Sample Business Plan

Source: Managing a Small Business 

Here is an abbreviated example of a serious business proposal. It is provided to give you a feeling for the style of writing that is used in a business plan, and is not intended to be a comprehensive guide of what should be covered in a good plan.

Children’s World has developed a line of toys that are superior to all other products that exist on the market today. In order to service our identified target markets with these superior toys, significant capital infusion is required.

Specifically, the required $15,000,000 will be allocated appropriately to:

Marketing and Advertising $ 1,500,000

Salaries -0-

Facilities 50,000

Capital Equipment 450,000

Research and Development 1,000,000

Operational Expenses 2,000,000

Inventory 10,000,000

Total $15,000,000

Children’s World is the major player in the global gift giving industry. Originally founded as a sole proprietorship in 1930, the marketing tactics employed by Children’s World had grown to the level of being a family legend by 1940. Annual toy production of Children’s World exceeded 86,000,000 units at this time, and major expansion plans were developed. However, due to a slight downturn in the global economy, these plans have been shelved as projected profit levels have fallen to a near break even point in 1993.

To revitalize the company, a rigorous program of research and development was undertaken in the early 1950's. The first major breakthrough of which is ready for production. To be able to make maximum use of our proprietary breakthrough technology, Children’s World needs to upgrade its existing facilities, as well as reevaluate the company's sleigh delivery system It is anticipated that a late model Cessna Citation could be modified to meet the operating requirements of Children’s World. In addition, several used cargo planes will need to be acquired to facilitate the development of large stockpiles of toys at strategic global locations. A central hub system is being considered.

Additional manufacturing upgrades are planned to facilitate the projected increases in manufacturing output. Some of the upgrades include the replacement of manual lathes with automated CNC machines, the installation of spray booths using the latest in electrostatic technology, computerized conveyor and sorting systems, and an upgrade in the Statistical Process Control (SPC) area of the Quality Assurance Department.

As can be seen, Children’s World is now at a point where they need to seek outside funding to refurbish/renovate their production facilities, upgrade their global navigational equipment, establish a more visible image, and to establish an extensive line of credit to cover seasonal inventory expenses.

Our Mission at Children’s World is: "To provide toys and games of exceptional quality, in a timely manner, priced at or below our competition, to enhance the profits of our company."

Background

Children’s World is a sole proprietorship that was founded in 1930. It is wholly owned by Mr. and Mrs. Sanford Theodore Clause. For the past 50 years, Children’s World has experienced an increase in the public awareness of our year end close-out (where we give away surplus inventory). Because of this practice, the public has begun to think of us on a seasonal basis as a philanthropic organization.

To alleviate this problem, we have just completed the development phase of a novel and proprietary product line that will once again place Children’s World in the minds of the public on a daily basis. By 1940, our operation had produced 86,000,000 toys, and has operated profitably ever since. However, revenue projections for fiscal year xxxx, without external funding for the introduction of this new product line, is expected to be down to a break even level ($1,100). With the funding for the renovations, advertising, and new product line our profits are expected to reach $30,000,000. Annual growth is projected to be 21% per year through the year 2100.

Concept

The "state of the art" of the industry today dictates that toys are produced without ever being touched by human hands. Our new revolutionary product line capitalizes on the fact that our toys have traditionally been hand built by our local elf community. Although our production methods are slow in comparison to other manufacturers, our quality levels are high while our costs are kept very modest.

This new product line incorporates a rare, refined essence (known only to our advanced Research And Development Dept.) that causes a strong attraction to be formed between the toy and the customer who first sees the toy. This essence is well known in the animal community. For instance, it is the reason why ducklings bond to the first animal they see after emerging from their shell (commonly called "imprinting"). These ducklings will not physically allow themselves to be separated, to any significant distance, from the "parent" animal for approximately six months.

After lengthy collaboration with the local duck community, and extensive field testing (test population will not be disclosed), our top notch R&D staff has been able to identify and synthesize the essence and increase its strength. When incorporated into our line of toys, this essence will create a bond between the recipient and the toy that will last for one full year! During this time, like the ducklings, the recipient who first sees the toy will not want to be separated from the toy to any significant distance (typically less than fifteen feet).

This instant "imprinting" at the time of viewing the toy had initially placed our R&D staff in a considerable quandary. To be effective and "imprint" on only the intended recipient, the entire channel of distribution must not be able to see the product. This enigma was eventually resolved by the decision to place the product in an opaque wrapper, bag, etc. that could be given to the intended recipient to be "opened". To prevent the early opening of the wrapper/bag, we have developed several colorful prints that can be placed on the opaque wrapper thereby lending it an attractive external appearance.

Compared to competitors products, the use of the "essence" will dramatically increase the recipients enjoyment of, and involvement with, our product line. Other significant refinements that our R&D staff has been able to develop are:

1. Gender Specific Essences. Using this innovation, a toy incorporating a female gender essence will bond most strongly with female recipients, and vice versa. This will help reduce the demand for pink and lavender trucks, baseball mitts, etc., and will dramatically reduce our internal manufacturing problems and inventory requirements.

The Children’s World target market includes the pre-adolescent to young adult groups on a global scale. Using data supplied by the Bureau of the Census the total population of the world is estimated at 5,700,000,000. Of this basis group, we have conservatively placed our estimate of our total target market at slightly over 300 million customers. At the present time our sales are hovering at the 250,000,000 unit mark (up from 86,000,000 in 1940) giving us an 83.3% market share. We believe that the requested funding will allow us to increase this market share to roughly 95% over the next two years. This would increase our sales by an additional 35,000,000 units per year (see Appendix A for source information and calculations).

Our primary focus (and most of our extensive field testing) is on the 1-5 year old individual. Our products are gender specific, with male vs. female sales forecasts mirroring the population demographics. As our products gain acceptance within this market, we will move to expand into the teenage markets as this time frame is known for its friction between family sub-units. This will mask the effects of the "de-imprinting" irritations, and will aid us in minimizing any public disclosure (and competitor espionage) during the early phase of our market introduction.

All Children’s World products are protected by the trademark and copyright laws, however we will not seek patent protection for the "essence" lines. Instead, we will keep these lines as a trade secret, thus preventing public disclosure and the subsequent possibility of legal entanglements from disgruntled parents, consumer activists, etc.

Although Children’s World is a broad based manufacturing and transportation company, competitive threats today come primarily from other toy manufacturers. However, with 83.3% of the overall market, the competition does not play a significant role on company pricing/credit policies.

The major competitors that are facing Children’s World are as follows:

Mattel, Inc. (Hawthorne, CA) Primarily a game manufacturer/marketer with sales of over $50,000,000/year.

Roadmaster Corp. (Olney, IL) Manufacturer of juvenile riding toys with sales of over $100,000,000/year.

Parker Brothers (Beverly, MA) Primarily a game manufacturer/marketer with sales of over $250,000,000/year.

Flexible Flyer Co. (West Point, MS) Manufacturer of juvenile riding toys with sales of over $50,000,000/year.

Tyco Toys, Inc. (Mount Laurel, NJ) Manufacturer of trucks/cars with sales of over $100,000,000/year.

Hasbro, Inc. (Pawtucket, RI) Primarily a game manufacturer/marketer with sales of over $50,000,000/year.

In spite of the competition in the toy industry, Children’s World has continued to deliver a high quality, low cost product that is unique to this industry. In addition, our research indicates that our performance is superior to any other company on the market today.

The gift market is heavily seasonal, with the preponderance of sales coming late in the year. As stated in the "Background" section of the Business Description above, Children’s World has experienced an increase in the public awareness of our year end close-out (where we give away surplus inventory). Because of this practice, the public has begun to think of us on a seasonal basis as a philanthropic organization.

The "state of the art" of the industry today dictates that toys are produced without ever being touched by human hands. Our new revolutionary product line capitalizes on the fact that our toys have traditionally been hand built by our local elf community. Although our production methods are slow in comparison to other manufacturers, our quality levels are high while our costs are kept very modest. In addition, the exciting new breakthroughs that we have achieved in our R&D department (see the Description of the Business section above) will further increase the sales and usage of our products.

To get the most out of our marketing dollars, we have developed the following strategy for promoting our products:

Pricing and Profitability. Our pricing is tied to our philosophy of operating at a break even basis. However, because of both the past losses incurred in the toy giveaways, and to pay for the capital improvements outlined in this plan, we will increase our pricing in order to retire the newly incurred debt. We are projecting a first year net profit of $30,000,000 as the result of this project.

Selling Tactics. Consistent with previous years, preseason publicity outlining new merchandising concepts is utilized extensively to generate paid advertising participation from retailers and shopping centers world wide. This has worked well, and we have no plans to alter this strategy.

Distribution. Central pre-distribution hubs have now been established in each country. This concept permits faster delivery, without the need to return to the North Pole each time the sleigh needs restocking. This is the most cost effective procedure implemented by Children’s World in the last 50 years.

Advertising and Promotion. Cooperative advertising funds are available to all participating retailers which leverages our national advertising exposure 400%. Proof of advertising activity from the participating merchant in the form of a paid invoice from the merchant and a tear sheet from the print media is required for final payment.

Public Relations. This activity has outgrown our in-house capabilities. Therefore, we have retained the services of an international public relations firm, Good, Better and Best, Inc., to coordinate those activities. The firm provides us their services at cost, as they benefit measurably through their visibility and association with Children’s World .

Business Relationships. Children’s World participates heavily in trade shows during the Summer months. This activity permits us to maximize our efforts and focus on the major retailers and buyers. Promotional activity by retailers may need to be reviewed in the near future, as seasonal promotion once targeted exclusively for December, has been pushed backward to Thanksgiving, and on occasion is now occurring as early as Halloween. This is a concern we are reviewing with our public relations firm.

The Children’s World production facilities wholly owned and are located at 101 North Pole Lane, Arctic Circle, Earth. Due to the nature of the toy industry, and its propensity for industrial espionage, Children’s World decided at an early stage that steps must be taken to isolate and camouflage their facilities. To date, their efforts have been largely successful, although a few close calls have been noted.

The facilities are debt free and are kept in good repair by the local elf community. To accommodate the planned product line expansion, only minor renovations (approximately $50,000) will be necessary as stated in the "Statement of Funding Proceeds" section above.

All licenses, and permits required for the continued operation of the company have been either secured, or renewed. Due to our location, our company is not affected by zoning regulations.

All Children’s World products are already protected by the appropriate trademark and copyright filings. Children’s World will not seek patent protection for the "essence" lines, however. Instead, we will keep these lines as a trade secret, thus preventing public disclosure and the subsequent possibility of legal entanglements from disgruntled parents, consumer activists, etc.

Due to the unique nature of their work force and the isolation of the environment, Children’s World does not have to provide insurance for their employees. However, Children’s World does have full property insurance as well as a general liability insurance policy for $1,000,000 per the requirements of most retailers.

Children’s World was founded in 1930 by Sanford Theodore Clause who recognized the entrepreneurial opportunities presented by the establishment of a charitable society. Through his efforts gift giving became more fashionable, particularly around the time of the Christian celebration of Christmas.

Management team

Our key management team consists of Mr. and Mrs. Clause whose backgrounds consist of almost 60 years of manufacturing and marketing experience. Our manufacturing team consists of over 300 well trained elf volunteers, each with at least 200 years of manufacturing, engineering and design experience.

A listing of our corporate organization is as follows:

Sanford T. Clause, President

Elizabeth M. Clause, Vice President, Henry J. Ticklebone, Director of Finance, Abagail B. Greenleaf, Director of Marketing Princely J. Rockafellow, Director of Sales, James A. Bronson, Director of Engineering, Jillaney P. Quackenmeyer, Director Research & Development’ Jeremy C. McDougal, Director of Operations, Thistle P. Stickler, Corporate Attorney.

As stated above, the strength of Children’s World management team stems from the combined expertise in both management and technical areas. This has produced outstanding results over the past 60 years.

The following are the summary job descriptions for the key officers of the Children’s World organization:

Abagail B. Greenleaf, Director of Marketing ($100,000/year salary) Manage market planning, advertising, public relations, sales promotion, merchandising and facilitate staff services. Identifying new markets and corporate scope and market research. Identify foreign markets.

Princely J. Rockafellow, Director of Sales ($100,000/year salary) Manage field sales organization, territories and quotas. Manage sales office activities including customer/product support/service.

Henry J. Ticklebone, Director of Finance ($150,000/year salary) Management of working capital including receivables, inventory cash and marketable securities. Financial forecasting, including capital budget, cash budget, proforma financial statements, external financing requirements, financial condition requirements.

James A. Bronson, Director of Engineering ($85,000/year salary) Oversees product development including quality control, physical distribution, product and packaging design, new product development improvement, and improvements on existing products. Research and development.

Jeremy C. McDougal, Director of Operations ($175,000/year salary) Service, manufacturing, raw materials management and allocation.

Outside support

An outside Board of Advisors, including highly qualified business and industry professionals/experts from the elfin community, will assist our management team to make appropriate decisions and take the most effective action; however, they will not be responsible for management decisions.