Thursday, 8 January 2015

Business Plan for online children website

Executive Summary

Introduction
InteliChild.com offers bright children an entertaining place to interact with each other, the Web, educators, and the world in general. It generates traffic first, valuation for investors, and eventually commerce and profits. It is a healthy place for kids to play, for parents and schools to buy, and a creative and fair work environment for employees.
The InteliChild.com e-commerce project is the natural evolution for the InteliChild.com Internet presence. The site will market and sell selected toys, books, and software products. It will also produce Web products and Web applications that will increase market share, promote name recognition, and maximize efficiency.
The Company
The present InteliChild.com is a start-up company with four full-time employees. The company was incorporated as a California C corporation owned by its principal founders, at 25% ownership each. (Name Omitted) Capital partners acquired 50% of the company. The company has a single office. The initial website is at www.citruscoolkids.com.
Our key competitive advantage is the in-house knowledge base we have developed. Our competitor spends five to 10 times the amount of money we do outsourcing to expensive companies for services we perform in-house. The same will take place with the InteliChild.com website. We already have the SQL™ server and ColdFusion™ programming expertise, and we will be adding the Flash™ integration of these skills.
Products and Services
InteliChild will be offering a steadily increasing mix of three lines of products:
  • Toys and Games: carefully selected toys and games that appeal to the target market, the parents of the target market, and educators.
  • Books: there should be a selection of books that appeal specifically to the parents and educators of the target market, so that these interested adults can go to this site and order books about their children. In addition, of course there is also a selection of books to be ordered by and for the kids to read.
  • Software: carefully selected software to appeal to the target market and target parents and educators.
The Internet reinvents itself every three months, or even faster. Therefore, our strategy for future development is to remain positioned with enough flexibility to adapt new technologies, and adapt to changes quickly.
The Market
The InteliChild.com market has been expanding exponentially with the advances of technology in the teaching sectors and the acceptance of technology as a teaching aid. The critical component to our entrance into the market will be approval and support from the school communities - including teachers, the PTA, and special education programs.
Our primary target markets include these four areas:
  1. The kids themselves.
  2. Parents.
  3. Educational institutions for children of the upper class.
  4. Self-teaching families.
While we have plans to expand into international territory, our initial launch will target our most important market - the American upper class. We know that most of our clients drive BMW's and have very good taste - they spend money on their children because they can appreciate the technology that we have created. They also generally have high bandwidth connections, and are impressed by first-class design.
Financial ConsiderationsOur start-up costs are high because of our commitment to dominate the Internet market place.
The Break-even Analysis indicates we reach steady-state break-even in this first year.
The sales forecast is based on increasing website traffic and increasing sales per unique user session. Sales are projected to rise exponentially from Year 1 to Year 3. The forecast obviously depends on traffic increase. We plan to lose money for at least three years while we build traffic and develop our position for the long-term future.


Objectives

  • Traffic, as measured in unique user sessions: 100,000 unique user sessions in June, Year 1; 450,000 in December, Year 1; 3.5 million in Year 2; and 5 million in Year 3. 
  • Sell-through, as measured in dollar sales per unique visit: a high of $0.58 per unique visit in December of Year 1; increasing to $0.83 in Year 2; and $0.92 in Year 3. 
  • Valuation, as measured in ability to bring in additional investment at economically feasible valuations. We need to attract moderate investment this year, and an additional large infusion in Year 2, with valuation performance that yields attractive internal rate of return (IRR) to investors. The financial section indicates IRR of more than 100% for all investors, with larger IRR for seed, declining slightly for first round and then second round. 
  • Acquisition or Initial public offering (IPO) in Year 4, with a valuation of more than $20 million. This assumes of course the market valuations based on sales and earnings, which are relatively high as this plan is written.

Mission

InteliChild.com offers bright children an entertaining place to interact with each other, the Web, educators, and the world in general. It generates traffic first, valuation for investors, and eventually commerce and profits. It is a healthy place for kids to play, for parents and schools to buy, and a creative and fair work environment for employees.

Keys to Success

  1. We must retain the customers. The website has to be easy to use and quickly viewable. User satisfaction is an ultimate priority. 
  2. The project will succeed if it can capitalize on the traffic that InteliChild.com produces, and turn the user sessions into dollars through the commerce site. 
  3. The sales process must be easy to administer and flexible enough to accommodate the needs of InteliChild, which is not ready to take on more employees to do so. 
  4. The e-commerce project should further establish InteliChild.com presence as a technology leader, not only returning traffic but actually bringing in new traffic.

Company Summary

The present InteliChild.com is a start-up company with four full time employees. We are a high-powered team of creative individuals. The company creates an Internet environment attractive to bright kids, and is planning to sell toys, books, and software to those kids, their parents, and schools. Our products will be the best reviewed in our niche.

Start-up Summary

Our start-up costs reflect of our commitment to dominate the Internet market place.
Our development costs are high, but because we are now located in Oregon instead of the Silicon Valley, our human resources costs are not as high as they might be - particularly for the talented programmers that we need. Marketing expenses are also high, but spending on the costly development of this site without promoting it appropriately would make it difficult to gather together the traffic necessary to make this a success.
Our location leverages our partner potential, even though we are paying a premium for space and for talent due to development costs.


Company Ownership

The company was incorporated as a California C corporation owned by its principal founders, at 25% ownership each.  (Name Omitted) Capital partners acquired 50% of the company.

Company Locations and Facilities

The company has a single office. Its important website and Internet infrastructure situation is explained in detail later in this plan. The initial website is at www.citruscoolkids.com.

Products

InteliChild will be offering a steadily increasing mix of three lines of products:
  1. Toys and Games: carefully selected toys and games that appeal to the target market, the parents of the target market, and educators. 
  2. Books: there should be a selection of books that appeal specifically to the parents and educators of the target market, so that these interested adults can go to this site and order books about their children.  In addition, of course there is also a selection of books to be ordered by and for the kids to read. 
  3. Software: carefully selected software to appeal to the target market and target parents and educators.

Product Description

In the original plan this is a detailed description of the specific toys and games, books, and software that are included on the website.  This level of detail was considered proprietary and was removed from the plan for purposes of illustration.  If you are using this sample plan as an example, then insert here a detailed list of your own products for your own plan.

Competitive Comparison

In the original plan this is a detailed description of and analysis of other channels and sources from which the target market and parents and educators can purchase toys, games, books, and software.  It describes in general some kinds of toy shops, and then specifically some catalog and web businesses that appeal to this audience.
This level of detail was considered proprietary and was removed from the plan for purposes of illustration.  If you are using this sample plan as an example, then insert here a detailed description of your competitors for your plan.

Sales Literature

Our answer to sales literature is the web.  Within six months we should also have a printed catalog that we can send to people to go along with the Web purchasing process, because some buyers will want to refer to a hard-copy catalog. 

Sourcing

In the real plan this section referred in detail to distributors and products they carried.  This detail was considered proprietary and strategic, and was omitted from the sample plan for purposes of illustration. If you are using this plan as an example, then in this section you should have detailed discussion of how the products to be sold can be purchased from manufacturers and distributors.

Technology

The InteliChild.com e-commerce site will be built on a three-tier structure. Driven by SQL™ servers and an IIS™ Web server backed with bandwidth, the site will be coded mostly in ColdFusion™ and ASP™. We will be taking our registration databases live to be able to email updates on products and the website to customers. We will offer customers the option to take themselves out of the list.
The information architecture will be based on four fundamental arenas - the free valuable information arena, the product detail arena, the final purchasing arena, and the purchase administration area.
The purchase arena will require a Verisign™ certificate and a Cybercash™ connection. That will begin immediately because dealing with Cybercash™ can sometimes be a lengthy process.
The administrative arena will be hosted on mirror servers that query to the live databases for migration into local databases. This server is hidden from Internet traffic and kept under high security even within the company.
The entire set-up will be somewhat costly. We will need five servers, two for in-house reasons, and three for Web hosting reasons. Two of the Web host servers will be serving traffic through ColdFusion™ and ASP™ in cluster, and the third will be a dedicated SQL™ server.

Future Products

The Internet reinvents itself every three months, or even faster. Our strategy for future development is to remain positioned with enough flexibility to adapt new technologies, and adapt to changes quickly.

Market Analysis Summary

The InteliChild.com market has been expanding exponentially with the advances of technology in the teaching sectors and the acceptance of technology as a teaching aid. The critical component to our entrance into the market will be approval and support from the school communities - including teachers, the PTA, and special education programs.

Market Segmentation

Our primary target markets include these four areas:
  1. The kids themselves. We include ages 5-9 and ages 10-14 in our market statistics because these are the breakdowns available at www.census.gov, and we include only 10% of the total in each category. 
  2. Parents. We include 10% of the parents, assuming that leads to an average combined income above $100,000. Most of these people live in suburban areas, but the urban upper class is also a major component. [Editor note: details for this sample plan are not necessarily correct.] 
  3. Educational institutions for the children of the upper class. This includes day care and private schools. Penetrating this market is excellent because it generates leads to our other targets. We include 107,000 schools in the U.S. in our table. 
  4. Self-teaching families. There is an excellent group of established customers who teach their children from home. The site will benefit greatly from the time available from this target group.


Target Market Segment Strategy

While we have plans to expand into international territory, our initial launch will target our most important market - the American upper class. We know that most of our clients drive BMW's and have very good taste - they spend money on their children because they can appreciate the technology that we have created. They also generally have high bandwidth connections, and are impressed by first-class design.
The market for intelligent technological teaching devices is growing exponentially. The key factors driving this growth are the increase in salaries in the technology sectors, the double-income household and the loss of leisure time. Hardworking parents are dedicated to giving their children every educational opportunity possible. Our target market's behavioral patterns are changing dramatically as well - research used to happen in many places; now increasingly it happens on the Internet.

Market Growth

The macro-environment is the real reason for the urgency of the InteliChild.com e-commerce project. All trends in our market indicate that strong a Web presence will not be a frivolous extra for the company, but rather, an absolute necessity. As mentioned before, the double-income family in the technological sector is doing their research on the Internet. In order to survive, InteliChild.com must be present as a destination for these search results.

Market Needs

The InteliChild.com website will have to reflect its product line - simultaneously fun, easy to use and informative. In order to gain recognition for our site efforts, we are going to have to put together a site that is worthy of attention. The design work should promote the feeling of superior quality. The InteliChild.com attitude will match the company's inherent value drive - parents and educators will feel guilty not buying into these products.

Industry Analysis

The website industry is exploding. Growth is absurd, amazing. We don't have business reasons to detail this situation in this plan, our readers are aware of it.

Competition and Buying Patterns

This is sample text describing factors in competition for website use by bright children ages 8-14, for sales to their parents and schools. It details information available about the importance of factors such as pricing, shipment, quality, presentation, etc.

Main Competitors

Our competition is the market leader - and their success is a symbol of our potential market. We were pleased to see their Web division spin-off to its own company that went public with a tremendous initial offering. The market is too large for them to cover entirely, and as a second-best in dollar market share, with better reviews from the critical industry leaders, InteliChild.com stands in a position to expand our business significantly.

Industry Participants

This is sample text describing the different companies addressing the same target market. The real plan included details on which companies sell products (toys, books, or games) into this market. It includes who owns them, how much market share they get (according to available information sources), and what we know about their assorted business models.

Distribution Patterns

This is sample text describing the different websites addressing the same target market. The real plan included details identifying these websites, who owns them, how much traffic they get (according to available information sources), and their assorted business models.

Web Plan Summary

The primary InteliChild.com strategy is to build an impressive destination website. The marketing of the site will be built around the core value that the site will offer. Although our competition has built a simple store for ordering the product, the InteliChild.com site will be reviewed by Web award companies as a great destination. We will build our revenue and market share around this traffic.
Our business model is based on the sales of our products over the website. Because the site is also intended to increase brand equity and awareness, we are building for high traffic. Our model requires giving users an excellent free experience and to develop trust to increase sell-through. We plan to lose money for at least three years while we build traffic and develop our position for the long-term future.
The traffic forecast is based on increasing sessions, increasing page views per session, and increasing orders per session.  The bottom line called "sell-through" is the overall dollars in order per user session, an important indicator that should be increasing over time.

Website Marketing Strategy

Our first class design and product quality are critical to our positioning as a dot-com company - we should be the best reviewed website in our category, and that will become the key to future sales. In the past, our design work and marketing has not matched our better-funded competitor. However, the core experience for the children has always been better, and with a new design team and a round of financing, the InteliChild.com company is ready to grow with the market. InteliChild.com will distinguish itself from its competitor as a full learning center, rather than just a store front.

Development Requirements

Of course the development needs to match the overall business strategy as explained in the rest of the plan.  This has to be an excellent site or we just haven't implemented.  That involves both front-end and back-end strategies, as explained in the following topics.
Front End
Because InteliChild.com's target customers are all affluent, we have the luxury of using the latest technologies to impress the visitors with excellent design and animation. We plan to release the site entirely in Shockwave™ format as almost 90% of our visitors will already have it installed.
We will carry on the colorful and extremely well branded design of our company literature and logo - the decisions on basic aesthetics will not get in the way. The site will have a colorful and intelligent design, taking the ad campaign and product art into an interactive medium on the Web.
Back End
The InteliChild.com e-commerce site will be built on a three-tier structure. Driven by SQL™ servers and an IIS™ Web server backed with bandwidth, the site will be coded mostly in ColdFusion™ and ASP™. We will be taking our registration databases live to be able to email updates on products and the website to customers. We will offer customers the option to take themselves out of the list.
The purchase arena will require a Verisign™ certificate and a Cybercash™ connection. That will begin immediately because dealing with Cybercash™ can sometimes be a lengthy process.
The administrative arena will be hosted on mirror servers that query to the live databases for migration into local databases. This server is hidden from Internet traffic and kept under high security even within the company.
The entire set-up will be somewhat costly. We will need five servers, two for in-house reasons, and three for Web hosting reasons. Two of the Web host servers will be serving traffic through ColdFusion™ and ASP™ in cluster, and the third will be a dedicated SQL™ server.

Strategy and Implementation Summary

This is sample text only. The original was very proprietary, describing the company strategy in detail. This is sample text only.

Strategy Pyramid

This is sample text only. The original was very proprietary, describing the company strategy in detail. This is sample text only.

Competitive Edge

Our key competitive advantage is the in-house knowledge base we have developed. Our competitor spends five to 10 times the amount of money we do out-sourcing to expensive companies for services we perform in-house. The same will take place with the InteliChild.com website. We already have the SQL™ server and ColdFusion™ programming expertise, and we will be adding the Flash™ integration of these skills.

Sales Strategy

This is sample text only. The original was very proprietary, describing the company strategy in detail. This is sample text only.

Sales Forecast

The sales forecast in the following table and charts is based on increasing website traffic and increasing sales per unique user session. Sales are projected to rise exponentially from 2000 through 2002. The forecast obviously depends on traffic increase.



Sales Programs

This is sample text only. The original was very proprietary, describing the company strategy in detail. This is sample text only.

Marketing Strategy

This is sample text only. The original was very proprietary, describing the company strategy in detail. This is sample text only.

Distribution Strategy

This is sample text only. The original was very proprietary, describing the company strategy in detail.

Marketing Programs

This is sample text only. The original was very proprietary, describing the company strategy in detail. This is sample text only.

Positioning Statement

This is sample text only. The original was very proprietary, describing the company strategy in detail. This is sample text only.

Pricing Strategy

This is sample text only. The original was very proprietary, describing the company strategy in detail. This is sample text only.

Promotion Strategy

This is sample text only. The original was very proprietary, describing the company strategy in detail. This is sample text only.

Strategic Alliances

This is sample text only. The original was very proprietary, describing the company strategy in detail. This is sample text only.

Value Proposition

This is sample text only. The original was very proprietary, describing the company strategy in detail. This is sample text only.

Milestones

The milestones graphic illustrates key implementation activities. The most important milestone to reach will be the design templates. During that time we will be putting together the back-end phases, and both milestones should be achieved at the same time. After that point, integration can begin between the back-end and the front-end phases. Our next milestone will be the beta release, followed by the full launch two weeks later.


Management Summary

Our producer, Sonny Cieliblu, will head the InteliChild.com project. This full-time position will oversee all activities for the project. Sonny interfaces with each partner and staff member. This places Sonny in the role of administrator and coordinator of development and marketing activities, but also requires him to implement training and individual development activities for each partner. We all recognize the challenge Sonny faces as an employee, coach, and supervisor.
More sample text here, not useful for purposes of example, describing the people involved and the management structure.

Organizational Structure

We need an agile organizational structure that recognizes the need for a smooth flow of ideas and implementation between sales, marketing, and website development.  We can't allow the team to think as if these were separate functions.
On the surface, however, we have the president dealing with three direct reports: admin/finance, sales/marketing, and web development.  In fact we are not going to manage with a strict hierarchy, because we need to emphasize the team.  Still, particularly as we grow in size, structure is necessary.  We will want to preserve decision-making power, and the ability to act, rather than trying to do everything by consensus.

Management Team

Person 1: More sample text here, not useful for purposes of example, describing the people involved and the management structure. 
Person 2: More sample text here, not useful for purposes of example, describing the people involved and the management structure. 
Person 3: More sample text here, not useful for purposes of example, describing the people involved and the management structure. 
Person 4: More sample text here, not useful for purposes of example, describing the people involved and the management structure.

Management Team Gaps

We agree that the most obvious weakness at this point is the lack of seasoned professional management with experience.  This is what the investors call the "gray haired factor."  We will be looking to add more experience to the team as we build our administrative and financial capabilities.

Personnel Plan

The following personnel plan details our plans for the ramp-up. We start with the four key founders; by the end of 2000 we should have 14 people, and 18 by the end of 2002.

Financial Plan

This is an Internet venture that, of course, depends on the developing financial prospects of the growing Internet world. To make it work financially, we need to increase valuation on schedule to bring in substantial additional capital. The following table defines the investment offering for investors. Specifically:
  1. The exit strategy is acquisition in 2003, valuing the company at more than $20 million.
  2. Equity plan and valuations at time of exit are detailed in the section that follows, "Exit Strategy." The plan assumes an ending valuation of $20 million based on market trends, with IRR of more than 100% for all investors.

Important Assumptions

The general assumptions are listed in the following table. Obviously these are detailed financial assumptions, trivial compared to the underlying critical assumptions, which include:
  1. Continued growth of Internet usage. We accept published forecasts that say 4% of the world's population presently uses the Internet, and that will grow to 11% by 2005. That's strong growth.
  2. No e-commerce disaster scenarios. We'll have no huge problems with credit card authorization, shipping, etc.
  3. Continued support of financial markets, which means continued rise in valuations of Internet companies, even Internet companies losing money. The increase in valuation is critical to our financial strategy.

Key Financial Indicators

The following benchmarks chart indicates a very ambitious increase in sales and matching increases in operating expenses. We expect to improve ratios of inventory, payable days, and collection days.
One of the more important assumptions is that we can increase sales at a very high rate without corresponding increase in operating expenses.  This is because of the leverage available in use of Internet technology as our main marketing and sales channel.


Break-even Analysis

The break-even analysis is a good financial indicator.  The following table and chart show break-even based on sales level per month and a high monthly fixed cost.  Given those assumptions, we reach steady-state break-even by the end of this first year.



Projected Profit and Loss

Despite the present trend towards investors encouraging losses for website businesses, we believe that we can turn a profit by the third year.  We also intend to reduce losses significantly in the second year, as shown by the following table. Nevertheless, the investment in on-line and off-line advertising is substantial, and the traffic justifies the loss.





Projected Cash Flow

As is to be expected in this kind of venture, the cash flow is supported mainly by new capital from new investment in the company. We've scheduled additional rounds of financing to make that realistic.


Business Ratios

Our ratios, as projected here, are typical of the kind of growth company we project.  The comparisons are based on NAICS code 454111, Electronic Shopping.  We do expect our gross margin and sales per employee to be much higher than standard retail.

Exit Strategy

Details of the exit strategy are included in two following tables:
  1. The Investment Analysis table details how we expect valuation to proceed over time, linked in to the planned rounds of financing.
  2. The table included here shows how we plan to distribute equity and shares over time, and planned ending valuation of $23 million and investment yield for three rounds of investment.


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Business plan for online gifts and home garden business

Executive Summary

G-T Enterprises is owned by E. Gwen Hultquist and her husband, Timothy A. Hultquist. While primarily operating the Web store, Grapevine Country Gifts at www.grapetime.com, the owners are also vendors at consumer gift shows, home and garden expositions, summer fairs and festivals; these events help us to promote the Web store. By the end of the third season, both online visitors and purchases have increased significantly over the previous year, despite the difficulties of a slow recovery of the national economy.
The owners of G-T Enterprises believe that continued growth of the business can be accomplished with:
  1. Serious revamping of the Web store (already in progress) and increased promotions;
  2. Sponsoring special community events and fund raisers for local organizations;
  3. Renovation of an existing building to safely store inventory and set up a more efficient packing and shipping area;
  4. Increasing the number of shows/events aimed at upscale consumers;
  5. Purchasing seasonal and regular inventory in larger quantities for better price breaks.
While the sales growth has been anticipated and welcomed, it has come a little late for financial recovery of debts incurred to reach this point. We need financing to renovate the existing storage space (our barn), alleviate the outstanding debts and release credit lines for product purchases and advance payments that are required for space rental at shows, festivals and other market events. In addition, financing will prevent us from missing opportunities for obtaining and selling "ground floor" products before they become available by other merchants on the travel show circuit.
In the local community, there are limited opportunities for unskilled employment for young people. We expect to hire high school students for stocking, packing, shipping, and training on other business activities. These students can benefit from our experience and education, and we hope to be role models for them, encouraging them to further their education or pursue their ambitions of entrepreneurship. In addition, we will be sponsoring special events (i.e., "SummerFest," 4th of July activities) and fund raisers for local organizations (schools, churches, other groups).
Our two main suppliers manufacture in the United States, so our sales are contributing to keeping jobs in America. We continue to seek out and direct-buy American-made products that we can offer at reasonable prices and receive a fair profit. We also have potential resources, with adequate funding, to obtain quality and highly saleable merchandise appropriate for fundraisers.
We are seeking $40,000 in long-term loans to finance renovation and restoration of the existing barn for use as a warehouse, and to maintain positive cash balances throughout the months we are occupied with the renovation.

1.1 Mission

Company Mission
Grapevine Country Gifts is a celebration of the home. Our mission is to provide unique and affordable home accents and gifts for the quality- and style-conscious consumer. We will make our products easily accessible with a presence online and at various shows and festivals.
Customer Creed
Grapevine Country Gifts takes pride in its customer service, good communication, and guaranteed satisfaction of consumers' purchases.
Employee Pledge
Our employees will enjoy a friendly and fair work environment, which rewards hard work and offers opportunities for training in a variety of business activities.

1.2 Objectives

  1. Continue to provide unique quality home and gift products at reasonable prices on the Internet and at consumer home/gift shows;
  2. Generate minimum total revenues of $125,000 by the end of year one;
  3. Expand and maintain Web store to increase revenues to create attractive purchase by year five;
  4. Realize an annual growth of approximately 45% in year two;
  5. Realize an annual growth of approximately 20% in year three and each year thereafter;
  6. Establish a following of customers in a specific road show circuit of 24-36 shows per year: Home & Garden Shows, Shipshewana On The Road, Summer Festivals/Arts & Crafts Shows;
  7. Seek out additional quality products to include in our product mix.

1.3 Keys to Success

The primary keys to success for the company will be based on the following factors:
  • Home based facilities that reduce overhead expenses and maximize profit margins.
  • Products that provide quality and value to the consumer while meeting needs for an expression of personal style.
  • Customer services, such as obtaining obscure and discontinued products (specifically Spoontiques Pin Art and Ear Art), and personalized promotions, so that customers are encouraged for repeat purchases and make referrals.
  • Communication with our customer base through email and postcard mailings.
  • A visible, accessible and welcoming Web store to position us as the preferred choice for our products and services within the marketplace on the Internet and local communities in our 4-state region.
  • Practice of daily management tactics, so that a successful and growth-oriented business is developed and maintained.


Company Summary

Grapevine Country Gifts is an Internet-based Web store spun off by G-T Enterprises. It began as an experiment for the design of an e-commerce site after a G-T customer refused to pay for development of a similar site because, "it wasn't making any money," within the first four days of implementation. Launched in January of 2000, the site was submitted to search engines about four months before search engines began charging for submission. Even though the site began attracting visitors, sales were slow at first, due in part to an inadequate (but costly) payment processing system which has since been replaced. With this early system we often had to meet suppliers' minimum order requirements in order to fill a single customer's order, as inventory levels were being built.
Our new system is much more efficient, and the higher sales volume we are now processing has streamlined our inventory management. Last year's sales revenues were more than 6 times higher than sales the year before that. We expect continued growth, at a much slower pace, in the foreseeable future.

2.1 Company Ownership

G-T Enterprises is currently a partnership owned by the married couple E. Gwen Hultquist and Timothy A. Hultquist. Gwen Hultquist is the majority owner and manager for both G-T Enterprises and Grapevine Country Gifts. Tim Hultquist is sole owner and manager of Technical Computer Support (TCS), a small-business computer consulting company for sales, installation, integration, networking, maintenance, and support, which is not part of this business plan. The owners both hold Bachelor of Business Degrees from Western Michigan University, Kalamazoo, Michigan and have had several years' of management experience prior to self-employment.
This business plan is based upon the consolidation of Grapevine Country Gifts (the Web store) into the pre-existing G-T Enterprises, which has so far focused on selling similar products through road shows. These endeavors are very similar, and combining them under the same company will greatly simplify our financial and marketing strategies, by treating them as different revenue streams in a unified plan. The larger G-T Enterprises will remain a partnership between the Hultquists, with Gwen as the majority owner.

2.2 Company History

G-T Enterprises began in 1999 as a website consultation, design and development firm for small- to medium-sized businesses. Various events led to the addition of the Web store, "Grapevine Country Gifts and Collectibles" (now simply, "Grapevine Country Gifts"), selling primarily Pin Art, Ear Art and miniature lighthouse replicas by Spoontiques©. We added hand painted Artistic Glass by Artistic Gifts© and other miscellaneous products from various vendors. In the spring of 2002, as a means of promoting the Web store, we began exhibiting and selling our products at consumer gift shows and home shows in a four-state area. "Newbies" in this area of commerce, the first show was a complete bust with the exception of gaining valuable experience in evaluating shows and developing organizational skills for setup and booth layout.
Operations of the business are conducted on our 100-year-old family farmstead, now reduced to approximately five acres. A 16' x 24' barn and a smaller antique outbuilding were converted and renovated for office/work shops. The three-story barn was re-roofed in 1995, along with the house. It is structurally sound, but requires extensive restoration and renovation for use as storage for product warehousing, packing and shipping. The home-based operations greatly reduce our overhead expenses and a fair portion of utilities and other related household expenses can be charged as business expense.
G-T Enterprises' start-up capital of $1,000 was originally provided by E. Gwen Hultquist. Her husband, Timothy A. Hultquist, has, among other things, supported the company financially, mostly by providing 'no-interest' short-term loans to cover working capital requirements. At the starting year of the current business plan (FY2004), Mr. Hultquist has provided a total of $20,000 of no-interest loans that need to be repaid within three years.

Products

Grapevine Country Gift's product line is extensive. We offer basically the entire Spoontiques vendor catalog of several thousand items, although we concentrate on several popular designs of Pin Art, Ear Art, step stones, and other unique items. Artistic Gifts has many designs of art glass in seven sizes, most of which are featured on the Web store.  Because of the large quantity of items and styles, it is not feasible to inventory all products; our website features those products we know to be bestsellers. However, any of these items can be purchased from Grapevine Country by special order, either at shows, by phone, or online.  Artistic Gifts will drop-ship for a nominal fee.  
Because of the relatively long lead time between a customer's order, arrival of the goods and subsequent shipment to the customer, Grapevine Country has found that certain items maintain a marked popularity and we stock these items ready for immediate shipment.  Wholesale value of inventory is approximately $6,000 at any given time. G-T Enterprises constantly searches for unique products that will offer value, fun, and appeal based on interests shown at shows and search strings in the Web store statistics.
Our products focus on personal style and interests. Spoontiques Pin Art and Ear Art are novel theme-based designs that excite buyers to purchase either for themselves or as gifts for someone else. The monkey and moose earrings are bestsellers, with anything in frogs or cats following closely. Our secondary product lines change as we find exceptional values. Summer show products are concentrated on products for the entire family and children as well as the home and garden décorand personal gifts.

Market Analysis Summary

Our target market is women over age 40, with household income over $60,000. With high disposable income, mature adults (empty nesters) redecorate their homes to reflect their tastes more than was possible when there were young children in the home.
Last year in the U.S., female consumers produced the highest growth rate in online sales, accounting for 52% of online purchases, an increase of 5% over 2002. Nearly 54% of those purchasers are in our target age group. Gifts and flower sales online were up 56% this holiday over last. Home and garden purchases were the top category in the 2003 holiday buying season, experiencing a 27.9% increase over 2002. This female target market is the primary purchaser of household gifts and home décor. The mature audience shopping online is expected to increase by 16%, compounded, per year through 2008. (Network World Fusion, Jan, '04, U.S. 2000 Census; Jupiter Research, Feb,'04)

4.1 Market Segmentation

As stated above, the company's target audience is women over 40 with a household income over $60,000. In terms of sales channels, we believe that about half of our target clientele will be reached through our website, with the other half split between the ones we reach via our participation in road shows and special events. We also forecast that the pool of potential web clients will grow at the fastest rate (at 20% annually), while the client base for road shows and special events will be growing at 15% and 10%, respectively, as summarized in the table below.

4.2 Target Market Segment Strategy

We know that the target market segment we have selected is already predisposed to seek out our products. Comfortably well-off women over 40 make up most of those attending home and garden and other shows at which we exhibit our products. Our presence at these shows has increased monthly visits to our website by 413% in the past year.
While online purchases by women over 40 continue to rise, publications by Jupiter Research in February, 2004, project that similar women over 60 will be expanding their Internet experience and expenditures at even higher rates in the near future. By expanding our presence on other shopping sites, we will continue to increase our access to this group.  Linking with other popular sites through a LinkShare program will not only provide additional revenues with "click-through" purchases, but associate Grapevine Country Gifts with other quality merchants on the Internet frequented by our target market.
Market Needs
Home redecoration allows women to reflect their tastes and use their creativity to make their homes truly special to them. Quite often this means that a woman looks for some rare, limited-edition item that will bring comfort to her home and peace in her mind. Although home decor products are carried by many retailers, out-of-stock items are hard to find, since few stores special-order items. While a few hard core collectors find the thrill of searching for rare items appealing, most of our customers who would like to decorate their homes favor convenient ordering and reasonable prices.

4.3 Industry Analysis

Post-2003 retail sales reports indicate that economic concerns and comfort levels for buying on the Internet are improved. Holiday sales, exceeding projections, were up 29.5% over 2002 – reaching $12.5 billion (excluding travel and auctions). (Network World Fusion, Jan. '04)  Although predictions for retail sales growth in 2004 are a little slow in coming, the recovery can be seen in sales bursts on the web and increased sales at Spring shows.

4.3.1 Competition and Buying Patterns

Competition for jewelry and home décor is stringent on the Internet and at consumer shows. Many online and traveling merchants have been in existence for a longer period and have established recognition. Our products are also carried in fine gift shops, such as Hallmark stores, and in major department stores. Many of our competitors have additional advantages because of their greater size, which allows them to more easily absorb losses on unpopular products.
Our targeted consumers are seeking convenience and value in their purchases. They want a wide selection to reflect their own individual styles, and easy purchase processes at good prices. Our switch to an easier payment process has shown how important it is to our customers to have a secure, transparent, and reliable purchase process with good customer service. This one change is responsible for at least half the strong sales growth we have seen in the last year.
Customers who come to shows and festivals where we exhibit are also seeking convenience and value, but our competition at these shows is largely the other vendors. A potential customer arrives with at least a subconscious notion of how much she is willing to spend, and on what, while at the event. Sales made by other vendors are money taken out of our pockets. Competition here is about value, attractiveness of displays, good selection, and friendly, in-person interactions. 

Strategy and Implementation Summary

We will focus our strategic efforts on promoting sales through our website. We see our key target audience as women over 40 years with disposable income of over $60,000. Customer reach will be increased by advertising with the main search engines. Our sales message will emphasize customer service and communication. We will do our best to source products for customers' orders by further strengthening our relationships with key suppliers, such as Spoontiques and Art Glass. Our website will be promoted through participation in key shows and exhibitions, where we will strive to establish rapport with our key target audience and ensure repeat sales.

5.1 Competitive Edge

Our competitive edges are our popularity, accessibility, flexibility, and ability to deliver. Any search engine brings up Grapevine Country in the top 5-10 listings on the search string, "Spoontiques Pin Art," and we are beginning to be found by searchers for Art Glass. We are developing a customer base and followers (called "groupies" by one show promoter) to our shows.  Previous year's customers have returned for additional purchases. Our marketing strategy will enforce and enhance our competitive edge for additional growth.
Our main competitive edge over gift chains and retail stores is our ability to deliver out-of-stock and hard to find items through special ordering. In addition, our website is more navigable and friendly than those of most large stores who carry similar products as a side-line. Our focus on home decor and jewelry allows us to highlight entire collections that get short shrift on competitors' online listings.

5.2 Marketing Strategy

Road shows and festivals were originally a means of promoting the Web store and will continue as such until the demands of the Web store reach our goals. Despite the travel and hard work involved, as "people persons," the opportunity of meeting customers face-to-face has been profitable. Even though the Artistic Glass has been sold in upscale gift stores for more than 10 years, many people are seeing it for the first time. Our show schedule is maintained on the Web store and customers seek us out when we exhibit in their area or, as it has happened, within a 2-hour drive. When possible, discount coupons for show purchases are sent to customers in regions of upcoming shows. Scented Roses tagged with the Web store URL and coded discount coupon on their next online purchase are presented to selected customers. We are purchasing "pay-per-click" listings on affordably-priced shopping websites (www.shopping.com and www.business.com) and expect to upgrade to shopping directory at www.Yahoo.com by the end of the year. These expenses are not reflected in the attached financial projections as the number of clicks are difficult to project at this point. However, the cash flow projections indicate there are sufficient funds to proceed.

5.3 Sales Strategy

We focus a large amount of energy on customer service and communication. The fact that we are often able to obtain out-of-stock, retired/terminated, or hard to find Spoontiques Pin Art is based on the great rapport we have with the company. We frequently receive referrals from Spoontiques, as well, because they know we stock many of the popular pieces that the general public cannot buy directly from the company. There have only been three instances in two years when a product was completely unavailable. We also special order items for a customer, a service not generally provided by gift stores or other sources.
We offer our customers multiple secure payment processing options, so they can use whichever process they feel most comfortable with. Customers placing orders by phone are extended every courtesy and can count on receiving quality products at a fair price. We also have an order form online that can be faxed to our office.
Payment options on the Web store started with an online credit card processing that proved to be costly, with too few sales in the beginning to be financially prudent. PayPal added merchant accounts to their program, and when our shopping cart provided a PayPal gateway, we switched. Unfortunately, PayPal was also a discouraging and difficult transaction facilitator, and several sales were lost until we emailed or called to offer alternative payment options. (PayPal recently upgraded and improved their program but it is less frequently used than our offline processing.)  
In early Spring of 2003, the shopping cart was upgraded to allow offline processing (manually, on our company credit card terminal) and sales soared. We provide additional payment options – checks and money orders, since there are still people concerned about providing their personal information on the Internet or over the phone.  However, shipments on the non-credit card paid orders are dispatched only once funds are collected, so for cash flow planning purposes, all sales are treated as cash sales.

5.3.1 Sales Forecast

2003 was our first profitable year, producing expectations of continued growth. We believe that our new payment options and marketing strategies will produce continued growth over the next three years, although probably not at the same explosive rate.
Based on current trends, and our own sales results, we are forecasting almost 50% growth next year, with continued high growth in online sales, and slower growth rates for our other revenue streams.
Our break-even point was based on an average sale of $21 at shows and $27 on the Web store. By increasing the incentives and awareness through promotion, we expect to raise the average sale to $35.  The spring shows and sales have been a little disappointing due to consumers' concerns about the economy.  However, while attendance at road shows is down, visits to the Web store have increased. We were able to establish 4 new web design clients which assisted cash flow.
Sales in the first quarter will be slow, as we begin preparations for renovating the barn and working out of an alternate site on our property during construction. We will be able to return full-time attention to generating sales in April.





Web Plan Summary

Our website (www.grapetime.com) is currently producing the largest revenue stream of all Grapevine and G-T Enterprises' endeavors. After initial difficulties with payment processing, we enabled offline payments (phone, fax, money orders, and checks) and saw immediate and dramatic changes in completed sales. We will continue to offer these multiple payment options while highlighting the website as our online showroom/catalogue. Our website offers the flexibility of changing our listings as soon as our suppliers release new products. There is no time waster waiting for printing, and no expense to absorb for obsolete catalogues.
We will expand awareness of our Web store with increased online marketing. We will place banner ads on sites popular with our target market, and "pay-per-click" advertising with sites hosted by our suppliers (Spoontiques, Artistic Glass, etc.).

6.1 Website Marketing Strategy

Since our primary sales are from the Web store, fundamental efforts will be concentrated on drawing buying visitors to the website. Special enticements to convert the general browser to purchase will be implemented. Some of these strategies include:
  1. Executing a simple and quick exit survey when no purchase occurs, to determine what deterred a potential customer from purchasing.
  2. Offering e-mail sign-up notification, where e-mail address is never shared with any third party for any reason, of new products and special offers or seasonal savings.
  3. Offering first-time customers a coupon discount on their next online (including phone or fax) order for referring a friend who makes a purchase online.
  4. Shipping free or breaks on purchases over $50.
  5. Listing the Web store on specific shopping sites (pay-per-click) for shopper leads.

6.2 Development Requirements

The Web store is established and in the process of functional upgrade. Payment processing options are in place and working efficiently. The shopping cart, which costs $200 per year, is upgraded for more benefits and is probably one of the easiest carts to navigate on the Internet.  Cooperative linking will be increased and is currently effective in producing additional indexing by search engines.  We have set up our own web host service which is paid for by current web design customers.  We have joined a linkshare program that earns a commission on purchases made by customers clicking through our site.  All our web design customer sites have links to our store, many have other external reciprocal links with other sites.

Management Summary

The owners, Gwen and Tim Hultquist, have had several years of management and business experience prior to self-employment. Ms. Hultquist was project administrator for an educational grant at a local university, overseeing annual budgets of several hundred thousand dollars over 10 years. She has operated the Web store for three years, bringing it to profitability in 2003. Mr. Hultquist was a production manager supervising several dozen employees at a technical electronics manufacturing company for seven years until the company was purchased by a foreign entity. He has been conducting his business of computer consulting since 1992, experiencing an annual growth of approximately 30%. He contributes objectivity, technical support, and in the first two years, financial support to the business. [Technical Computer Support operates separately from Grapevine Country/G-T Enterprises and is not an instrumental part of this business plan.] Both have Bachelor of Business Administration degrees, with honors, from Western Michigan University. 

7.1 Personnel Plan

The personnel goal of the business is to provide employment opportunities to 8th to 12th grade students for after school and occasional weekends when we are not participating at shows. These students would be utilized primarily for packing and shipping web orders, unpacking and storing inventory, doing data entry for invoices and other non-private information processing computer activities. We would also employ certain students for lawn care and assisting in making the grounds more presentable to visitors and/or customers. Some shows are within daily driving distance, not requiring overnight accommodations and occasionally desirable shows occur on the same weekend. We would be able to "double-book" same-date shows with a competent assistant for break relief. Each individual would need to be adept at operating a cash register and handling cash, and also processing check and credit card transactions.
We expect turnover to be considerable due to conflicts of extra-curricular activities and personal schedules, as well as times when a student employee simply does not work out. Student employees would be paid a little better than minimum wage and receive additional benefits since they would not be eligible for insurance, etc.
It may be necessary to employ additional staff on a seasonal basis from time to time. Such will be determined on an as-needed basis.

Financial Plan

This section outlines our financial goals. Our plan is to maintain a 50% gross margin and a net margin of 6-9% (after the first quarter of 2004, once barn renovations are complete). This should allow us to remain profitable and have a solid cash flows that will help us repay both our long-term loan and the no-interest loans extended by the owner's husband, and to steadily grow the net worth of this business.
The Profit and Loss statement shows our operating expenses, including portions of the mortgage and utilities for business-only areas and usage. Our general marketing expenses are low, because most of our sales are currently being generated through personal contacts at events, and by word of mouth about our website. We are allocating roughly $500 per year for increased online marketing, which our research indicates will be sufficient for reaching our target market. We project net profit rebounding soon after property renovations are completed.
The Cash Flow shows our loan repayments, as well as money to be spent on barn renovations (as increased asset value). The long-term loans we are seeking will help us to maintain a positive Cash Balance while performing needed work on our storage area (the barn) and increasing sales.
The Balance Sheet shows our increasing net worth over the next three years, as we pay off loans, increase assets, and retain greater earnings within the business.

8.1 Important Assumptions

Our financial model is build on the following assumption:
  • All capital assets are depreciated on a 10-year, straight-line basis
  • No-interest loans provided by Mr. Hultquist in the total outstanding amount of $20,000 will be fully repaid within three years ($6,670 per year)
  • Long-term loans at 7% interest will be repaid within 8 years.
  • For cash flow planning purposes, all sales are treated as cash (no accounts receivable).

8.2 Business Ratios

The table below summarizes our key business ratios and includes industry averages for comparison. Industry data comes from the "Gift, Novelty, and Souvenir Shops" industry (SIC Code 5947). Unlike most gift and small-art item retailers, the majority of our sales are online, so our asset and inventory ratios are unusual. 
As we accumulate cash and reduce loans, our solvency ratios will significantly improve. Since the bulk of our products will be sourced after we receive customer orders, our inventory levels of most popular items will be below the industry average ranges.

8.3 Break-even Analysis

Assuming variable costs of 48% our analysis shows that to break-even we need to have monthly revenues as summarized in the table and chart below. After barn renovations are complete, we should surpass that sales volume by May of 2004.


8.4 Projected Profit and Loss

The table below shows our profit and loss projections. Although we expect to sell some higher margin products in the first months of 2004, we expect that our overall gross margin will stabilize at around 50%. We believe that our new strategy will allow us to average a healthy net margin in 2004, which will eventually stabilize over the next two years.






8.5 Projected Cash Flow

Our cash flow projections are summarized in the table below. The fact that all of our sales are treated as cash-only helps us avoid possible collection problems. More importantly, growth in sales and profits will allow us to start repaying the no-interest loans that have been extended by the owner's husband, Mr. Hultquist, as well as our long-term loans.
Overall, our new strategy should allow us to end 2004 with a cash level sufficient for smooth inventory management.





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