This sample (and briefer than usual) business plan is intended to show a start-up business as the owner moves from conceptualizing the business into operating it on a day-to-day basis. A business plan provides a “road map” for the first year of operation that will help the owner establish who the customers are, how best to reach them, and how sales should flow throughout the year.
Executive Summary
The mission of Gift Baskets Galore (GBG) is to bring joy, comfort, and inspiration into the lives of its customers by delivering affordable, imaginative gift baskets that connect the giver and the recipient at key moments in time.
Customers can be divided into several categories based on who they're giving the baskets to: businesspeople, friends, family, and networking acquaintances. Gift Baskets Galore reaches its customers primarily through its Web site, which allows visitors to preview standard gift baskets by “occasion” category in a range of price points or to request custom-designed baskets. Visitors can select, order, and pay for their baskets on the Web site or by calling the phone number that's prominently displayed on the site.
The business operates in a marketplace that has other gift basket competitors including florist shops and supermarkets. However, GBG sets itself apart by focusing solely on gift baskets, by pricing them affordably, and by providing services for both buyers and recipients that have a uniquely personal touch, thus encouraging repeat business and referrals.
GBG is a sole proprietorship that's owned and operated by a college-trained floral designer with seven years of experience in the industry, primarily spent in supermarket floral/accessory sales departments. It is a recently launched home-based business located just outside the downtown core of a city with a population of 10,000. GBG's goal is to generate $15,500 in sales in its first year, increasing to $20,000 in year two, and $30,000 in year three. The owner is running the business part-time while also caring for their own pre-school children. Long-term plans include switching to full-time business operation when the children enter school full-time. If the business begins to exceed its sales targets, and thus the time available from the owner, contingency plans include hiring an employee to handle the work overflow.
Marketing Plan
In terms of its overall market, GBG operates in a community that is well diversified in its economic base with businesses in the manufacturing, resource, information technology, and health sectors. The regulatory framework for home-based businesses here is not burdensome: The state has no sales tax, and the home-based business permit for GBG was approved without difficulty. In summary, the economic climate is healthy, with no immediate threats to it.
GBG's customer purchases are occasion-driven and include birthdays, anniversaries, thank-yous, get well wishes, congratulations, and employee recognition. Customers tend to be those without the time or desire to assemble their own gift baskets. Part of the purchase process is therefore a need for convenience and for imaginative baskets/contents that make people say, “I wouldn't have thought of that.”
Customers can be found across demographic categories, but individual repeat clients tend to be men and women with incomes of more than $50,000 a year, indicating that they have busy lives and need gift solutions that are meaningful and yet convenient to purchase. Repeat business clients are often in service businesses, such as real estate agents. Late November through December is expected to be one of the busiest times of the year for GBG, because businesses purchase holiday gifts at that time. GBG's location near downtown, where many business offices are located, makes quick deliveries possible.
GBG's greatest potential for increasing its client base is the business sector, where it can be promoted as a convenient, personal (yet appropriate), and high-quality tool for customer care, and employee/supplier recognition. GBG will not overlook the potential of its individual clients, however, promoting itself as a solution for those gift-giving times that require a personal touch.
GBG's primary competitors include supermarket floral departments and stand-alone florist/gift shops. Supermarket gift basket prices tend to be slightly lower than GBG prices, but they draw their products from within their own store: Customers may view them as somewhat limited in scope and personal touch as a result. Florist/gift shops are comparable in price to GBG, but because baskets are a secondary product line, they have a more limited range of gift baskets than GBG.
GBG's SWOT analysis includes:
Strengths: the personal and creative touches that it provides to its customers, including thank-you notes that are sent to basket buyers along with order delivery confirmation.
Weaknesses: the lack of a physical location for customers to drop by and select gift basket products.
Opportunities: GBG does not currently have a presence in local hospital gift shops, and could pursue this as a revenue stream.
Threats: the potential for competitors to recognize GBG's strengths, such as its personal touches and its extensive Web site resources, and copy them.
To make up for the lack of a physical location, GBG needs to focus on attracting customers to its Web site. Because the business does not have a significant advertising budget, GBG will focus on attracting positive publicity through local newspapers and magazines. A publicity plan targeting specific publications with story ideas will be developed. In addition, GBG's Web site address and phone number will be prominently displayed on all communication materials. The Web site will also be assessed for its search engine rating so that key words can be increased if necessary.
In addition, GBG will contact local hospital gift shops to offer its services as a value-added product line. Although the gift shop will likely require a portion of the sales price, the advantage for GBG is that select baskets can be displayed within the gift shop and available for immediate purchase, This should increase sales and will reach a currently under-served customer niche market. It will have the added benefit of providing a public display space for select gift baskets.
GBG will also assess marketing tools such as discount programs for repeat customers and for customer referrals. It will also research local service-oriented businesses to determine which ones to target with personalized letters of introduction and follow-up with free sample baskets during a personal interview.
Financial Data
GBG operates from a dedicated room in the owner's home, where baskets and contents are stored and assembled. Furnishing requirements are minimal:a large folding table and a comfortable office chair. The owner's personal computer has now been transferred to use as a business asset. The owner also uses a personal vehicle for gift basket delivery, entering business usage in a mileage register.
As a result of this reduced requirement for capital equipment, funding has not been sought from outside sources. The owner relies on an unsecured personal line of credit with a maximum of $10,000, but follows a policy of never using more than $5,000 of the available credit at any one time. This limits the owner's exposure to too much debt, while also providing a ready source of funding if personal or business emergencies arise.
Sample financial statements can be found in Chapter 5, on page 62 (income statement) and 63 (cash flow projection) and 64 (balance sheet).
The income statement shows that in the first year of operation, cost of goods sold is 51 percent of gross sales and that operating expenses are 29 percent of gross sales, leaving room for a net profit for the owner of 20 percent of gross sales at year's end. Finding a cheaper source of supplies for the gift baskets is essential in order to bring down the cost of goods sold. The owner needs to manage operating expenses to reduce them as much as possible. Sales need to be increased if the business is to be sustainable — if it is to provide a reasonable return on the owner's time and funds for payment of the owner's income taxes.
From the cash flow projections, it can easily be seen that the owner will be forced to use the line of credit funding to support the business for the first two months that the business is operating. The owner will only start to see positive cash flow balances, and the possibility of beginning to repay the line of credit from the business in the third month.
From the balance sheet, the debt-to-assets ratio at March 31 is $3,085 divided by $8,085, which equals 38 percent. This means that 38 percent of the business's assets are currently financed by debt. As the business begins to make money and the debt begins to be repaid, this ratio will decrease.
To reach the sales target of $15,500 in the first year, assuming an average price of a basket at $60, sales targets for the year are 259 baskets, basically the sale of five baskets per week. Realistically, however, some weeks (prior to Valentine's Day, possibly, and during late November/December) will be much busier than others.
Based on the percentages from the above analysis, the break-even point in terms of number of baskets can be determined. The calculation is as follows: the year's operating costs ($4,500) divided by (the unit selling price [assume an average of $60] minus the unit cost of goods sold [51 percent or $30.60]). This equals $4,500 divided by $29.40, just over 153 baskets. This means that GBG will need to sell 154 baskets to cover the business's costs and that each sale after the sale of the 154th basket will increase the business's profit.
Sales Plan
Based on the target markets and the marketing plans, the following sales targets have been set for the first year:
Business sales: 144
Individual consumer sales: 75
Hospital sales: 40
Marketing Plan
The business owner, who has sole responsibility for owning and operating the business, has a college certificate in floral design, which included course material that dealt with gift basket design. She gained experience by working as a paid employee in the floral departments of major supermarkets for seven years.
The owner's experience and education mean that she is well versed in the creation of new and innovative gift baskets for GBG's product line; however, the administrative and strategic tasks involved in running a small business are less familiar to her. In order to improve this situation, professional development over the coming year will include four weekend workshops (one per quarter), dealing with bookkeeping, tax issues for small businesses, inventory control, and marketing.
In addition, the owner is working on an ongoing basis with a volunteer coach at the local small business development center to identify and solve problems for the business.
In terms of daily business operations, the owner is currently able to manage gift basket order taking and creation and delivery of gift baskets on her own. However, busy periods such as Valentine's Day and pre-holiday November/December sales could increase volume to the point where she can only handle two of those three tasks. Strategically, the owner has decided that she needs to handle order taking and basket creation to retain control over the creative side of the business.
Delivery, however, is something that can be delegated to someone else. The owner will investigate, prior to the onset of the busy periods, whether a local courier company would be willing to partner with GBG to deliver the gift baskets at a discounted price. If this price is out of reach of GBG's resources, then the owner will hire an independent contractor to handle basket delivery in their own vehicle.
In the longer term, GBG will grow, as the owner's time and resources allow, from a part-time operation to a full-time operation. As time progresses, the owner will determine whether employees will need to be hired and business space expanded.
