a low cost to us. Here are the items included in the average per-unit variable cost: Manufacturing ingredients, i.e. flour, sugar, yeast and butter. Payroll. Mortgage. Utilities. Advertising.

The Break-Even Analysis as it appears below indicates that the break-even point will be attainable each month.

Break-even Analysis

Click to Enlarge Break-even Analysis: Monthly Units Break-even Monthly Revenue Break-even Assumptions: Average Per-Unit Revenue Average Per-Unit Variable Cost Estimated Monthly Fixed Cost
7.3 Projected Profit and Loss
The following table shows the projected profit and loss for Sulabee Bakery.

4,720 N16,519

N3.50 N0.90 N12,271 [back to top]

Pro Forma Profit and Loss 2002 Sales Direct Costs of Goods Other Cost of Goods Sold Gross Margin Gross Margin % N251,700 N89,450 N0 -----------N89,450 N162,250 64.46% 2003 N324,000 N115,200 N0 -----------N115,200 N208,800 64.44% 2004 N400,000 N142,000 N0 -----------N142,000 N258,000 64.50%

Expenses: Payroll Sales and Marketing and Other Expenses Depreciation Utilities Insurance Mortgage Payroll Taxes Other Total Operating Expenses Profit Before Interest and Taxes Interest Expense Taxes Incurred Net Profit Net Profit/Sales
7.4 Projected Cash Flow
grow through reinvestment.

N105,000 N13,040 N3,492 N519 N1,800 N10,800 N12,600 N0 -----------N147,251 N14,999 N13,924 (N278) N1,352 0.54%

N115,500 N14,640 N3,492 N600 N2,400 N15,096 N13,860 N0 -----------N165,588 N43,212 N13,249 N7,491 N22,472 6.94%

N127,050 N16,640 N3,492 N800 N2,800 N15,096 N15,246 N0 -----------N181,124 N76,876 N13,219 N16,180 N47,478 11.87% [back to top]

The following chart illustrates a healthy cash balance for the first three years, enabling the company to

Cash

Click to Enlarge Pro Forma Cash Flow 2002 Cash Received Cash from Operations: Cash Sales Cash from Receivables Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received New Current Borrowing New Other Liabilities (interest-free) N0 N0 N0 N0 N0 N0 N0 N0 N0 N251,700 N0 N251,700 N324,000 N0 N324,000 N400,000 N0 N400,000 2003 2004

New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received Expenditures Expenditures from Operations: Cash Spending Payment of Accounts Payable Subtotal Spent on Operations Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets

N0 N0 N0 N0 N251,700

N0 N0 N0 N0 N324,000

N0 N0 N0 N0 N400,000

2002

2003

2004

N12,980 N222,050 N235,030

N17,868 N275,716 N293,583

N22,147 N322,985 N345,132

N0 N12,000 N0 N4,248 N0

N0 N0 N0 N354 N0

N0 N0 N0 N354 N0

Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance
7.5 Projected Balance Sheet
upcoming fiscal years.

N0 N0 N251,278 N422 N12,514

N10,000 N6,000 N309,937 N14,063 N26,576

N15,000 N8,000 N368,486 N31,514 N58,091 [back to top]

The following table represents the financial position of the Sulabee Bakery at the end of each of the three

Pro Forma Balance Sheet Assets Current Assets Cash Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities 2002 N11,825 (N12,000) N12,000 2003 N16,278 (N12,000) N12,000 2004 N20,176 (N12,000) N12,000 N175,000 N3,492 N171,508 N184,022 N185,000 N6,984 N178,016 N204,592 N200,000 N10,476 N189,524 N247,615 2002 N12,514 N0 N12,514 2003 N26,576 N0 N26,576 2004 N58,091 N0 N58,091

Subtotal Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth

N11,825

N16,278

N20,176

N168,752 N180,577 N7,500 (N5,408) N1,352 N3,444 N184,022 N3,444

N168,398 N184,676 N7,500 (N10,056) N22,472 N19,917 N204,592 N19,917

N168,044 N188,220 N7,500 N4,417 N47,478 N59,394 N247,615 N59,394