Business plan example - The Market

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.

Initial responses from our market test customers indicate that our new lines are enjoying an excellent reaction. Inquiries from prospective customers suggest that there is considerable demand for these toys. Relationships with leading retailers, major accounts, and distributors substantiate the fitness of Children's World for considerable growth and accomplishment.

Competition

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.

It is our belief that we will be able to turn this mistaken perception around with the funds that we are seeking via this proposal. After all, in all comparisons Children's World's products provide more features and have superior performance than competitive products. In most cases, the difference in the number of features is substantial. A complete technical comparison is available upon request.

Marketing Strategy

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.

Credit Terms. Standard credit terms will be offered to wholesalers/retailers (2% 10 net 30), while cash and checks will be accepted on the retail level.

Getting the Cash Needed to Starting a New Small Business. Now that You have calculated your initial capital requirements, where
will you get the money? The first source is your personal savings. Then relatives, friends, or other people may be found who are
willing to"venture" their savings in your company. Before getting too big a share of money from outside sources, remember that you
ought to have private control of enough to assure yourself ownership.

Once you can show that you have closely worked out your fiscal Requirements and can demonstrate expertise and integrity, a
financing institution may be willing to finance a part of your operating requirements. This could possibly be done on a short-term
basis of from 60 days to as much as one year. Any institution which has money to lend is mainly concerned with security. The
safety might be a business advantage, but if you're just starting the ideal security is usually your home or some other personal
advantage.

The next thing the lender will want to see is Some Kind of Business plan. If you finish a business strategy - which includes a
cash flow forecast - that the lender will observe that you have completed some serious and realistic thinking about your business
and be more likely to consider your request.

Be familiar with your banker. In selecting a banker consider Progressiveness, mindset toward your business, credit services
provided, and the dimensions and management policies of the bank. Is the lender progressive? The physical appearance of the bank
may give you some indication. When the employees are pretty youthful, interested in your issues and active in civic affairs the
lender is likely to be progressive. The character of the bank's advertisements may also be an indicator for its progressiveness.

To succeed the banker should be interested in Assisting You to Become a better manager, and build a continuing relationship which
will mean profitable business for you as well as the lender over time.

Will the bank offer you the type of credit you want? For example, If seasonal accumulations of stock become an issue will the
lender create a loan against public or field warehouse receipts? If your capital is tied up in accounts receivable throughout your
heavy selling season, will the bank take these receivables as security for a loan? Will the bank contemplate a term loan?

Finally, understand the dimensions and direction policies of the bank. Will Your maximum conditions fall well within the
bank's"legal limit"? If you intend to do some export company, does it have a foreign exchange department? In the event that you or
your traders sell on installation terms does the lender have facilities for managing installment paper? How deeply is the lender
concerned with the rise and prosperity of your local community?

When you deal with your banker, sell yourself. Whether or not you Want a bank loan, make it a practice to visit your banker at
least once every year. Openly discuss your strategies and problems. It's the bank's company not to betray a confidence. If you
need financial aid carefully prepare, in written form, complete information that will present a thorough comprehension of your
entire proposition. Many business-people or potential small business operators destroy their chances of getting financial aid by
failing to present their proposal correctly.

Trade creditor or gear manufacturer, Companies from which you Buy equipment or product may also provide capital for you in the
kind of extended credit. Manufacturers of store fixtures, cash registersindustrial machines frequently have funding plans under
which you may buy in an installation basis and cover from future earnings. You don't need to pay for the goods simultaneously. If
goods are for resale, then no safety other than repossession rights of the unsold goods is involved. But too long a use of charge
can prove expensive. Usually cash discounts are offered when a bill is paid in 10, 30, or 60 days. By way of instance, a term of
sale quoted because"2-10; net 30 days" signifies a cash discount of 2 percent will be awarded if the bill is paid within 10 days.
If not paid in 10 days, the whole amount is due in 30 days. If you don't take advantage of the cash discount, you're paying 2% to
use money for 20 days, or 36 percent each year. That can be high interest. Avoid it.

Among the principal causes of failures among companies is Inadequate funding. Should you enter business, remember it is your
obligation to provide, or obtain from other people, sufficient money to provide a firm foundation for the business.

Sharing Ownership With Others. Now that you have determined what Company to start and about how much capital will be required, you
may find it necessary to join with one or more partners to establish the enterprise.

If you lack certain management or technical skills that are of Major value to your preferred company a partner with these
abilities may prove a most satisfactory means to pay the deficiency. If you are very proficient in your special area but lack
direction training and skills, you might search for a partner with a background in direction. If you may need more startup money,
then sharing the possession of this company is 1 way to get it. Fantastic care should be taken in deciding upon a spouse.
Personality and character, as well as ability to render technical or financial aid, influence the achievement of a pa333ship.

A partnership may be a mixed blessing. A spouse who puts in time Or cash has a right to expect a share in running the business.

In a partnership the accountability for the debts of the firm is Unlimited, just as it's in one proprietorship. This means the
owners are Personally accountable for the firm's debts, even in excess of the amount that they Have invested in the business. In a
business the liability of the owner is limited To the amount that they pay for their shares of stock. A partnership, such as one
proprietorship, lacks continuity. This means the business terminates upon the Death of the owner or a spouse, or upon the
withdrawal of a spouse.

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