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Business Plan For Saturation Inc Add in library

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Question:

Describe about the Business Plan for Saturation Inc.?
 
 

Answer:

Background of Company

Saturation Inc. is an Australian based firm which is situated in Bronte. The company is involved in supply of grocery products to big retailers’ houses from past several years. The increase in the number of supplier of grocery products in the area has lead to declination into the profit percentage of the company and their some retailers have shifted to those suppliers that provides product at low cost. Therefore, Saturation Inc. has decided to penetrate into the field of organic grocery store to attract local residents and visitors. The company has taken such decision as there is not much of organic grocery store in the area. The Saturation Inc. has forecasted that they can be able to increase their profit margin and can cover of the losses that have been registered from less supply of grocery products in markets. Moreover, the company will include distinct menu, hard to find grocery products from around the globe.

Mission of Saturation Inc

The mission of the company is to deliver upscale organic grocery store to the visitors and local customers and delicatessen. The deli will be composed of serving the salads, sandwiches, picnic lunches, quality and hard to find drinks. The gift items will also be served in the store to gain large customers. Moreover, the store will hold all fresh and quality organic products both vegetables and non-veg.

Products and Services

The Saturation Inc. is planning to include products and services that are organic groceries, gifts and delicatessen in the store. In context to organic grocery, the company will engage high standard grocery from Australia, Asia, Mexico, United States and Europe and locally. The items that will be included in the organic grocery are spreads, oils, rice, cheese, peppers, meats, chocolates, hard to find candies and desserts, etc (Abrams, 2010). On the other hand, in case of gifts item, the Saturation Inc. will comprise the items such as picnic items, kitchen wares, sewn jewelry, and cookbooks and also gift baskets will be made available too in the grocery store. Apart from that, the delicatessen section will provide dinner, lunch and breakfast. Therefore, the menu will offer salads, drinks, soups, sandwiches, soups, desserts and other frozen meals. The breakfast menu and picnic lunches will also be offered. Thus, the biscotti, quiche and scones will be provided in the breakfast menu whereas frozen meals, homemade breads, sandwiches, daily specials, etc. will be offered in lunch or dinner menu (Barringer, 2010). Moreover, tea juice, soda and quality coffee from all over the globe will be offered all day. The visitors or travelers will be provided picnic lunches.

Industry Analysis

The market of organic grocery store in other parts of Australia such as Sydney, Melbourne, Queensland is doing quite well and people are satisfied with the organic grocery product as it helps in enhancing their health quality (Bird, 2010). It is evident from the Australian Organic Market Report of 2012 than organic grocery market will grow by 64% in 2017. The growth in the organic grocery store has helped many companies such Woolworth to increase their sale by 36%. Therefore, it can be assumed that there is a great opportunity for the Saturation Inc. to penetrate into organic grocery store in the untapped area of Bronte. On the other hand, the total sale that has been acknowledged from organic grocery product is $1.27 billion in 2012 (Drummond, Ensor, and Ashford, 2012). Thus, there has significant growth in the organic grocery store since 2005 which ensures that customers are more willing to consume organic product.

Year

Sales Growth

2005

5%

2006

9%

2007

12%

2008

16%

2009

19%

2010

22%

2011

24%

2012

27%

2013

32%

2014

44%


Table 1: Organic Product Sales Growth in Australia

 

Market Analysis

The major target market of the company would be people that are residents of Bronte and searching for superior quality ingredients in order to prepare national as well as international cuisine (Finch, 2010). Further, the surrounding businesses will be targeted that are looking for delicious meal for their staff members and customers. On the other hand, travelers both from domestic and international that visits Bronte will be targeted and also families all over the world can be taken in account.

Market Segmentation

The marketer of Saturation Inc found that there are around 120 businesses in Bronte that can become potential customers of the company. Therefore, in the starting phase, the company can account 20% that can ensure 10% hike every year. On the other hand, as per the report of 2011Australian Census, there are 6827 residents in Bronte and there is a projection that it will grow by 3% in next eight years. Therefore, the company has compounded on residents as their major target group (Gandellini, Pezzi, and Venanzi, 2012). Moreover, the number of visitors has been estimated on the basis of report of Pump-house Point that in 2011, around 737,342 people on an average visited the point each year (Hajro, 2012). Therefore, the targeted market will help the company in increasing the sales and improving the brand equity. However, the major sales the company can generate from local residents as they will decide the success of the company.

Target Market Segmentation Strategy

It is understood that from last several there has been significant hike in the explorations of gourmet goods and foreign products in Australia. Therefore, the company has focused on developing strategy to provide effective service to the targeted audiences. The residents of Bronte visit to other cities to buy the gourmet or luxury items which are not available in the market of Bronte. Therefore, setting up an organic grocery store will help the residents save their time and buy the products without travelling to other places (Heagney, 2012). Thus, in order to target the market, the company can use media and placing hoarding at different locations of Bronte so that people can become aware about the organic grocery store.

Market Growth

The company has a belief that adopted products and services will help them to gain market in Bronte. The market will ensure growth of the store and customers can be attracted to visit the stores.  The Australian Retail Sales of Beverages and gourmet 2001 to 2010 shows following growth,

Product Classification

2001 ($)

2006 ($)

Compound Annual Growth Rate (2001-2006)

2010 ($)

Compound Annual Growth Rate (2006-2010)

Compound Annual Growth Rate (2001-2010)

Cheese and Condiments

4230

5435

6.5%

7252

5.9%

6.2%

Confectionary and Beverages

9904

14700

10.4%

22701

9.1%

9.6%

Ready to eat meals and gourmet foods

8000

10100

6.0%

13516

6.0%

6.0%

Total

22134

30235

8.1%

43469

7.5%

7.8%


Market Trends

The market trends of Australia can be understood through retail sales of beverages and gourmet foods from 2007 to 2012 on the basis of outlets

Outlet Type

Sales (%)

Gourmet and specialty stores

34.3%

Warehouse Club

4.9%

Supermarkets and grocery stores

44.6%

All other Outlets

16.2%

 
Therefore, from above data, it can be understood that people of Australia are developing interest to buy upscale food products. The gourmet and organic grocery products is helping the people to improve their health status and find stability in their health. The people search quality products as they become highly educated and improvement in the living standards has made people to purchase quality organic products (MacMillan and Venkataraman, 2009).

 

Strategy and Implementation

The main strategy that can be adopted by the company is by exploiting the benefits of company over the competition so that growth can be registered. The company will place all the products in the stores that are organically grown so that the trust of the customers can be won over the quality.

Competitive Edge: In order to gain competitive edge, the location has to be well tapped. The store can be located in the main market of Bronte as most number of customer visit the main market area to purchase the required product. Moreover, it will be a convenience factor for customers and they may be willing to spend more if the required products are easily available (Marburger, 2012). Therefore, placing high quality organic grocery product in store will ensure competitive advantage.

Marketing Strategy: In order to attract the consumers and visitors in the store, the company can use strategy such advertisement through local newspapers, sending flyers via mail, promotional drink glasses and yellow pages (Mackay and Wilmshurst, 2012). Therefore, it can be effective in making people aware about the store. On the other hand, free samples of products can be distributed among the customers as it will help in creating an image in the mind of the customers.

Sales Strategy: The Company will be focusing on forming an environment that will force the customers to visit the store again and again. Therefore, a friendly and comfortable atmosphere will be developed that can satisfy the expectation of consumers. On the other hand, the pricing strategy will be accordance with the market rate and discount will be provided on buying bulk amount (Goksoy and Ozsoy, 2007). The price of the product and services will not be above the market price and moreover, the company can decrease the price for regular customers. Apart from that, the company will engage employee that will provide high standard service to the customers and visitors in stores (Dess, 2012).

Strategic Alliances: The Saturation Inc can associate with local businesses such as restaurants, outfitters and hotels as it will help the company in increasing sales. On the other hand, the relationship can too be formed with the local product growers in order to receive fresh products to stock in store (Clarke, 2010).

Management Summary

The management of the Saturation Inc. will have a capacity of 50 staffs that will take up the responsibility of the organic grocery store in due manner. The company can have two managers, three merchandise managers, three book keepers and rest of the staff involved in serving clients and recruiting people and delivering the products.

 

Year 1

Year 2

Year 3

Year 4

Managers

50000

50000

54000

60000

Accounting/Books

3000

4000

4000

5000

Cooks/Kitchen

11000

11000

13000

14000

Merchandise Manager

30000

32000

36000

40000

Other Staffs

25000

25000

28000

28000

Total Payroll

119000

122000

135000

147000


Personal Plan

Figure 1: Company Structure of Saturation Inc.

Financial Plan

Profit and Loss Projection

 

 Particulars

Year 1

Year 2

Year 3

Year 4

Year 5

Revenue

 

 

 

 

 

 

 

Gross revenue

$496,000

$505,920

$526,157

$557,726

$602,344

 

Cost of goods sold

174,400

177,888

185,004

196,104

211,792

 

Gross margin

$321,600

$328,032

$341,153

$361,622

$390,552

 

 

 

 

 

 

 

 

Other revenue [source]

$0

$0

$10,000

$0

$0

 

Interest income

$900

$0

$0

$0

$0

 

Total revenue

$322,500

$328,032

$351,153

$361,622

$390,552

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Sales and marketing

$39,000

$39,780

$41,371

$43,853

$47,362

 

Payroll and payroll taxes

59,000

$60,180

$62,587

$66,342

$71,650

 

Depreciation

36,000

36,720

37,440

38,160

38,880

 

Insurance

38,000

$38,760

$40,310

$42,729

$46,147

 

Maintenance, repair, and overhaul

13,500

13,770

14,040

14,310

14,580

 

Utilities

29,000

$29,580

$30,763

$32,609

$35,218

 

Property taxes

14,000

$14,280

$14,851

$15,742

$17,002

 

Administrative fees

17,000

$17,340

$18,034

$19,116

$20,645

 

Other

4,000

$4,080

$4,243

$4,498

$4,858

 

Total operating expenses

$249,500

$254,490

$263,640

$277,360

$296,341

 

 

 

 

 

 

 

Operating income

 

$73,000

$73,542

$87,513

$84,263

$94,212

 

 

 

 

 

 

 

 

Interest expense on long-term debt

4,038

3,224

2,369

1,471

528

 

 

 

 

 

 

 

Operating income before other items

 

$68,962

$70,318

$85,144

$82,792

$93,683

 

 

 

 

 

 

 

 

Loss (gain) on sale of assets

0

0

1,000

0

0

 

Other unusual expenses (income)

0

0

0

0

0

 

 

 

 

 

 

 

Earnings before taxes

 

$68,962

$70,318

$86,144

$82,792

$93,683

 

 

 

 

 

 

 

Taxes on income (30%)

 

20,689

21,095

25,843

24,838

28,105

 

 

 

 

 

 

 

Net income (loss)

 

$48,273

$49,223

$60,301

$57,954

$65,578

 

 

Cash Flow Projection

 Activities

Particulars

Year 1

Year 2

Year 3

Year 4

Year 5

Total

Operating activities

 

 

 

 

 

 

 

 

Net income

$48,273

$49,223

$60,301

$57,954

$65,578

$281,330

 

Depreciation

36,000

36,720

37,440

38,160

38,880

187,200

 

Accounts receivable

0

0

0

0

0

0

 

Inventories

0

0

0

0

0

0

 

Accounts payable

0

1,000

0

(1,500)

0

(500)

 

Amortization

0

0

0

0

0

0

 

Other liabilities

0

0

0

0

0

0

 

Other operating cash flow items

0

0

0

0

0

0

 

Total operating activities

$84,273

$86,943

$97,741

$94,614

$104,458

$468,030

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

Capital expenditures

$0

$0

$0

$0

$0

$0

 

Acquisition of business

0

0

0

0

0

0

 

Sale of fixed assets

$0

$0

($1,000)

$0

$0

(1,000)

 

Other investing cash flow items

0

0

0

0

0

0

 

Total investing activities

$0

$0

($1,000)

$0

$0

($1,000)

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

Long-term debt/financing

$83,712

($67,102)

$7,043

$31,145

($94,798)

($40,000)

 

Preferred stock

0

0

0

0

0

0

 

Total cash dividends paid

0

0

0

0

0

0

 

Common stock

0

0

0

0

0

0

 

Other financing cash flow items

0

0

0

0

0

0

 

Total financing activities

$83,712

($67,102)

$7,043

$31,145

($94,798)

($40,000)

 

 

 

 

 

 

 

 

Cumulative cash flow

 

$167,985

$19,841

$103,784

$125,759

$9,660

$427,030

 

 

 

 

 

 

 

 

Beginning cash balance

 

$60,000

$227,985

$247,826

$351,610

$477,369

 

Ending cash balance

 

$227,985

$247,826

$351,610

$477,369

$487,030

 

 

Balance Sheet

 

Particulars

Initial balance

Year 1

Year 2

Year 3

Year 4

Year 5

 Assets

Cash and short-term investments

$60,000

$227,985

$247,826

$351,610

$477,369

$487,030

 

Accounts receivable

4,000

4,000

4,000

4,000

4,000

4,000

 

Total inventory

25,000

25,000

25,000

25,000

25,000

25,000

 

Prepaid expenses

0

0

0

0

0

0

 

Deferred income tax

0

0

0

0

0

0

 

Other current assets

5,000

5,000

5,000

5,000

5,000

5,000

 

Total current assets

$94,000

$261,985

$281,826

$385,610

$511,369

$521,030

 

 

 

 

 

 

 

 

 

Buildings

$90,000

$90,000

$90,000

$90,000

$90,000

$90,000

 

Land

100,000

100,000

100,000

100,000

100,000

100,000

 

Capital improvements

0

0

0

0

0

0

 

Machinery and equipment

90,000

90,000

90,000

90,000

90,000

90,000

 

Less: Accumulated depreciation expense

0

36,000

72,720

110,160

148,320

187,200

 

Net property/equipment

$280,000

$244,000

$207,280

$169,840

$131,680

$92,800

 

 

 

 

 

 

 

 

 

Goodwill

$0

$0

$0

$0

$0

$0

 

Deferred income tax

0

0

0

0

0

0

 

Long-term investments

0

0

0

0

0

0

 

Deposits

0

0

0

0

0

0

 

Other long-term assets

0

0

0

0

0

0

 

Total assets

$374,000

$505,985

$489,106

$555,450

$643,049

$613,830

 

 

 

 

 

 

 

 

Liabilities

 

Initial balance

Year 1

Year 2

Year 3

Year 4

Year 5

 

Accounts payable

$2,000

$2,000

$3,000

$3,000

$1,500

$1,500

 

Accrued expenses

0

0

0

0

0

0

 

Notes payable/short-term debt

0

0

0

0

0

0

 

Capital leases

0

0

0

0

0

0

 

Other current liabilities

100

100

100

100

100

100

 

Total current liabilities

$2,100

$2,100

$3,100

$3,100

$1,600

$1,600

 

 

 

 

 

 

 

 

 

Long-term debt from loan payment calculator

$90,000

$73,712

$56,610

$38,653

$19,798

$0

 

Other long-term debt

$100,000

$200,000

$150,000

$175,000

$225,000

$150,000

 

Total debt

$192,100

$275,812

$209,710

$216,753

$246,398

$151,600

 

 

 

 

 

 

 

 

 

Other liabilities

0

0

0

0

0

0

 

 

 

 

 

 

 

 

 

Total liabilities

$92,100

$75,812

$59,710

$41,753

$21,398

$1,600

 

 

 

 

 

 

 

 

Equity

 

Initial balance

Year 1

Year 2

Year 3

Year 4

Year 5

 

Owner's equity (common)

$60,000

$60,000

$60,000

$60,000

$60,000

$60,000

 

Paid-in capital

250,000

250,000

250,000

250,000

250,000

250,000

 

Preferred equity

0

0

0

0

0

0

 

Retained earnings

0

48,273

97,496

157,797

215,751

281,330

 

Total equity

$310,000

$358,273

$407,496

$467,797

$525,751

$591,330

 

 

 

 

 

 

 

 

 

Total liabilities and equity

$402,100

$434,085

$467,206

$509,550

$547,149

$592,930

 

 

Loan Payment

Annual interest rate

5.0%

Monthly rate

0.41%

Loan amount

$90,000

Term of loan (months)

60

Payment

($1,693.84)

 

Month

Principal balance

Principal payment

Interest

Payment

1

$90,000

($1,327)

($367)

($1,694)

2

88,673

(1,333)

(361)

($1,694)

3

87,340

(1,338)

(356)

($1,694)

4

86,002

(1,343)

(350)

($1,694)

5

84,659

(1,349)

(345)

($1,694)

6

83,310

(1,354)

(339)

($1,694)

7

81,955

(1,360)

(334)

($1,694)

8

80,596

(1,365)

(328)

($1,694)

9

79,230

(1,371)

(323)

($1,694)

10

77,859

(1,377)

(317)

($1,694)

11

76,482

(1,382)

(312)

($1,694)

12

75,100

(1,388)

(306)

($1,694)

13

73,712

(1,394)

(300)

($1,694)

14

72,319

(1,399)

(295)

($1,694)

15

70,920

(1,405)

(289)

($1,694)

16

69,515

(1,411)

(283)

($1,694)

17

68,104

(1,416)

(277)

($1,694)

18

66,688

(1,422)

(272)

($1,694)

19

65,266

(1,428)

(266)

($1,694)

20

63,838

(1,434)

(260)

($1,694)

21

62,404

(1,440)

(254)

($1,694)

22

60,964

(1,445)

(248)

($1,694)

23

59,519

(1,451)

(242)

($1,694)

24

58,067

(1,457)

(237)

($1,694)

25

56,610

(1,463)

(231)

($1,694)

26

55,147

(1,469)

(225)

($1,694)

27

53,678

(1,475)

(219)

($1,694)

28

52,203

(1,481)

(213)

($1,694)

29

50,721

(1,487)

(207)

($1,694)

30

49,234

(1,493)

(201)

($1,694)

31

47,741

(1,499)

(195)

($1,694)

32

46,242

(1,505)

(188)

($1,694)

33

44,736

(1,512)

(182)

($1,694)

34

43,225

(1,518)

(176)

($1,694)

35

41,707

(1,524)

(170)

($1,694)

36

40,183

(1,530)

(164)

($1,694)

37

38,653

(1,536)

(157)

($1,694)

38

37,117

(1,543)

(151)

($1,694)

39

35,574

(1,549)

(145)

($1,694)

40

34,025

(1,555)

(139)

($1,694)

41

32,470

(1,562)

(132)

($1,694)

42

30,908

(1,568)

(126)

($1,694)

43

29,340

(1,574)

(120)

($1,694)

44

27,766

(1,581)

(113)

($1,694)

45

26,185

(1,587)

(107)

($1,694)

46

24,598

(1,594)

(100)

($1,694)

47

23,005

(1,600)

(94)

($1,694)

48

21,404

(1,607)

(87)

($1,694)

49

19,798

(1,613)

(81)

($1,694)

50

18,185

(1,620)

(74)

($1,694)

51

16,565

(1,626)

(67)

($1,694)

52

14,939

(1,633)

(61)

($1,694)

53

13,306

(1,640)

(54)

($1,694)

54

11,666

(1,646)

(48)

($1,694)

55

10,020

(1,653)

(41)

($1,694)

56

8,367

(1,660)

(34)

($1,694)

57

6,707

(1,667)

(27)

($1,694)

58

5,040

(1,673)

(21)

($1,694)

59

3,367

(1,680)

(14)

($1,694)

60

1,687

(1,687)

(7)

($1,694)

61

0

0

(0)

$0

62

0

0

(0)

$0

 

 

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