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Business Plan_Terracotta Water Carriers_Complete

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Business Plan_Terracotta Water Carriers_Complete

  1. 1. Terracotta Water Carriers © 2015 1 Business Plan Date: 24/04/15 Contact: Ciaran Gethings, Luke Martin, Rob Kavanagh or Veena Arulmozhi Email: TCWC@gmail.ie Tel: +353 86 123 4567 The Terracotta Water Carrier’s Business Plan is confidential and contains proprietary information including trade secrets. Neither the Plan nor any of the information contained in the Plan may be reproduced or disclosed to any person under any circumstances without expressed written permission.
  2. 2. Terracotta Water Carriers © 2015 2 Contents 1. Executive Summary.........................................................................................................................4 Description of the Business Concept and the Business......................................................................4 Management Team.............................................................................................................................4 The Opportunity and Strategy ............................................................................................................5 The Target Market and Projections ....................................................................................................5 Research and Development................................................................................................................6 Financial Projections...........................................................................................................................6 Funding Requirements........................................................................................................................6 2. Management Team.........................................................................................................................7 3. Industry and the Product................................................................................................................8 The Industry........................................................................................................................................8 The Company and the Concept...........................................................................................................8 The Product.........................................................................................................................................9 Entry and Growth Strategy ...............................................................................................................11 4. Market Research...........................................................................................................................12 Target Market and Trends ................................................................................................................12 Competition and Competitive Advantage ........................................................................................13 Customers and Estimated Market Share..........................................................................................15 5. Marketing and Sales Plan..............................................................................................................16 Overall Marketing Strategy...............................................................................................................16 Sales Strategy....................................................................................................................................18 Advertising and Promotion...............................................................................................................18 6. Research and Development..........................................................................................................20 Development Status and Tasks.........................................................................................................20 Difficulties and Risks .........................................................................................................................20 Product Improvement and New Products ........................................................................................20 Costs..................................................................................................................................................21 Sole Distributorship ..........................................................................................................................22 7. Operating and Staffing Plan..........................................................................................................23 Location and Facilities.......................................................................................................................23 Strategy and Plans.............................................................................................................................23 Regulatory and Legal Issues..............................................................................................................23
  3. 3. Terracotta Water Carriers © 2015 3 Staffing..............................................................................................................................................24 8. Financial Plan ................................................................................................................................25 Pricing strategy: ................................................................................................................................25 Key Assumptions...............................................................................................................................26 Profit and Loss Accounts...................................................................................................................27 Balance Sheets..................................................................................................................................29 Cash Flow..........................................................................................................................................30 Summary...........................................................................................................................................30 9. Critical Risks and Problems ...........................................................................................................33 10. Funding Requirements..............................................................................................................34 11. Appendices................................................................................................................................35 Appendix 1: Company Website.........................................................................................................35 Appendix 2: Prototype......................................................................................................................37 Appendix 3: Company Brochure .......................................................................................................38 References ............................................................................................................................................39
  4. 4. Terracotta Water Carriers © 2015 4 1. Executive Summary The concept of paying for water doesn’t sit well with the Irish psyche. Spoiled by a naturally wet climate, combined with an inherent mistrust in the governing bodies of this country; the recent introduction of water charges is a bitter pill to swallow for the Irish people. While we at Terracotta Water Carriers do not agree with ripping off the Irish public, we do believe in the idea of conserving this valuable and precious resource. With the installation of one of our beautifully designed rainwater harvesters, a terracotta water carrier can provide a practical solution to household cleaning and irrigation needs. Description of the Business Concept and the Business The key to this business is simplicity. This company is in the business of water conservation and by extension, saving our customers money (i.e. water charges). We intend to enter the market with the following three styles of terracotta rainwater harvesters pictured in figure.1.1. Figure 1.1: Three styles offered by Terracotta Water Carriers The function of these devices is to offset mains water usage for a variety of household tasks such as watering the garden, washing the car and providing drinking water for pets. To put this in perspective, a hose uses more water in an hour than an entire Irish family does in one day (Tap Tips.ie, 2015). We estimate that an investment in our 210 litre harvester costing 145€ will be paid back within two summers; based on the assumtion that it offsets hose-use by 30 hours and current estimates of water charges fixed at €3.70 per 1000 litres. Management Team The four founding members met whilst studying their respective master’s courses at UCD. What started out as a class project for an entrepreneurship module; turned into the inception of a real business idea. Building upon their shared passion for sustainability and the environment, Ciaran, Luke, Rob and Veena decided to take their idea to market. This lead to a scenario where all four stakeholders each invested a 25% stake in the business hence it was in all their interests ensure maximum profitability of the product. Pre-market responsibilities such as market research, financial forecasts, commercialisation routes and
  5. 5. Terracotta Water Carriers © 2015 5 product design were delegated according to each stakeholder’s previous experience. The responsibility of selling and distributing the product is to be shared equally. The Opportunity and Strategy With the heavily disputed introduction of water charges in Ireland it is inevitable that people will be looking for ways to conserve their water usage. In the second half of 2014, sales of water butts at Woodies have more than doubled while google searches for such products have quadrupled in the same period (The Journal, 2014). With the incorporation of Terracotta Water Carriers, it is our intention to enter this relatively new market with our beautiful selection of rainwater harvesters. The idea of rainwater harvesting is not a new one; however the existing models on the market are rather crude in design and predominantly moulded from composite plastic. Our product is designed to be practical but also to be aesthetically pleasing, composed of terracotta clay, giving it that must-have garden feature appeal for the summer of 2015. The quest of getting this product to market will start off with hard work and simplicity. Our distributor is willing to provide us with three different designs available in four size variants. The minimum order is 1000 units at 3.50€ - 4.00€ each. Between three of our board members there is sufficient storage space to handle this amount of stock. Throughout spring, summer and early autumn, there are an abundance of garden orientated events and farmers markets which are most likely to be attended by our desired customer base. We intend to roll out a B2C and a direct marketing strategy by attending these events and demonstrating our products. There will also be brochures provided with images showing our product in designer gardens. These brochures will also act as coupons with a code and a link to our website where customers who attended the event can avail of a 20% discount. A Terracotta Water Carriers website has been created which will provide customers with information on our business, shareholders and most importantly, our company ethos. There will be also a section where customers can place orders for our products. Provided we reach our sales targets 2015, we will seek sole distributorship for the terracotta-designed rainwater harvesters and expand our marketing resources throughout the entire country. The prospect of investing in additional design features such as an attachable power-hose will also be considered at that point. The Target Market and Projections Due to the company’s limited resources upon start-up the main focus will be on the Dublin region. There are approximately 470,000 households within the greater Dublin area (Central Statistics Office, 2011). The company needs only to engage with 0.7% of this market to meet
  6. 6. Terracotta Water Carriers © 2015 6 its financial predictions by the end of year three. In order to avoid meeting competitors head on, the company will target a niche market of middle to high income home owners initially and expand in due course. Research and Development At present no research and development is required to penetrate the market. Upon establishing a steady cash flow after year three, the company intends to improve our products and expand the business to include additional features such as rainwater attic tanks, power hoses and a filtration system. Financial Projections The projected cash flow and profit/loss statement of Terracotta Water Carriers is summarised in tables.1 and 2. The price range varies with the capacity of the harvesters. The business is a lean start-up with high profit margins. 50 Litres 100 Litres 210 Litres 350 Litres Sales Pricing €49 €99 €119 €149 Cost of Sales YEAR 1 €23.00 €26.00 €28.00 €30.00 Cost of Sales YEAR 2 €23.20 €26.40 €28.50 €30.60 Cost of Sales YEAR 3 €23.50 €26.90 €29.00 €31.20 Volume YEAR 1 145 86 79 51 Volume YEAR 2 271 190 145 92 Volume YEAR 3 281 187 162 107 Sales Cost of Sales Gross Profit Profit margin Year 1 €32,619 9,313 €23,306 71% Year 2 €63,052 18,251 €44,801 71% Year 3 €67,503 19,670 €47,833 71% Funding Requirements To facilitate start-up the four co-owners have contributed €250 each and have availed of a €4000 bank loan from Allied Irish Bank at an interest rate of 12.99%. The €800 deposit for Bloom is required by May 16th and we intend to start trading from the beginning of this month. The cost of inventory will be €3750 including shipping which will be payable by the middle of April. The revenue generated by year 1 sales will be reinvested to cover the equivalent costs in year 2.
  7. 7. Terracotta Water Carriers © 2015 7 2. Management Team Ciaran Gethings: Ciaran has a degree in Natural Sciences, majoring in Botany from Trinity College Dublin and a Masters of Science in Plant Biology from University College Dublin. Ciaran is responsible for product research, operations and staffing; and securing finiancial assitance business start-up. Luke Martin: Luke has a degree in Natural Sciences, majoring in Geography from Trinity College Dublin and a Master’s of Science in Sustainable Energy and Green Technology from University College Dublin. Having gained product-marketing experience during his internship at OMI Industries, an odour-solutions company; Luke’s main role in the company is determining the commercialisation route to get the product to market. Rob Kavanagh: Rob has a degree in Natural Sciences majoring in Botany from Trinity College Dublin and a Master’s of Science in Plant Biology from University College Dublin. Rob intends to capitalise on several years’ experience within the retail sector and apply his expertise to the logistics of shipping, storing and distributing the product. Rob also played a major role in the design and manufacture of the prototype created for demonstration purposes. Veena Arulmozhi: Veena has an undergraduate degree in Engineering from Dr. M.G.R Educational and Research Institute, Chennai, India and a Master’s of Science in Sustainable Energy and Crops from University College Dublin. Drawing on her engineering background, Veena is responsible for the product design, sourcing the materials and calculating the financial forecasts.
  8. 8. Terracotta Water Carriers © 2015 8 3. Industry and the Product The Industry Due to a monetary value being assigned to the resource, the past year has witnessed increased public awareness about conserving water. With the water charges coming in, people are looking out for options to invest in products that can help them save water and money. Looking at the present scenario, the future of the industry seems to be quite bright and very optimistic. The market survey results have confirmed that the scope of rainwater harvesting industry is huge (74% saying they would buy a rainwater harvester). Presently the market is populated by large retailers offering garden water butts with plastic as the material base and small companies specialising in rainwater harvesters. Looking at the finance projections, it can be concluded that retailing garden water butts would yield desirable profits. The finances also point out that the start-up capital is also low. The future of investing in rainwater harvester is bright and the industry which now is the growth stage will mature soon. During the growth stage the demand is higher in comparison to the supply, hence low competition. Since the market is vulnerable at present to such a product, industry maturity is expected soon. The Company and the Concept This company is in the business of water conservation and by extension saving its customers money considering the introduction of water charges will put a monetary value on water. It is our ambition to eventually become the market leader for all our customers water conservation needs. Prior to realising this ambition it is necessary for our company to raise sufficient capital to invest in such an enterprise. In order to penetrate the Irish market the business will revolve around selling terracotta rainwater harvesters as opposed to plastic models. These products have exceptionally high profit margins, allowing the company to generate enough revenue to facilitate the desired expansion into other areas of the market. Although a lot of effort is put in by the market competitors to create water butts which mimic the appearance of terracotta, very few actually use this material. Upon realising that it is financially feasible, this business offers its customers garden water butts in a varied choice of styles, capacity and colour using terracotta as the base material as shown in figure 3.1. A lot of emphasis is laid on aesthetics and sustainability of this product, which gives the business an upper hand against its potential competitors. The four co-owners are expected to have an equal, hands-on approach with the initially business approach based on a business-to-consumer and direct marketing strategy. Upon meeting the projected sales targets, the plan is to expand the business over a wider area, developing new products and improving on the existing products. This will require more staff and resources to come on board.
  9. 9. Terracotta Water Carriers © 2015 9 The Product From a practical standpoint the function of these products is to offset mains water usage for a variety of household activities such as watering the garden, washing the car or to act as a source of drinking water for pets. To put this in perspective, a garden hose uses approximately 600 - 750 litres of water in one hour. This company believes that the aesthetic quality of these devices must also be of a high standard to justify them as garden features. Figure 3.1 shows the three terracotta styles of water carriers offered by the company. The use of terracotta as a base material gives our products a unique selling point over our competitors who prefer to manufacture their materials out of plastic. This material change will be promoted as most environmentally sustainable as it offsets hydrocarbon usage while the aesthetic superiority of terracotta will also be highlighted to our customers. Helena For those with a classical taste, this roman-style water carrier would look beautiful against a white background, amongst some Laurel bushes. Beehive For zoological enthusiasts, this beehive mould could compliment an intricate floral arrangement which attract those buzzing, black and yellow, pollen-collecting insects. Cascata This mould is designed to appeal to the botanists out there with a compartment built into the lid for potting plants. Each of these designs will be available in four sizes; 50, 100, 210 and 350 litres and are priced according to these capacities. The main disadvantage associated with this product is the brittle nature of terracotta. Following installation this product is just as sturdy as its plastic alternatives however this vulnerability is exposed during transit. As we intend to Figure 2: Terracotta Water Carrier styles
  10. 10. Terracotta Water Carriers © 2015 10 establish ourselves as a reputable brand in the market, a one year warranty will be applied to all products sold where customers will be offered a replacement product free of charge. Pending on the timely delivery of the product inventory, the company is ready to enter the market and commence trading and requires no further development of the product at this point. Opportunities for expansion of the business are discussed in subsequent sections.
  11. 11. Terracotta Water Carriers © 2015 11 Entry and Growth Strategy The key to successful a market entry is approaching the target market directly to: 1. Catch their attention with a captivating sales pitch, 2. Demonstrate the products unique selling point and most importantly, 3. Establish the Terracotta Water Carriers brand name. These objectives will be achieved by attending some of Ireland’s premiere gardening festivals such as the National Ploughing Championships, Bloom and the Flavours of Fingal, to name a few. This will afford the company the opportunity to engage their target market and put the aforementioned objectives into action. Pessimistically, the first three years will be considered the growth phase of the business and the four co-owners have agreed not to take a wage during this period and reinvest any revenue generated into the business. By limiting ourselves to the Dublin market initially and enlisting in the use of a courier service to deliver our product, this should allow us to operate the business on a part-time basis hence allowing us to earn a living in the meantime. The emphasis will be to provide stellar customer service so, as the business grows customers will associate the Terracotta brand as reliable and trustworthy. The company has created a chic and stylish website to facilitate online sales. There are also plans to maintain a strong social media presence to reinforce the brand and entice new customers to by the products. Finally, the whole point of this business venture is to become the number one water conservation company in Ireland. Upon raising sufficient capital, the company will stock a variety of additional products associated with water conservation such as: 1. Rainwater collector for attic storage to offset bath and shower mains water usage. 2. Power hose adaption for garden models. 3. Filtration system to upgrade collected rainwater to a standard suitable for human consumption.
  12. 12. Terracotta Water Carriers © 2015 12 4. Market Research Target Market and Trends The concept of rainwater harvesting is not a new idea by any stretch. In many countries with drier climates, the issue of water conservation is much more prevalent than it is in Ireland and rainwater harvesting devices are commonly used as mitigation measures in these situations. It is only since society has become more environmentally conscious that a demand for such devices came about in Ireland. With the introduction of water charges it is anticipated that the demand for water conservation devices will increase rapidly. In the second half of 2014, sales of water butts at Woodies have more than doubled while google searches for such products have quadrupled in the same period (The Journal, 2014). With many companies already established in this market, each with greater resources at their disposal than this company, it is necessary for “Terracotta Rainwater Harvesters” to narrow its focus initially to gain a foothold in a niche market. This way the company is avoiding head-on competition from its financially superior rivals. According to the Central Statistics Office (2011) there are approximately 470,000 households in Dublin. Of these households approximately 28% are apartments and are unlikely to have garden space. Deducting these housing types, that yields a potential target market of 338,400 households. This company intends to enter the high-end market in Co. Dublin initially, targeting middle to high income households, refining the potential number of households even further to approximately 140,000. Looking at things from the supply side, the company plans to buy stock of 1000 units so it only needs to engage with 0.7% of this market to reach its sales targets for year one. By focusing on this high-end market, it facilitates the high pricing of the product resulting in favourable profit margins whilst allowing the company the opportunity to develop a reputation of providing excellent products and services. Upon achieving year one targets, any profit will be reinvested into the company to buy more stock and potentially a company vehicle which would allow for expansion of the business beyond the Dublin region. Although the target region may expand in year one, the target market will remain the same, allowing for a high-priced product. Upon demonstrating its ability to sell stock and run a good business, the company will seek sole distributorship for the product in Ireland. At this stage there should be enough profits to employ an extra delivery person or sales representative.
  13. 13. Terracotta Water Carriers © 2015 13 Competition and Competitive Advantage As previously mentioned there are a number of competing companies in this market. Although massive retailers such as Woodies and B&Q stock a range of rain water harvesters they are not considered competition in this instance as they do not specialize in these products hence are not focusing specifically on the desired target market. Therefore the companies which may offer this company some competition are those which specialize in rainwater harvesting products and distribution. Irish Water Butts <http://www.irish-water-butts.com/> Strengths  Selling products at a low price.  Trading on a national scale. Weaknesses  Dated Website.  No company brand.  Products not aesthetically pleasing. Opportunity  Centre the company on a product of superior aesthetic quality.  Create a modern, user-friendly website to facilitate online sales. Threats  Company is trading on a national scale; would be difficult to compete on this scale upon initial start-up.  By centring the business on a product of superior quality, it would be difficult to compete with this company’s price points. Rain Barrels <http://www.rainbarrels.ie/> Strengths  Offers a wide range of rainwater harvesting products varying in price and quality.  Emphasises importance of aesthetic appeal of the product. Weaknesses  No company brand Opportunity  Build a brand as well as a business. Impress early customers with excellent customer service, a personable sales pitch and prompt delivery of the product. Upon successfully achieving these standards, customers can associate the brand with reliability and value. Threats  Company is targeting a number of different markets by offering a wide variety of products as well as the high end market terracotta water carriers intends to target. If a superior quality of service cannot be delivered, it would be difficult to compete with this company.
  14. 14. Terracotta Water Carriers © 2015 14 Saving Water Ireland <http://www.savingwaterireland.com/> Strengths  An expanded product range to provide water conservation solutions all around the household as opposed to focusing just on rain water harvesting.  Attempts to establish a brand.  Trading nationally. Weaknesses  Website not very engaging.  Emphasis is on cheap and practical solutions, a strength in some markets but a disadvantage in the high end market.  No emphasis on aesthetics. Opportunity  Build a more impressive, eye- catching, personable brand than this company’s one. Threats  Given that this company’s business model is based on bargain basement tactics, it would be difficult to lower the price of terracotta products to the price of these plastic ones. Not a threat initially, but may become one upon company expansion From this SWOT analysis of the water conservation market, the stand-out strength the competition has over “Terracotta Rainwater Carriers” is their ability to trade nationally, extended product ranges and ability to undercut our disruptive pricing strategy should they need to. However there are also some inherent weaknesses associated with most of the competitors;  Lack of an established brand,  Dated/poorly maintained websites along with minimal social media presence,  No emphasis on aesthetics or when there is, the product is severely over-priced. In order to gain a significant competitive advantage, this company intends to pick up on all these weaknesses and make them the core strength of the organisation. The methods applied to achieve this are outlined in the marketing section.
  15. 15. Terracotta Water Carriers © 2015 15 Customers and Estimated Market Share As stated previously, the initial target market is middle to high income householders. This niche market has been targeted for a number of reasons;  Avoid head-on competition with other rainwater harvesting companies, and prevent spreading the company’s resources too thin.  This demographic is less likely to be off-put by our prices as long as the quality is good and are readily accessible at a number of summer festivals and farmers markets.  Intend to play on the “keeping up with the Joneses” aspect associated with this demographic, prompting word of mouth promotion of our products. With an estimate of approximately 140,000 middle to high income households in the greater Dublin region, the company only needs to sell to 0.7% of this market to achieve its year 3 sales targets. Upon establishing the Terracotta Water Carrier brand, a more ambitious share of this market will be targeted. In addition, using the revenues gained from early sales, new resources will be invested in to facilitate the penetration into other markets.
  16. 16. Terracotta Water Carriers © 2015 16 5. Marketing and Sales Plan Overall Marketing Strategy In order to differentiate this company from the range of competitors and achieve the projected sales targets, it is important to begin building a brand as well as a business. As discussed in the market research section, a key weakness in all of the competitor rainwater harvest companies was the lack of one brand within the market which consumers can trust to provide an excellent service. Terracotta Water Carriers intends to fill this void in the market by first targeting a niche market to establish the brand and then following up with some marketing techniques. Market Entry Initially, the main objective is to get the company and the brand established. A high end niche market will be targeted at first because customers within this category are likely to have an interest in gardening hence are more likely to invest in an innovative and aesthetic garden feature such as a terracotta water carrier. In addition, it allows for a high pricing of the product, widening the potential profit margins at the early stages of the business. In order to generate sales in this market, an emphatic launch strategy will be applied. The company will attend a number of garden-orientated events and farmers markets throughout 2015 such as those shown in figure.3. Figure 3: Festivals Terracotta Water Carriers will be attending in 2015 These events will offer the co-owners an excellent opportunity to interact with the target market directly. Bloom (2015) for example, is frequented by approximately 11,000 people per day. Upon successful interaction with a potential client, a brochure (Appendix.3) with a discount up to 20% off the products will be offered to the customer should they wish to buy a harvester from the company website. These coupons are intended to stimulate word-of- mouth interest by two methods; I. The coupon can be activated only after the consumer likes and shares the company’s page on social media outlets such as Facebook, Twitter or Instagram. II. The unique code on the voucher can be used be used twice, prompting people to tell their friends.
  17. 17. Terracotta Water Carriers © 2015 17 This is intended to generate awareness about the company and more specifically, the “Terracotta Water Carriers” brand for when it expands into larger markets. The main focus at this early stage of the company is to provide a high-quality and efficient range of products and services to solidify the company’s reputation. Company Name “Terracotta Water Carriers” is a play on the words from the infamous discovery of the “Terracotta Warriors” in China. This discovery was made in 1974 by a couple of farmers in China who were searching for a water-well. These impressive sculptures are depicted as protectors to an ancient Chinese emperor in his afterlife. The rainwater harvesters in the same vein are products of sustainability and can be viewed as contributors to the protection of the future generation’s environment. The resulting name of the company is intended to roll of the tongue easily and when customers ask the meaning behind the name, the terracotta warrior story can direct the conversation to sustainability. Company Logo The Terracotta Water Carriers logo depicted in figure.4 portrays the concept of water conservation through the water droplet icon depicted to be dropping into the “Terracotta Water Carrier” font beneath. Additionally the entire logo is watermarked to reinforce this concept further. The “Terracotta” typeface is enlarged and centralised to emphasise the material in which all the company’s products are made from. It is also envisaged that by giving this word a prevalent position in the logo, it will prompt customers to the enquire about the origin of the name giving the sales team an opportunity to open their sales pitch and link the product to sustainability as discussed in the previous paragraph. Figure 4: Terracotta Water Carriers company logo
  18. 18. Terracotta Water Carriers © 2015 18 Sales Strategy The company will rely on a combination of direct sales at the aforementioned summer festivals and on retrospective online sales facilitated through the company website (Appendix.1). This approach is ideal during the initial stages as the cost of renting premises is avoided. The rental of spaces at the festivals is more likely to give a return on investment as there are high volumes of people anticipated at these events. Upon placing an order, the product will be sent via courier service to the customer, the cost of which is already included in the price of the customer pays for the product. This cuts out the need of distributors or sales people at the early stages of business however upon achieving successful establishment of the brand, investment in sales reps will be made and avenues into stocking our product in retail outlets will be pursued. Advertising and Promotion Direct B2C Marketing As the key market-entry plan is centred on direct sales at various gardening festivals, the aim is to market the products primarily by interacting with the customer base and demonstrating the product features. It is envisaged that the Terracotta Water Carrier team member’s overwhelming passion and exuberance for the business, coupled with the unique range of products will generate considerable interest in company at these events. Inbound Marketing Inbound marketing is the promotion of a company through blogs, social media and e- newsletters, winning the attention of customers and directing them to the website. By publishing the right content in the right place at the right time, our marketing becomes relevant and helpful to our customers, instead of being a nuisance (Hubspot, 2015). Although this form of marketing is unlikely to generate a significant amount of business initially, it is ideal at the early stages of the business as it costs virtually nothing to carry out and will undoubtedly raise awareness of the brand. More specifically, this technique will involve creating a Facebook page, an Instagram account and various other social media accounts, designed to promote and market the company and its products. For example, the Instagram account could be used to take pictures of the product in various designer garden settings to stimulate interest in the product. These images can then be posted at scheduled peak usage times such as in the morning to capture commuters or at lunch time when people are likely to be looking at their social media profiles. Company Website A fresh and exuberant website has been created to facilitate online sales and give customers an opportunity to find out more about the company and its background. This website,
  19. 19. Terracotta Water Carriers © 2015 19 visible in appendix.1 was created via squarespace.com is far superior to any of the company’s potential competitors operating out of Ireland. Customers have the opportunity to place orders through a pay-pal account using a credit or debit card. Goods will be delivered within a week via courier service.
  20. 20. Terracotta Water Carriers © 2015 20 6. Research and Development Development Status and Tasks The outsourcing of the production of our terracotta water carriers is invaluable towards the cash flow of the business at the start. Sufficient quantities of water carriers can be produced and delivered to us for a relatively small price per individual unit. This strategy allows more of the financial and intellectual resources of the company to be assigned to other areas of the business other than manufacturing. Many opportunities will arise in the future for further development of the company through our existing terracotta water carrier range and new products ideas. With the future development of the company may come increased sales and revenue. This may allow the company to produce the water carriers ourselves, if financially worthwhile, or avail of discounts through economies of scale in production. Our young, vibrant and passionate management team have many insightful ideas to be further developed in line with our sustainable and environmentally conscious company values. Difficulties and Risks There will always be substantial risks associated with starting up a new business. This business plan developed by our company will help to alleviate the uncertainties associated with our business venture. Raising capital for the business’ initial costs will require a loan to be approved and each member of management contributing their own respective finances into the business. Essential to our product purchasing power and marketing strategy is the securing of capital in the form of a €4,000 loan from AIB (2015). The market research conducted by the company and the associated positive feedback with our products shows that the public are willing to spend money on high-quality terracotta water carriers. Legislation dealing with the registration, compliance with taxes and employment laws of start-up companies has been fully adhered to and is elaborated upon within the Regulatory and Legal Issues section of this business plan. The main risks to our business from a competitor standpoint would come from cheaper, plastic alternatives to our terracotta water carriers. However, we aim to market our much superior product towards a particular niche market consisting of avid gardeners and members of the public with higher disposable income. This market, our research has found, would not be discouraged by paying more for their water carrier if it was of a higher quality and being sold to them by a company with company ethos and values such as ours. Product Improvement and New Products From the marketing research conducted by the company, it was revealed that there does exist, a potential market for our product through consumer surveys. The investment in a terracotta water carrier, by our customers, comes with the onus on our company to provide
  21. 21. Terracotta Water Carriers © 2015 21 aesthetically yet functional and durable products. Product improvements, in the future of this company, will certainly place emphasis on the aesthetics of our products. As a business, we want our terracotta water carriers to be focal points of the gardens in which they stand. Thus, acting as a marketing device in themselves, whether being seen as a contemporary sculpture in the garden or a conversational piece with our customer’s house guests or neighbours. The dimensions and shape or structure of the water carriers along with their capacities can be altered to provide additional products for our company to sell in the future. The company could potentially commission one-off unique terracotta water carriers to be aimed at a niche market. Further accessories can also be included with our water carriers. These may consist of ornamental power-hose pipes to help with watering plants, compartments along the side of the water carriers that will directly feed water to grow water-loving plants or the addition of a filtration mechanism to our water carriers to provide clean and drinkable water. Some of these features are shown in figure.5. The filtration mechanism addition would be mostly marketed at the more environmentally aware consumer who may wish to save on further water charges or to one-off houses in the countryside which could be termed “off the grid”. Figure 5: Additional products to be added to the company's inventory upon successful market penetration Further products which may be under research and development in the future could include water mains tanks being fed through a rainwater harvesting mechanism similar to our terracotta water carrier products. However, feasibility studies must be done first on the financial viability to the company of such a venture. Costs Currently, the company has accrued no costs from our research and development activities. This is due to our outsourcing of production of our water carriers. The research and development conducted into the marketplace, competitors and future company ventures has been undertaken by our management. Hence, minimal costs have been associated with these activities. Further along the lifetime of our company, it is expected that negotiations will be conducted with our distributor of water carriers to get a discount on our bulk purchasing of their
  22. 22. Terracotta Water Carriers © 2015 22 products. Hence, this will give more money to invest back into our future production facilities or the development of our new product ideas. The initial costs of setting up a Research & Development department can be quite substantial. Although this establishment may be feasible in the future, it is not part of our short to medium-term planning and finance strategies. This department will need to wait until the company is fully established and financially stable until it warrants further thought and analysis. Sole Distributorship An important milestone for the company will be ensuring that we convince our distributor of our terracotta water carriers to only supply our company in Ireland with their products. This distributor currently produces these water carriers for the cheapest prices and any of our competitors would find it difficult to produce these products themselves as cheaply or to source such inexpensive water carriers. This licensing agreement would help our company to “corner the market” in Ireland on the sale of high-quality terracotta water carriers, if found to be in compliance with EU Competition law. This means that our pricing structure could be altered to maximise our company’s profits. This development would help with the raising of finance capital from banks and help to further establish our brand on the Irish market for the roll-out of further products.
  23. 23. Terracotta Water Carriers © 2015 23 7. Operating and Staffing Plan Location and Facilities Location As a new start-up company, our business believes in placing our financial resources towards supplying superior quality products and customer service. From this regard, Terracotta Water Carriers does not currently have a fixed premises to conduct our business operations. This strategy will save the company money on leasing office space. All business activities will initially be conducted by our staff through the use of the company’s website, e-mail address and landline telephone numbers. Communication and accommodation costs are elaborated on further in the Financial Plan. As the business expands over time, this cost saving strategy will be reviewed in regard to the lease or purchase of office space. Facilities Storage facilities for unsold or damaged stock are required for the business as the water carriers themselves will take up substantial amounts of space. These storage facilities will initially be provided by the use of warehouse storage space personally owned by a staff member. This warehouse facility will be provided free of charge initially. A review of the company’s storage facility requirements will occur after the demand for our product has been truly gauged through initial water carrier sales. Strategy and Plans The operating strategy implemented by the company will involve outsourcing of production of our terracotta water carriers. These water carriers will be produced in line with the design, dimensions and capacities specified by the company. The completed products will be transported via shipping to Ireland. The production and transport costs of these water carriers will be further elaborated upon under our Financial Plan. Unforeseen events which may halt production of our water carriers have also been taken into account and a number of different production facilities have been identified as potential suitors to take on our production requirements if needed. The company will review over time whether future savings can be made through developing our own terracotta water carrier production facilities in Ireland. Currently, the company is content to progress with the strategy of outsourcing production and subsequent importation of these finished products. Regulatory and Legal Issues The company will be run as a private limited company. The shareholders of the business will consist of the management team with each owning a 25% stake in the company. This
  24. 24. Terracotta Water Carriers © 2015 24 business ownership strategy will allow limited liability on the shareholders if any debts are accrued by the company. Therefore, Terracotta water carriers will be registered with Companies Registration Office (CRO, 2015). Reports and accounts from our company will be filed to the CRO every year. As the company will be incorporated, it shall liable for corporation tax at a rate of 12.5% in the Republic of Ireland and will be registered for tax purposes with the Office of the Revenue Commissioners. Though as a newly incorporated company, tax relief may be available for the first 3 years of operation. The Health and Safety Authority (HSA, 2015) legislation on health and safety will be fully complied with by the company with a risk assessment of our storage facility to be comprehensively completed. Manual handling training will also be required for all employees of the company. Employment of additional staff in the future will require the company to ensure basic legal requirements for employees are in place in line with current Employment Laws. The shipping, storage and/or damage of the water carriers in transport will be covered by a fully comprehensive insurance policy. The courier services used for transport of the individually sold water carriers are also fully comprehensively insured against damage and theft of their products being delivered. Staffing The management team does not currently envision the need for staffing levels to be any higher than the four management members themselves until Year 2. The management team will oversee all aspects of the company from finance, sales, R & D and I.T through to marketing strategies for our product until extra staff are employed to deal with these tasks. Further staff may be employed if the workload is deemed too much for management to undertake, thereby, affecting customer service. These initial low staffing levels in Year 1 will initially allow the new company to save money. Staffing needs will be constantly reviewed by the company. Outsourcing of delivery of the water carriers themselves will be employed by courier service as this service is seen as being relatively cheap and allows management to concentrate on other aspects of the business.
  25. 25. Terracotta Water Carriers © 2015 25 8. Financial Plan A financial report is a formal record of the financial activities taking place in the business. The report encompasses the study of assets, liabilities, profits, loss, and flow of cash over a period of time. These values depend on the capital invested and the returns on investment. The company focuses on selling rain water harvesters. These harvesters are placed in the garden and the products vary in style and capacity. The capacity of the water butts sold by the company varies from 50 litres, being the minimum to 350 litres. The prices of the harvesters are dependent on the capacity, while the company provides varied styled products for the customers to choose from, for absolutely no charge extra. The prices of the water butts are fixed by the management only after a through market research. This finance report has the details of all the costs involved in running the business. Every industry goes through a life cycle, which begins from the development and ideation stage and reaches a decline state. The rain harvesting industry in Ireland is on the growth stage. Figure 6: Industry life cycle. The water charges introduced by the Irish Government has encouraged the public to explore eco-friendly and economical options to conserve water. Pricing strategy: The company has analysed the market properly and the research suggests that the rain harvester market is soon going to mature and as a precautionary measure the start-up has adopted smart marketing strategies. Disruptive Pricing: Generally in a mature market, the major investors tend to lower the price in order to capture the market. Since the company’s marketing research team believes that the market
  26. 26. Terracotta Water Carriers © 2015 26 might mature soon, we have adopted disruptive pricing strategy in order to penetrate the market. The price range begins from €49 to €149. Deviation from existing material used in the market: The material used in the water butts is terracotta, which is completely recyclable and eco- friendly in nature. The varying capacity, styles and colours are designed to attract more customers. Marketing techniques: The company has adopted a direct marketing strategy to convince and explain the features and positives of investing in our products. Since business is all about dealing with people, direct marketing and face to face interaction has been adopted. Figure 7: Market penetration strategy Key Assumptions The report is prepared after a thorough study of the costs involved in purchasing the products, transport, packaging etc. The product is purchased in bulk from Quanzhou, Kainuosen Import & Export Co., Ltd. This company is based in China and all the products are shipped from Xiamen port in China. The cost of sales is assumed to be between 2 Euros to 3.50 Euros (assuming that dollar is equal to euro). This cost is inclusive of shipping charges from China to Dublin. Since in year one the sales volume is not very high, the profits are also not very commendable. In the first couple of months the business may experience a bit of a loss, but as the marketing and advertising campaign improves over the time, the business could break-even and optimistically, could start making profits by the end of august. The sales volumes are assumed based on the water butts sold by other competitors (mentioned
  27. 27. Terracotta Water Carriers © 2015 27 in their online store website.) As observed by a popular press report, the sale of water harvesters has increased dramatically (Journal.ie, 2014). The water tax has encouraged people to invest in water butts. The water collected in them could be used for watering the plants in the garden or cleaning their cars. The sales volumes are expected to pick up after our promotion of the products at Bloom festival. The expenditures involved are calculated using data acquired from researching on the market prices of the quantities. The product prices are fixed comparing them with the other competitors. Unlike other competitors, the packaging and delivery charges are borne by the company and the customers only pay for the product and the company delivers the product all over Ireland at completely free of charge to the customer. The next step was to find out the expenditure of the company on monthly bases. Since the company has borrowed a loan of Euros 4,000, a monthly repayment of 356 Euros including the interest rates. The major expense included cost of sales, packaging and delivery. The list of expenses is included in the summary. Profit and Loss Accounts For understanding the profit loss statements let us take a look at the product pricing and sales volume for the 3 years. The table illustrates the related information. Table.2: Product Pricing and volume Capacity 50 L Capacity 100 L Capacity 210 L Capacity 350 L Capacity Sales Pricing €49 €99 €119 €149 Cost of Sales YEAR 1 €23.00 €26.00 €28.00 €30.00 Cost of Sales YEAR 2 €23.20 €26.40 €28.50 €30.60 Cost of Sales YEAR 3 €23.50 €26.90 €29.00 €31.20 Volume YEAR 1 145 86 79 51 Volume YEAR 2 271 190 145 92 Volume YEAR 3 281 187 162 107 The business is a high profit margin one with minimal amount of energy, capital and time invested. The expected profit margin is around 71%.
  28. 28. Terracotta Water Carriers © 2015 28 Table.3: 3 year Profit statement PROFIT STATEMENT YEAR1 YEAR2 YEAR3 Revenues 41,418 80,060 85,771 Cost of Sales 11.825 23,174 24,976 Gross Profit/(Loss) 29.593 56,886 60,735 Expenses 20.688 57,108 65,592 Operating profit and loss 8,905 -222 -4,857 Other Income 0 0 0 Net Profit/(Loss) 8,905 -222 -4,857 (2,000) 0 2,000 4,000 6,000 8,000 10,000 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 Value Months 3 Year Profit Forecast Revenues Gross Profit/(Loss) Net Profit/(Loss)
  29. 29. Terracotta Water Carriers © 2015 29 Balance Sheets The balance sheets are a summary of the finance statement. The table below is a short description of the finance of the company. YEAR 1: Product Name SALES VOLUME COST OF SALES SALES PRICING TOTAL PROFIT (EXCLUDING OVER HEADS) Product A 145 3,335 7,105 3,770 Product B 86 2,236 8,514 6,278 Product C 79 2,212 9,401 7,189 Product D 51 1,530 7,599 6,069 YEAR 2: Product Name SALES VOLUME COST OF SALES SALES PRICING TOTAL PROFIT (EXCLUDING OVER HEADS) Product A 271 6,287 13,279 6,992 Product B 190 5,016 18,810 13,794 Product C 145 4,133 17,255 13,123 Product D 92 2,815 13,708 10,893 YEAR 3: Product Name SALES VOLUME COST OF SALES SALES PRICING TOTAL PROFIT (EXCLUDING OVER HEADS) Product A 281 6,604 13,769 7,166 Product B 187 5,030 18,513 13,483 Product C 162 4,698 19,278 14,580 Product D 107 3,338 15,943 12,605
  30. 30. Terracotta Water Carriers © 2015 30 Cash Flow Three year cash flow graph: Summary The capital invested in the business is 5000 Euros out of which 4000 Euros has been borrowed as personal loan for small business from Allied Irish Bank. The rate of interest for the loan amount is 12.99 %.p.a. The management team has invested 250 Euros each and the stock is brought in bulk shipped from (Xiamen) China. The order was placed for 1000 pieces consisting of 250 pieces of each product. As mentioned earlier the products differ in terms of capacity and style. The table below gives information about all the finance involved in the business for the first three years. This is a summary of all the cost of sales, expenditures incurred by the company and the sales pricing. The profits gained at the end of each year has been calculated and mentioned in the table. 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 06/04/2015 06/06/2015 06/08/2015 06/10/2015 06/12/2015 06/02/2016 06/04/2016 06/06/2016 06/08/2016 06/10/2016 06/12/2016 06/02/2017 06/04/2017 06/06/2017 06/08/2017 06/10/2017 06/12/2017 06/02/2018 06/04/2018 CASHBALANCE(EUR) MONTH 3 Year Cashflow Forecast Cash Balance
  31. 31. Terracotta Water Carriers © 2015 31 Table.4: Finance Summary Capital invested: Euro 5,000 Bank loan Euro 4,000 Interest rate 12.99% Year 1 Cost of sales (Year 1) Euro 921 Sales Pricing (Year 1) Euro 32,619 List of expenditures: (Year 1) Stocks and Inventory Euro 1,836 Phone bills Office Euro 360 Mobile Phone bills Euro 300 Internet Bills Euro 240 Post Euro 300 Couriers Euro 5,201 Packaging Euro 4,000 Transport Euro 504 Interest Term Debt Euro 264 Insurance (Aviva) Euro 528 Stationary Euro 60 Copy Euro 24 Print Euro 72 Accommodation Euro 1,068 Advertising Euro 180 Promotion Euro 2,952 Website Euro 240 Total expenditure (Year 1) Euro 18,129 Loan Repayment Euro 4,000 Year 2 Cost of sales (Year 2) Euro 2,013 Sales Pricing (Year 2) Euro 63,052 Salaries and Wages Euro 19,200 Employer’s Payroll Tax Euro 2,304 Stocks and Inventory Euro 3,036 Phone bills Office Euro 360 Mobile Phone bills Euro 300 Internet Bills Euro 240 Post Euro 300
  32. 32. Terracotta Water Carriers © 2015 32 Couriers Euro 9,529 Packaging Euro 7,330 Transport Euro 504 Interest Term Debt 0 Insurance (Aviva) Euro 528 Stationary Euro 85 Copy Euro 24 Print Euro 72 Accommodation Euro 1,068 Advertising Euro 180 Promotion Euro 2,952 Website Euro 240 Total expenditure (Year 2) Euro 48,252 Loan Repayment 0 Year 3 Cost of sales (Year 3) Euro 2,572 Sales Pricing (Year 3) Euro 67,503 Salaries and Wages Euro 24,600 Employer’s Payroll Tax Euro 2,952 Phone bills Office Euro 360 Mobile Phone bills Euro 300 Internet Bills Euro 240 Post Euro 300 Couriers Euro 9,698 Packaging Euro 7,460 Transport Euro 504 Interest Term Debt 0 Insurance (Aviva) Euro 528 Stationary Euro 120 Copy Euro 24 Print Euro 72 Accommodation Euro 1,068 Advertising Euro 180 Promotion Euro 3,252 Website Euro 240 Total expenditure (Year 3) Euro 51,898 Loan Repayment 0
  33. 33. Terracotta Water Carriers © 2015 33 9. Critical Risks and Problems There are several different risks that could be encountered in the future of the business and here some of these potential risks will be discussed with regarded to “Terracotta Water Carriers”. Firstly in the context of the Irish market one risk is that with the impending general elections in a year’s time, which the new government may decide on abolishing water charges. This would make our product less desirable to the general population as they wouldn’t be concerned with conserving water anymore and thus our potential revenues would decrease as a result of this potential loss off customers. Another highly probable risk is that if and when we become established within the market place competitor companies will offer the same or similar products at a more cost effective price than we will be offering. As a small start-up this would prove highly problematic to overcome as large companies or retail stores i.e. B&Q etc. as we would not be able to absorb the financial hit as effectively as large companies who have other revenue streams. Perhaps the greatest risk is a problem with our supplier i.e. if our supplier where to go out of business we would be working off the stock that we have in storage without the possibility of replenishing said stock again, also if another company where to approach our supplier and offer them a more lucrative deal for the purchase of the product financially we would probably not be in a position to compete, if it were a company competing against us. Transportation costs also come into play especially with the rising costs of oil around the world. This would affect our company in our ability to ship our supply to Ireland and also in being able to deliver our stock around the country if we were to use our transportation and also would add extra cost if we were to use a courier. Several of the above risks all play into the financial security of the company and this is a major risk in terms of our ability to pay back our creditors and debtors. This would have wide scale ramifications as an inability to pay back creditors and debtors would ultimately lead to the winding up of the company and also as founders of the company the four of us would then probably have to be declared bankrupt as well as losing the business. Stock loss, damage of stock in transit and also work related accidents are also other risks but these can be largely absorbed by taking our insurance in the case of work related accidents and ordering sufficient numbers of stock with the knowledge that some of the stock may be damaged or stolen.
  34. 34. Terracotta Water Carriers © 2015 34 10. Funding Requirements To facilitate start-up the four co-owners have contributed €250 each and have availed of a €4000 bank loan from Allied Irish Bank at an interest rate of 12.99%. The €800 deposit for Bloom is required by May 16th and we intend to start trading from the beginning of this month. The cost of inventory will be €3750 including shipping which will be payable by the middle of April. The revenue generated by year 1 sales will be reinvested to cover the equivalent costs in year 2.
  35. 35. Terracotta Water Carriers © 2015 35 11. Appendices Appendix 1: Company Website
  36. 36. Terracotta Water Carriers © 2015 36
  37. 37. Terracotta Water Carriers © 2015 37 Appendix 2: Prototype
  38. 38. Terracotta Water Carriers © 2015 38 Appendix 3: Company Brochure
  39. 39. Terracotta Water Carriers © 2015 39 References Allied Irish Bank. (2015) aib.ie. Available from: http://business.aib.ie/products/finance-and- loans/sme-loans [Accessed 20 March 2015]. Bloom. (2015) Bloom.ie. Available from: http://bloominthepark.com/facts/ [Accessed 7 March 2015]. Central Statistics Office. (2013) CSO.ie. Available from: http://www.cso.ie/quicktables/GetQuickTables.aspx?FileName=CNA33.asp&TableName=Nu mber+of+private+households+and+persons+in+private+households+in+each+Province+,+Co unty+and+City&StatisticalProduct=DB_CN [Accessed 26 March 2015]. Chill Insurance. (2015) chill.ie. Available from: https://www.chill.ie/business-insurance/ [Accessed 14 March 2015]. Citizens Information. (2015) Citizensinformation.ie. Available from: http://www.citizensinformation.ie/en/environment/water_services/water_charges.html [Accessed 12 March 2015]. Companies Registration Office. (2015) cro.ie. Available From: https://search.cro.ie/company/ [Accessed 17 March 2015]. Hubspot. (2015) hubspot.com. Available from: http://www.hubspot.com/internet-marketing- company [Accessed 2 March 2015]. Health and Safety Authority. (2015) hsa.ie. Available from: http://www.hsa.ie/eng/Your_Industry/Retail/ [Accessed 14 March 2015]. Irish-Water-Butts. (2012) Irish-water-butts.com. Available from: http://www.irish-water- butts.com/prices.htm [Accessed 9 March 2015]. The Journal. (2014) Thejournal.ie. Available from: http://www.thejournal.ie/water-butt-sales- woodies-1754100-Nov2014/ [Accessed 6 March 2015]. Rain Barrels. (2015) rainbarrels.ie. Available from: http://www.rainbarrels.ie/?slug=index&cPath=100 [Accessed 9 March 2015]. Saving Water Ireland. (2015) savingwaterireland.com. Available from: http://www.savingwaterireland.com/services.html [Accessed 9 March 2015]. Squarespace. (2015) squarespace.com. Available from: https://www.squarespace.com/login [Accessed 4 April, 2015]. Tap Tips. (2015) Taptips.ie. Available from: http://www.taptips.ie/house-and-garden.htm [Accessed 6 March 2015]. UCD. (2015) UCD.ie/nova. Available from: http://www.ucd.ie/nova/sussedcompetition/businessplantemplate/ [Accessed 1 March 2015].
  40. 40. Terracotta Water Carriers © 2015 40

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