painter... · web viewa delicious business plan. to: mpacc. investors . july 13, 2011. sweet...

A Delicious Business Plan

To: MPAcc Investors July 13, 2011

Sweet Sweat Inc. & Co.Keira Balderston

Mallory DennistonAdrian PapeIshan Singh

Sweet Sweat Inc. Business Plan: Underarm Icing

Contents

1.0 Executive Summary.................................................................................................................................4

2.0 Introduction..............................................................................................................................................4

2.1Product & Objectives............................................................................................................................4

2.2 Mission.................................................................................................................................................5

2.3 Key to Success.....................................................................................................................................6

2.4 Value Proposition.................................................................................................................................7

3.0 Company Summary.................................................................................................................................8

3.1 Background..........................................................................................................................................8

3.2 Ownership............................................................................................................................................8

3.3 Location and Facilities.........................................................................................................................8

4.0 Operations Plan........................................................................................................................................8

4.1 Description of Operations....................................................................................................................8

4.2 Organizational Structure and Floor Plan..............................................................................................9

4.3 Board of Directors..............................................................................................................................11

4.4 Average Business Day.......................................................................................................................12

4.5 Working Capital Forecast..................................................................................................................13

4.7 Operating Expenses...........................................................................................................................14

4.8 Quality Control..................................................................................................................................14

4.9 Website-.............................................................................................................................................14

5.0 Marketing Plan.......................................................................................................................................15

5.1 Market Analysis.................................................................................................................................15

5.2 Competitive Analysis.........................................................................................................................16

5.3 Product...............................................................................................................................................18

5.4 Pricing................................................................................................................................................19

5.5 Promotions and Advertising..............................................................................................................19

5.6 Place...................................................................................................................................................21

5.7 Segmentation......................................................................................................................................22

5.8 Target Market.....................................................................................................................................22

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5.9 Positioning and Strategy....................................................................................................................22

5.10 Sales Projections..............................................................................................................................23

6.0 Human Resources Plan..........................................................................................................................23

6.1 Job Descriptions.................................................................................................................................23

6.2 Planned New Positions......................................................................................................................24

6.3 Wages and Benefits............................................................................................................................24

7.0 Financial Plan.........................................................................................................................................25

7.1 Projected Profit or Loss.....................................................................................................................25

7.2 Projected Balance Sheet.....................................................................................................................26

7.3 Projected Cash Flow..........................................................................................................................26

7.4 Business Ratios..................................................................................................................................26

7.5 Business Valuation.............................................................................................................................27

8.0 Risks.......................................................................................................................................................27

8.1 Outline of Risks.................................................................................................................................27

8.2 Exit Strategy.......................................................................................................................................28

9.0 Summary................................................................................................................................................29

Appendices...................................................................................................................................................30

I Operations Diagram............................................................................................................................31

II Floor Plan...........................................................................................................................................32

III Website...............................................................................................................................................33

IV Market Research Survey.....................................................................................................................34

V Value Curve........................................................................................................................................36

VI Sample Logos.....................................................................................................................................37

Financial Appendices – see Excel Attachment

I Income Statement II Balance Sheet III Cash Flow Statement IV Long Term Debt Amortization V Variable Cost Analysis VI Salaries and Wages VII Financial Ratios

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1.0 Executive SummarySweet Sweat Inc. is competing in the business of manufacturing and distributing natural female

deodorants; uniquely and playfully branded as “Underarm Icing”. Our brand has a descriptive

synergy with icing due to its delicious smell, resemblance through packaging, and creation from

natural ingredients that would not be harmful to ingest orally. We focus on an aggressive

marketing strategy to increase brand awareness amongst our target consumers and cement a

strategic position in the market. Our operations have started small-scale, manufacturing our

product out of our Controller’s basement. Our primary sales channel in the future will be through

our larger grocery stores; however we have already enjoyed small-scale success through direct

marketing in specialty eco-friendly stores, open markets, farmer’s markets and breast cancer

awareness events. Our marketing research so far includes family and friends who are committed

to using our natural deodorant. We will not be looking for further distribution channels until after

the next one to two years of operations. Our executive team is currently able to effectively

manage manufacturing and distribution, and is expected to be able to handle capacity for the next

two years. After two more years we will have stronger market and sales information upon which

to forecast sales volume and necessary capital investments. Our current financial plan includes a

forecast for both small-scale and large-scale operations into the future.

2.0 Introduction2.1 Product & Objectives

“Underarm Icing” is a natural female deodorant, as compared to antiperspirants that contain

proven health harming substances such as aluminum and parabens. Marketing research indicates

that there is an increasing acceptance rate of deodorant over antiperspirants amongst women;

however, there is a limited selection of such natural deodorants and they often fail to adequately

cover body odors. Sweet Sweat Inc. is capitalizing on this opportunity in the market by creating a

strong product line offering a variety of pleasant deodorant scents.

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Sweet Sweat Inc.’s objectives:

1. Become a recognized brand in the female cosmetic industry; known for our commitment to

meeting the daily needs of women without compromising their health.

2. Increase sales exponentially in the next 2 years through aggressive marketing techniques and

a strong internet presence and website community.

3. Obtain financing to increase manufacturing capacity and distribution, through increased

investment in marketing and capital resources.

4. Continue to focus on customer satisfaction and loyalty through quality products, quality care,

and a true commitment to the brand identity.

2.2 Mission

Our mission is to run a profitable business by providing women of all ages with products that

will not harm their bodies. We have started our company through offering a completely natural

deodorant, without hazardous materials that have been research proven to harm women. We will

be promoting the importance of using natural ingredients on women’s bodies rather than taking

the fear tactic of focusing on the harm caused by antiperspirants.

Our goal is to care for women by providing them with a healthy alternative; with an edgy and

recognizable brand. We are always open to customer feedback through a commitment to

obtaining specific comments on what our clients like and dislike about our deodorant. We have

ensured that adequate channels are available to obtain such feedback, and will design a special

dialogue and community comment section on our website. We want to ensure that we are known

for quality and care; being seen as a friendly and approachable brand for women. Although we

have started with one product line, “Underarm Icing”, our long-term vision is to grow to a

capacity and revenue volume with which we could use internal financing to offer a variety of

products (soaps, creams, and shaving gels) that are all natural to a widening customer base. This

future market would include men as well as babies. Although this is a 5-10 year plan, we believe

that dreaming big is extremely important to our visionary success as a small company. This

vision is also contained in our vision statement and is in line with our third objective of obtaining

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financing for future growth. Our vision is “Noticeable annual growth through a passion for

business, healthy products, and a commitment to the needs of our customers.”

Our mission statements as we establish ourselves in the market are: “Promising to protect the

health of women’s bodies through a commitment to quality all-natural products” and “For every

woman caring about her body”.

Our slogan, which has already been quite complementary to our fun and flirty brand name, is

“From sweat to sweet”. This slogan has been successfully used in all of our marketing campaigns

to date. There was an article in a local Vancouver newspaper that took a play on our slogan – “A

company successfully proving that sweating can be sexy” and “You could take this company’s

name to bed with you”.

2.3 Key to Success

1. Marketing, Marketing, Marketing: Each member of our executive team holds true passion for

the business. We all strive to get out into the community and showcase our commitment to both

our product and our customers. Marketing and significantly increasing brand awareness is our

primary step to success and will allow us to establish a competitive edge in the market.

2. Brand: Our brand is connected with the Breast Cancer Foundation and is keen on assisting in

any way possible in the prevention of breast cancer through increasing research. We hope that

this commitment will connect with customers and solidify the identity of our company and our

products.

3. Website: We will be driving sales by first getting our brand into the market and then directing

customers to our website. Essentially our website will include a forum to customers for

providing feedback, as well as additional information on regarding the benefits of our product.

Through our website we will be able to showcase our commitment to women. On our website we

will also direct associate our company with the Breast Cancer Foundation providing a donation

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homepage where support can view upcoming charitable events, obtain more information about

current research, make personal donation as well as communicate with other regarding the topic.

4. Loyalty: A foundation of our promotion will be through word of mouth. Our desire is that

women will want to share our product with their friends and family. Our product has already

proven to be the kind that brings people back to us, and encourages them to recommend our

product to friends and family. We know this as our customer return rate has been greater than

90% to date and 50% of new customers have been through referrals. This indicates to use the

importance of ensuring that people speak from the heart when talking about our brand.

5. Natural Ingredients: Our product contains 100% natural ingredients, without harmful

substances or fabricated chemicals. All of the ingredients have been chosen with the following

mantra in mind: if you can’t bake it, we won’t make it. And this has appealed to our target

market. It is also in line with current trends towards organic alternatives and a greater

commitment to health. This also is why our marketing focus has been through smaller farmers

markets and campaigns where product offerings are often specialized and home-made. However,

as our brand awareness increases, our distribution will be equally as successful through local

retailers such as Capers, IGA and Whole Foods. In Vancouver, all of these locations have special

cosmetic and organic areas where our product would be able to find shelf space.

2.4 Value Proposition

The true value proposition of our product is in the entire experience that it embodies. Our

product not only offers women a healthy alternative to other deodorants and anti-per spirants in

the market, but connects them to the fight for women’s health and the commitment to their

bodies. Through our connection with the Breast Cancer Foundation, and a commitment to

marketing and distribution through channels that promote healthy living, our view is for our

brand to be what inspires women to buy our products. Similar to the concept successfully enable

by Tom’s Shoes, which has enjoyed incredible success in the past few years, we want the brand

experience to be what drives women to pick our deodorant off the shelf. We will be one more

podium on which women take a stand to demand the highest quality 100% natural products.7


3.0 Company Summary3.1 Background

Sweet Sweat Inc. is a new company, with a humble beginning in one of the executive member’s

residential homes. This workplace has allowed us to manufacture our deodorant and distribute it

to a small but satisfied client base. We have been in operation for almost one year and our

feedback so far has been overwhelmingly positive, with women preferring the scent over

antiperspirants and other deodorants in the market.

3.2 Ownership

Sweet Sweat Inc. is small corporation (CCPC), with equal investments made by the four

members of the executive team. Currently we have each invested $5,000, allowing us to

successfully commence and continue operations. Mallory Denniston has been manufacturing this

product for over five years prior to incorporation, and all members of the team have strong

backgrounds in business with CA designations. We are currently able to finance our operations

through internally generated revenues and our initial investments, however in order to expand a

capital injection will be necessary.

3.3 Location and Facilities

As stated, we are currently operating out of a home but as our financial forecasts will show, we

plan on expanding which could include leasing or buying a larger space to meet increased

production demand. The space would be located in a lower-rent area of Vancouver, BC, as we do

not require promotion directly through our location. We will require some investment in

manufacturing and packaging equipment, potentially doubling the current assets that we hold.

4.0 Operations Plan4.1 Description of Operations- Appendix of operations

Please see Appendix I for the diagram of operational flows. The overall capacity of production

will increase from year 1 to year 2, due to the planned expansion of operations. The main

constraint to capacity will be labour hours and machinery. Assuming Mallory produces each

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Sweet Sweat Inc.

Mallory Denniston 25%

Keira Balderston 25%

Ishan Singh 25%

Adrian Pape 25%


batch using one blender at a time (which is the case during the first year of operations), each

batch takes one hour to produce (including measurement of raw materials and mixing in the

blender) and generates 30 units of underarm icing. Therefore, during the first year of operations

Mallory will only have to invest only 33 hours of labour, which can be easily achieved on a part-

time basis.

During the second year of operations, we will increase capacity to two blenders and an additional

manufacturing employee. Therefore, total capacity will be greater than the planned production

during the second year, as per the attached financial plan.

4.2 Organizational Structure and Floor Plan

Sweet Sweat Inc. is an incorporated company, taking advantage of the small business deduction

limit, along with the lifetime capital gains exemption offered to shareholders of the business.

This tax minimizing corporate structure provides an added incentive to potential future investors

of the company. In addition, incorporating has provided limited liability to owners of the

business, and helped facilitate the generation of additional financing in the future through the

ability to issue share capital for growth and expansion. Please see Appendix II for our floor-plan

layout.

The current shareholder ownership is as follows:

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Management:

In the next year of operations, Mallory Denniston will continue to be in charge of all

manufacturing and distribution operations. During this period, Mallory will continue to operate

out of her basement, due to the cost advantages and relatively small scale of production. Given

Mallory’s extensive experience and product knowledge, she can successfully manage this

business and the responsibilities that it entails, including acquiring all raw materials, putting

them together to create the saleable product and packaging them for delivery to customers. As

she will create this product in batches, the time commitment required to make the product can be

flexibly scheduled, thus allowing Mallory to operate the business part-time. Mallory is not taking

a salary during the first few years of operations, as the objective is purely promotional and

awareness-generating.

Considering that the next two years will be focused around marketing and promotion, we will

hire a marketing assistant to help promote the product. This individual will likely be a student

who is passionate about healthy living, has strong communication and interpersonal skills, and

has a desire to mitigate carcinogenic materials used in deodorants and antiperspirants. The

marketing assistant will be paid on an hourly basis, and will be utilized during trade shows,

concerts, cancer-awareness campaigns, and other events. Mallory will be in charge of hiring the

assistant and managing him/her on a go-forward basis.

As indicated in the Marketing Plan, Sweet Sweat Inc. will have a website, to allow for online

sales and promotion. The IT component of website operations will be outsourced to an external

expert, to handle online sales transactions, client technical issues, and website operation/design.

Mallory Denniston will be an administrator to the website, and will actively post in the blog and

answer e-mails. In addition, any orders received through the website will be processed by

Mallory, as she will ship the products to the customers directly from her basement. Any shipping

and handling costs incurred will be passed on directly to customers, thus resulting in no

additional costs to the company.

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In the second year of operations, we anticipate a significant increase in sales. After this increase,

we will look for a larger area to lease (warehouse) from which to produce our product, in

anticipation of increased product demand. We will purchase our raw materials in bulk, thus

reducing our costs due to economies of scale (please refer to Financial Appendix I for the

Income Statement- indicating reduced unit costs in 2012 versus 2011). Mallory will then

transition into a full time role with Sweet Sweat Inc., and will be directing operations. At this

point, the Board of Directors will become more involved in the business, the details of which

will be discussed below. We will hire one full-time staff member to assist Mallory with all

aspects of production, with the potential of additional members in future years depending on

capacity and overall demand. Even though we will not have an office space at this point due to

cost minimization, we will rent offices as we need in order to meet with potential clients,

creditors, and market representatives. This will be achieved through the use of daily office

leasing services, and will enable Sweet Sweat Inc. to maintain a level of professionalism when

conducting business while minimizing fixed costs and overhead.

4.3 Board of Directors

The Board of Directors will be comprised of four individuals: Mallory Denniston, Keira

Balderston, Adrian Pape, and Ishan Singh. Mallory Denniston has direct expertise with the

product, as she has been developing her own deodorants for the past five years. Given her

extensive experience with developing the ideal product mix, including extensively researching in

the very best ingredients to be included, she provides valuable operational and product

knowledge to the Board. All four Board members are CAs, and have previous experience

working for international professional services firms. Each board member provides differing

insights due to having been exposed to various industries through their experience at these firms.

Each Board member also possesses a Masters of Professional Accounting degree.

Beginning in the second year of operations, the Board will take more of an active role in the

business by assisting with strategic planning, as well as marketing and financing initiatives. The

Board will also be involved with preparing financial statements, tax returns, as well as

determining operating budgets, sales targets, and working capital management. The Board will

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be actively involved with the promotion of products by tapping into their existing networks, and

seeking out new networks through which to promote the product. They will meet monthly to

discuss any significant operational issues, along with marketing, strategic, and financing

opportunities.

4.4 Average Business Day

Seeing as this is a small business early in its business cycle, there are no structured activities for

the operation of the business during the first year. In general, common activities during the first

year are as follows:

- Daily:

o Respond to e-mails and monitor customer blog on the website

o Experiment with the ingredients mix based on customer feedback (scent)

o Conduct market research and identify if there are any potential venues or events

for product promotion

o Contact local small businesses to sample and sell product

- Weekly:

o Purchase of raw materials, manufacture product, package, and store

o Receipt of customer orders, package, and organize shipment

o Co-ordinate with marketing assistant, and attend events where product promotion

will take place

- Yearly:

o Prepare the corporate tax returns

o Overall review of strategy, mission statement, and overall objectives

o Re-evaluate progress towards goals and re-assess vision if necessary

o Create formal forecasts to provide to potential investors

Common Activities during the second year will be as follows:

- Daily:

o Same as during the first year

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o Purchase of raw materials, manufacture product, package, and store

o Receipt of customer orders, package, and organize shipment

- Weekly:

o Co-ordinate with suppliers and distributors to determine levels of inventory

required along with orders needed to be fulfilled

o Prepare staff schedules

o Market research and product development initiatives

- Monthly:

o Bank reconciliations

o Compare target to actual sales

o Review of budget to actual

o Determine any additional staffing/labour requirements

o Review of working capital levels, and determination of the need to acquire

additional financing

- Yearly:

o Salary assessments and potential bonus payouts

o Dividend pay-out determination when profitable and able to distribute earnings

o Tax returns preparation

o Overall review of strategy, mission statement, and overall objectives

4.5 Working Capital Forecast

In 2011, Sweet Sweat Inc. has financed operations through a bank loan of $50,000 (backed by

personal guarantees) as well as from initial capital contributions by the executive team totaling

$25,000. In the second year, an additional capital investment will be needed to sustain operating

cash flows totaling $50,000. It is expected that at the end of the first year when sales have been

achieved, equity financing would be sought, subject to due diligence being performed and

additional financial forecasting based on updated sales and cost of sales figures. See Financial

Appendix III for further details.

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4.7 Operating Expenses

The majority of expenses relate to wages paid to marketing and production assistants to help

facilitate the high volumes of sales required to build the brand recognition and develop a

customer basis. In addition to employees, a strong marketing effort through event promotions

and the online website make up the remaining significant expenses incurred on an annual basis.

See the Financial Appendices for further details as well as the discussion in the Financial Plan

below.

4.8 Quality Control

Ensuring a consistently high level of quality is an integral component to the success of Sweet

Sweat Inc.. Mallory, who has extensive experience with making the product, will be measuring

and mixing the ingredients for each batch herself. There will be customized measuring cups for

each ingredient to ensure a consistent amount is used each time and that none of the ingredients

are mixed. In addition, Mallory will use her professional judgment to test each batch for quality

control after it is made to ensure integrity of ingredients as well as appropriate proportions used.

This will be performed by assessing the scent of each batch as well as ensuring the consistency

and texture is appropriate. Having separate custom-made measuring cups for each ingredient

used would provide an effective control to ensure all necessary ingredients are used, along with

the appropriate amounts. These controls, along with specific instructions, will allow for future

employees to follow these simple steps to make the perfect Underarm Icing product. If any

complaints are ever received from customer due to a lack of quality, our policy will be 100%

refund or direct shipment of a new product. Although this could be costly we believe that this

optimal service and quality care is part of the brand.

4.9 Website

As described in many parts of our report, the website will be an integral component for both

sales distribution and also our overall relationships with our customers. It will be very vital to

promoting our brand identify and providing a forum for customers to express opinions, provide

feedback all well as obtain updated information regarding product promotions, upcoming

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campaigns and new articles in the development of research for Breast Cancer. Please refer to

Appendix III for a snap shot of the website.

5.0 Marketing Plan5.1 Market Analysis

Marketing Research

Market research has allowed us to gain valuable insight on the identity that customers currently

associate with our brand, allowing us to better tailor our marketing strategy. Our survey has

been, and continues to be conducted, along with samples provided to customers. When a sample

is given, we provide the survey and then direct the customer to our website. This is dually

beneficial as it has provided us with actionable feedback and increased our presence on the web

through customer hits. Our website, as explained earlier, provides the customer with further

information regarding our brand and our overarching commitment to women’s health. The

survey can also be directly accessed through the website, and is visible on the homepage.

Overall, customers are encouraged to provide feedback both through the survey as well as

through discussions on our community social network on the site. We have a “Facebook” wall

feature on our page which allows for immediate feedback and customer interaction with both us

and each other. Please refer to Appendix IV for a copy of the current market research survey. We

will continue to adjust the survey for new information that we believe the me important for

future marketing promotions and sales tactics.

The market research survey elicited a 60% response rate, and responses received were positive

and encouraging; with reinforcement that we are promoting the brand that we want. Of the total

responses to date, 68% indicated that they connected with the brand and prefer our product to

alternatives on the market. Of those that were already loyal customers, 75% replied that they had

successfully encouraged friends and family to try the product, many by showing them ads and

informational blogs on our website. Discussions conducted through our wall suggest curiosity

and excitement at the prospect of increasing distribution of our product as well as potential other

future offerings in the future (with high demand around face and body lotion).

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Based on the marketing research conducted and the demographics of our target market in

Vancouver, we are confident that demand for our product will only continue to increase

contingent on continuous promotional community campaigns. Our target market is “all women

who care about their body” and this is definitely represented through our site and survey

responses. Our future promotions and weblogs will specifically target these women, continuing

to enhance our brand. The details on bringing the “Underarm Icing” brand to a greater market are

outlined in the marketing operations below.

5.2 Competitive Analysis - Appendix with SWOT

Strength

The executive team and Board of Directors have strong cumulative business knowledge and

expertise since they are all Chartered Accountants with varying backgrounds in economics,

marketing, finance, accounting, and tax. In addition, the executive team has connections with

professionals in the accounting and finance industries when financing is required to grow in the

future.

“Underarm Icing” has the strategic value proposition to customers of offering better scents, a

greater variety of scents, and superior bacteria killing abilities; all bundled in an attractive and

unique package.

Sweet Sweat Inc. will be aiming to develop a brand akin to LuLu Lemon where the customers

perceive the company as having coinciding values to their own. Sweet Sweat Inc.’s brand will

embody the notion that we care about women’s holistic health and not just about producing

profits. Other natural deodorant companies have not succeeded in their attempt to extend their

brand beyond anything more than a name that represents natural products.

Being a small company, Sweet Sweat Inc. is able to quickly adapt to customer suggestions as

well as to quickly implement necessary strategic changes to initiate industry trends. Per

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Appendix IV at the end of the report, the value curve outlines that we have the highest quality

ingredients that will not potentially harm our customers.

Weaknesses

This is the first business venture for the executive team, so we do not have direct experience with

starting a company. Being a small company, there is a small pool of human capital to rely on for

new ideas. Additionally, as a startup company, the cash flow from operations is not as steady and

established as compared to our major competitor, Secret. Deodorants do not prevent sweat, so

antiperspirant companies offer their customers sweat-free underarms. We are entering a large

market so we need to aim marketing very directly at our target market in order to be successful.

Opportunity

An increasing number of women are concerned about the potentially harmful effects of

antiperspirants and are therefore willing to sacrifice the benefit of sweat prevention. Also,

deodorants do not cause yellow stains on shirts that are a result of the aluminum in

antiperspirant. Through market research, we have found that these women are generally

disappointed with the current selection of female deodorants and their ability to kill bacteria and

mask odors, which are the qualities that Underarm Icing possesses.

Adidas has a female deodorant in two scents but both smell very similar to the male deodorants,

which is not desirable among women. Dove and Secret have the largest share of the

antiperspirant market, and they are very reputable and established companies; however, they do

not sell deodorants since this is direct cannibalizing of their antiperspirant sales. Also, to

effectively market the benefits of the deodorant they would have to admit to the harmful

substances in their antiperspirants. Therefore we have the opportunity to enter into a very open

niche market, in a somewhat concentrate industry. Although it will require dedication and drive,

this is a definite opportunity in this market. Additionally, if successfully in establishing a strong

brand, we will be able to offer new products in the future and leverage the brand reputation in

order to be successful.

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Threat

Dove and Secret have the largest share of the antiperspirant market and are very reputable and

established companies that could have the resources to create a new brand and break into the

deodorant market if a sufficient number of women were to switch to deodorant. Only savvy

customers would know that the new brand is really owned and operated by antiperspirant

companies. This is a threat of which we will mitigate through the fact that customers will buy our

product not only for the health benefits but for the overall experience that the brand provides.

The ingredients are printed on the packaging so customers could attempt to make their own

rather than paying for our pre-made deodorant. This would erode our sales. However we believe

again that customers will pay for the overall experience of the brand and not just want to create it

themselves.

5.3 Product

The Problem: Body odor is problematic for women because it is unpleasant and not culturally

accepted. The commonly accepted fix over the years has been antiperspirant, but this has created

a new problem. Antiperspirants contain both Aluminum and parabens. Aluminum is a neurotoxin

and it has been linked to Alzheimer’s disease, respiratory illnesses, reduced renal function, and

DNA damage. The parabens in many antiperspirants may be linked to breast cancer since it is

found in tumors that have been removed from patients. The current alternatives to antiperspirants

are female deodorants but there is limited scent selection and the scents available fail to mask the

odors. The question posed: Can we mask underarm odor without harming women’s health?

Our Product, The Solution: We have created a competitively priced natural deodorant that kills

odor-causing bacteria, smells amazing, is available in a wide variety of scents, and doesn’t

contain health harming ingredients. The ingredient mix includes:

1. Baking soda - a natural bacteria killer that kills the odor-causing bacteria

2. Arrowroot powder - a pure and natural starch that is more sensitive on women’s skin

than other starch equivalents18


3. Coconut oil - a natural oil proven to be an effective and skin-sensitive

moisturizer

4. Tea tree oil -a natural disinfectant that works in tandem with the baking soda

5. Essential oils -grapefruit, vanilla, lemon, peppermint, and coconut

5.4 Pricing

Underarm Icing is priced at $5.99, a premium over the indirect antiperspirant competition and

approximately average as compared with the direct natural deodorant competition. This is priced

at a 170% mark-up over the variable cost of the product leading to a margin of 63% on each unit

sold. In the first five years, while unit sales are expected to be relatively low in comparison to the

market as a whole, these margins will be important for recovering the high fixed costs of the

heavy marketing and promotion costs and are expected to improve with economies of scale.

5.5 Promotions and Advertising

The overall promotional strategy for the first three years is to execute low cost promotional

activities to generate a word of mouth promotional campaign. The activities that will be included

are as follows:

Events: Aligning ourselves with the Breast Cancer Foundation, by sponsoring individuals in The

Walk to Cure Breast Cancer event and having them display our logo on their shirts. At these

events we will also have a booth to educate potential customers on our product, give out samples

and business cards with our website address, as well as to sell our product in larger containers as

well. We will have a kiosk at other events as well such as sporting tournaments to target athletes

and farmers markets to target organic consumers.

Website: Sweet Sweat Inc. has a website that highlights the benefits of our product with full

disclosure of our ingredients. The website allows people to provide their feedback as well as

order our product. Sweet Sweat Inc. has a website application that allows customers to set up an

account and design their personalized perpetual “Underarm Icing” orders so that they don’t need

to reorder. Customers are able to change their orders if their preferences change. Customers are 19


also able to subscribe to our monthly e-mail updates if they so desire. These email updates will

provide discounts on products, monthly specials, what events we will have our kiosk at and other

information regarding health living and taking care of your body.

Blog: Sweet Sweat Inc. has blog that provides an informal method of communicating with

current and potential customers. This blog is located on our website (in addition to the

“Facebook” wall) and is manages by Mallory Denniston who posts customer testimonials and

updates on new products.

Online Advertisements: Online advertisements will be placed on Facebook and other social

media websites to direct potential customers to our website. This will be initiated in the next

year, with the assistance of our website developer.

Other activities: Sweet Sweat Inc. is identifying celebrities that care about natural products and

are sending them free products samples. We have also sent some products to smaller local artists

in the Vancouver area. The objective of this initiative is to impress these higher-profile

customers in the hope that they communicate their satisfaction with our product to the media.

Labels and Logo

Refer to Appendix VI for a sample of the labels to be used (sexy and edgy design). Please note

that our logo appears exactly as the labels but without any words. Our brand will be recognized

simply through the curves outlining the shape of whipped icing; using many fun and bright

colors associated with each scent:

Vanilla - White

Grapefruit - Neon Pink

Mint - Neon Green

Coconut - Blue

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5.6 PlaceFirst, we must decide in which countries women use antiperspirants or deodorants. We have

identified these countries as predominantly Canada, Australia, and the US. In the first two to five

years, we will focus on Canada because this is where we are located. This will assist with easy

distribution as we have a strong network which will assist with initial sales. We are located in

Vancouver, a city with relatively high income earners that value organic items as evidenced by

the number of successful organic grocery stores such as Capers and Whole Foods; all charging a

significant premium for natural products.

We will also initially target the Greater West Coast Area which includes Vancouver Island,

Sunshine Coast, and the Gulf Islands. These areas value local products as evidenced by their

support for local products such as Salt Spring soaps and Holy Crap cereal, similar companies

which have succeed in recent years. To grow the business, we will expand into the East Coast,

followed by the US and then Australia. This expansion will be assisted through our website

which can be visited all over the world. After we have initiated sales, obtained proof of price and

product, and perfected the product based on our initial sales we are confident that such expansion

is possible. Antiperspirants and deodorants are not common in European and Latin countries so

we would avoid these areas in our long-term strategy.

For the first two to five years, we will have a distribution line that is close to the end customers

so that we can immediately respond to the feedback by adjusting the product to best suit the

customers’ needs. These direct lines are simpler to manage which allows the executive team to

establish an operationally effective distribution system on a small scale before expanding.

Our targets for distribution lines include small local businesses, farmers market, organic food

grocery stores, events (as noted in the promotion section), and direct online orders. After the

establishment of a distribution process and customer base, we would seek to expand to larger

chains such as grocery stores and beauty product retail stores such as London Drugs. We are

hopeful that through our well-established brand theses distributers would seek out our product

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and make shelf space available. At the point of expansion, we would need to decide if the

benefits of continuing the initial distribution lines would outweigh the costs.

5.6 Segmentation

Our consumer segment is women in Canada, the US, and Australia because “Underarm Icing” is

for women who wear deodorant. Our research has shown that 91% of woman in the above-

mentioned geographic areas use deodorant on a daily basis. Users apply between one and three

times each day depending on their level of physical activity. The users range in age from 12 to

the elderly since this age bracket both produces sweat and is cognoscente of and concerned with

the effects of the resulting unpleasant odor.

5.7 Target Market

We have two main target markets:

1. Deodorant users: woman who are already using deodorants because they prefer natural

products and recognize its benefits. Our marketing will therefore be focused on

communicating why “Underarm Icing” is superior to other deodorants; enticing them through

our unique scents and brand commitment to overall health.

2. Antiperspirant users: Women who use antiperspirant and whose genetics put them at a

higher risk of breast cancer, Alzheimer disease, or the other aforementioned health risks.

Also, antiperspirant users who are not educated on the benefits of deodorants and the options

available. Therefore, our marketing will communicate the benefits of our deodorant over

antiperspirants. We will also recognize that antiperspirant users could ease into deodorant use

by continuing to use antiperspirants on those sweatier days such as an important presentation,

interview or high level of physical activity while using “Underarm Icing” on a more daily

basis.

5.8 Positioning and Strategy

Direct competition: Positioned amongst the direct competition (i.e. female deodorant products)

as trendy because of its catchy name and funky brand, slogan, logo, and packaging. It is 100%

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natural option because all of the ingredients are natural and organically provided by the earth

with no human alteration needed. As a result, it is positioned as not potentially harmful on your

body. It provides customers with more options than the direct competitors because of the variety

of scents. Sweet Sweat Inc.’s scents are just that - sweet.

Indirect competition: Amongst our indirect competition (ie. Female antiperspirant and other

beauty products used to cover up and or prevent unwanted underarm scents), we are the all

natural option. We are perceived as local, not part of a large chain such as Dove so that our

customers can trust that our decisions are in their best interest and not those of the shareholders.

We are perceived as producing a higher quality product since we charge a higher price. We are

aluminum and paraben free; therefore, we are not potentially harmful. Underarm Icing does not

test on animals, it is vegan and celiac friendly, and does not have any genetically modified

organisms (GMOs).

5.10 Sales Projections

A significant metric for the long-term success of the Underarm Icing product and Sweet Sweat

Inc. as a whole is the number of units sold each year. In 2011, we are forecasting a modest 1,000

units, increasing that figure to 4,000 by 2012 to prove the value of Underarm Icing to larger

retail stores. In the third year of business, Sweet Sweat Inc. plans to expand into grocery chains

such as Urban Fare and Whole Foods, with a more long-term goal of entering into Costco. These

larger distributors will help achieve sales targets of 30,000, 60,000, and 100,000 in years 3-5.

Please refer to Financial Appendix I- Income Statement for projection of sales.

6.0 Human Resources Plan 6.1 Job Descriptions

In our first few years of operations there are very few requirements in terms of human capital.

Mallory Denniston, original founder and CEO, is currently managing the operations. She is

personally able to organize the promotional campaigns (farmer’s markets, charity runs, etc) on

the evenings and weekends with very little operational assistance. Keira Balderston, Adrian Pape

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and Ishan Singh are in charge of assisting with strategic decisions and obtaining future financing,

as well as any financial reporting that is deemed to be necessary by potential investors.

Currently there are two other employees, one marketing intern to assist with promotional

campaigns and an IT expert who is outsourced to manage the website. Both of these positions are

supervised by Mallory, and the two individuals have been with the company since inception.

6.2 Planned New Positions

Once the necessary financing is obtained, and we can move operations into a larger facility, the

growth in capacity will require increased human resources. Planned positions for future

operations include:

1. Operations: We will require one additional staff member to assist with the production of

deodorant in our new facility when we begin moving into larger retail distribution channels. We

hope to see increased production levels of 30,000 units in the third year and additional

operational staff may be required to produce the deodorant. This will also allow Mallory to stop

working in direct production of product and focus her attention on supervision and quality

control.

2. Marketing Personnel: Although we are currently managing with one intern and Mallory, as

capacity increase additional marketing personnel will be necessary. These employees will be

able to manage extended marketing endeavors such as print advertisement and media campaigns.

We would also like them to be involved in looking for additional PR opportunities, above and

beyond our current association with the Breast Cancer Foundation. They will be the leaders of

our brand, enhancing the representation on the marketplace through continuous innovational

pathways on how we access our markets.

6.3 Wages and Benefits

Currently the only fixed wages are those being paid to the marketing intern and website manager.

The summer intern would be hired for 1,000 hours per year at $15.00/hour, with a focus during 24


the busy summer months. During the winter our company has not been as busy in terms of

promotional campaigns since there are few community runs and the markets are closed. The

website construction cost was $10,000 for the initial set up and is now paid a monthly fee of

$200 to manage the site data and streamline the orders to Mallory. There is constant and direct

communication between Mallory and the web designer; however he is able to operate out of his

own facilities. As this is a startup company, Mallory has taken limited remuneration choosing

rather to re-invest her capital in the operations of the company.

In the future, we will be paying for additional operations staff ($30,000 for the production

assistant) as well as the additional marketing personnel ($15,000 per additional intern required).

The accounting role will be as filled by Mallory depending on the time available, but will likely

shift to the production assistant when she transfers operational duties to the new team.

Benefits will be in line with industry standards, providing paid vacation of 3 weeks per annum, a

flexible medical plan ($1,200 per employee), etc. We will also be providing product discounts

for family and friends as an added bonus ($1,000 per employee), and also as a way to further

expand our brand identity through word of mouth.

7.0 Financial Plan7.1 Projected Profit or Loss

As per Financial Appendix I, Sweet Sweat Inc. expects to incur losses for the first three years of

operations while marketing and promotions begin to fuel sales and develop the customer base.

The company should turn a profit in its fourth year and achieve exponential increases in profits

from that point forward.

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2011 2012 2013 2014 2015

Units Sold 1,000

4,000

30,000

60,000

100,000

Revenues 5,990

23,960

179,700

359,400

599,000

Net Income (25,769)

(33,234)

(2,974)

63,139

201,321

7.2 Projected Balance Sheet

See Financial Appendix II for an estimate of balance sheet figures at year end for the first five

years of operations. Negative retained earnings will be sustained over the first four years of

operations; however in the fifth year are expected to reach around $200,000.

7.3 Projected Cash Flow

See Financial Appendix III for cash flow projections over the first five years of operations. As

mentioned previously, equity or debt financing will be required in the second year of $50,000.

This financing will help pay back the long-term debt incurred in the first year as well as facilitate

the losses incurred in relation to heavy onset years of marketing and promotion.

7.4 Business Ratios

As per Financial Appendix VII, financial ratios are expected to improve over time. A healthy

current ratio will be important to ensure the short term viability of operations. Debt to equity

ratios will be negative while losses are incurred over the first two years, but will return to

healthier levels following the third year. The return on equity will be negative for the first three

years. It is expected that once Underarm Icing enters large grocery chains, sales will skyrocket

while maintaining relatively low fixed costs. This should lead to much stronger ROE figures

beginning in the fourth and fifth years.

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2011 2012 2013 2014 2015 Liquidity Ratios Current Ratio 3.01 2.64 1.23 7.39 28.57

Solvency Ratios Debt to Equity (51.93) 1.86 1.63 0.15 0.04

Profitability Ratios Return on Equity $ (1.03) $ (0.44) $ (0.04) $ 0.84 $ 2.68

7.5 Business Valuation

As per Financial Appendix VIII, the business is currently valued at about $300,000 based on the

forecasted years of net income, ignoring the onset years spent building brand awareness and a

customer base. This forecast weights future years more heavily due to the more accurate

representation of sales and income, and uses a 3x multiplier due to the high-risk nature of the

business. The required capital investment of $50,000 would therefore represent a 16% interest in

the total value of the company.

8.0 Risks 8.1 Outline of Risks

As a small start-up company we definitely need to be aware of potential risks in the business.

Thus we want to highlight that we have considered the significant risks to the business as well as

effective ways to mitigate them.

Financing

Sweet Sweat might be unable to secure equity financing in second and third year or to obtain

more bank debt due to the risk associated with this new venture. We are thus considering

alternative sources of financing, as well as further personal investments into the business. If

neither is possible then we would be happy to continue the business at a smaller scale through

internal financing from revenues generated.

Feasibility of the Plan

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Larger companies might recognize the profitability of our product and create their own flashy

brand of deodorant which would cannibalize our sales. There is a risk that they are large enough

to offer a lower price at first to attract our customers long enough to put us out of business. Once

we are no longer competition, they would be able to increase their price to a more sustainable

level. This is mitigated through our brand. It is our brand that will be difficult to replicate and

not simply the product itself.

There is the risk that the management team could be unable to manage operations with minimal

staffing levels if the capacity and productivity assumptions are not accurate for larger scale

production. This would be mitigated through the regular risk assessment and planning meetings

held by the BOD. These meeting will look at and discuss items such as profits and costs and

make financial forecast to determine how to sustain increasing capacity while keeping costs in

line.

Product Acceptance

There is the risk that the market will not accept Underarm Icing as they may prefer the more

basic branding and scents available from current natural deodorant companies. There is also the

risk that not enough women will make the switch from antiperspirants to deodorants to sustain

our operations. Women may be sensitive to the ingredients we use and may therefore not

purchase our product which would put us below our sales target. We believe that the likelihood

of this risk is low. However if we do encounter this risk then again we may have to re-set our

strategic and overall corporate goals to include a less aggressive growth target. We believe that

even if there is lower acceptance there will be enough to enjoy profitability into the future. And

the development of new products could increase our market and capitalize on our brand.

8.2 Exit Strategy

If a third party or a competitor were to offer to buy us out after five years, we would only do so if

we could remain on the board of directors as well as collectively maintain 25% ownership of the

company. This is important to us because we would be able to influence the strategic direction

of the company and ensure that it continues to use high quality natural products. Our personal 29


reputations would therefore not be tarnished by the potential of the new owners not following

through with the original mandate of Sweet Sweat Inc.

The price would also need to compensate us for the goodwill value of our brand and must also

incorporate the future growth potential. The valuation done would need to be performed

assuming that revenues would continue to grow exponentially since 91% of females in the

identified areas used antiperspirant so there is a large potential market base as these customers

shift to deodorant.

Ideally we would like to continue to run the company and own it for a lengthy period into the

view. However we are aware that if synergistic profitability can be obtained or if we are

struggling to reach our sales targets but could easily do that through a profitable acquisition then

we would consider a reasonable offer.

9.0 SummaryWe have a plan for the next five years with a passion to continue into the indefinite future. With

the proper financing we are confident that our targets will be met, if not exceeded.

With the increasing focus that women place on healthy and natural products, and the untapped

niche in the deodorant market segment “Underarm Icing” is in a prime position to succeed. By

leveraging off of their strategic marketing plan, uniquely scented and effective new product, and

dedication to quality care, Sweet Sweat Inc. can handle any threats or mitigate any potential

risks, namely increasing competition and substitute products.

Sweet Sweat Inc’s customers are heath conscious individuals looking for a unique product that

ensure their well-being. While deodorants are widely used, we are targeting women with a

commitment to health. Our competitive advantage can be maintained and our strategic objectives

achieved if we remain in line with our five key success factors: aggressive and unique marketing,

ensuring brand alignment and consistency, focusing on customer loyalty by obtaining constant

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feedback, providing quality products and capitalizing on an interactive website. Mallory, Keira,

Adrian and Ishan have a strong set of skills, passion and energy to take this business to a position

that makes healthy products a fundamental component in many women’s lives.

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Shipping

Baking Soda

Arrowroot Powder

Coconut/Tea Tree/Essential Oils

Heated Blender

Packaging & Storage in a temperature-controlled environment


Appendices

I Operations Diagram

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Front Door

OfficeWashroom

Mixing & Packaging Centre

Storage Area Promotional Materials & Supplies

Blender

Raw

Mat

eria

ls

Fini

shed

Goo

ds


II Floor Plan

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III Website Layout

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“Promising to protect the health of women’s bodies through a commitment to

quality all-natural products”


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Thoughts and Comments

FACEBOOK WALL

“I love your products. My boyfriend says I have never smelt so delicious”

“Will you please make some deodorant for my boyfriend?”

“When is your next promotional campaign?”

HOME OUR PRODUCT ORDER


IV Market Research SurveyUnderarm Icing- “Sweat to Sweet” in the eyes of our customers

1. Which of the following do you usually use? (circle all that apply)a. Deodorantb. Antiperspirantc. None

2. Where do you usually purchase these?a. Grocery storeb. Marketc. Drug store d. Specialty storee. Onlinef. Other

3. Do you like to test products prior to purchasing?a. Alwaysb. Sometimesc. Never

4. What amount do you generally spend on the above product(s)?a. Under $5b. $5-$8c. $8- $10d. Over $10

5. Are you willing to spend more for a premium product?a. Yesb. Noc. Maybe

6. How did you hear about Icing?a. Mediab. Promotional campaignc. Community rund. Friends or family e. Other

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7. Are you aware of the sponsorship lines with Breast Cancer?a. Yesb. No

8. What words would you associate with the Icing brand? (circle all that apply)a. Healthb. Qualityc. Cared. Comforte. Effectiveness

9. Have you visited the website before?a. Yesb. No

10. Have you ordered Icing online?a. Yesb. No

11. What is your favorite scent?a. Coconutb. Vanillac. Shea

12. Would you recommend Icing’s products?a. Yesb. No

Other comments?

Thank-you very much for your time and help!!!

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V Value Curve- Competitive Dimensions

Price Variety of scents

odour prevention

quality of inputs

Brand appeal Harmful ingredients

SecretAdidasToms Natural Sweet Sweat

Analysis: The Value curve reveals that Underarm Icing is capitalizing on Secret's main weakness of not using natural ingredients. When compared to the deodorants, it is evident that Underarm Icing is superior in offering a greater variety of fragrances as well as the quality of the fragrances. The value curve reveals that there is a market for Underarm Icing as there are qualities that consumers care about that are not being currently being offered in any single product. As Underarm Icing continues to develop their brand and reputation in the market, they will also have a strategic advantage over the current deodorants that have not developed a dynamic brand in the market.

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VI Sample Labels – Logo is the same but without words

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painter... · web viewa delicious business plan. to: mpacc. investors . july 13, 2011. sweet...

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