1. 1. Xian JIAOTONG-LIVERPOOL UNIVERSITY Coursework Submission Cover Sheet Name 1 Ma Chenghao Name 2 Nguyen Amanda Mai Vy Name 3 Patel Abhishek Name 4 Rolfes Frederik Student Number 1 1200902 Student Number 2 1406993 Student Number 3 1406980 Student Number 4 1303081 Programme BusinessAdministration Module Title Entrepreneurship Module Code MAN208 Assignment Title BusinessPlan Submission Deadline May21st2015 Module Leader AlexGoldsborough By uploading or submitting this coursework submission cover sheet, I certify the following: I have read and understood the definitions of PLAGIARISM, COLLUSION, and the FABRICATION Of DATA, as outlined in the Undergraduate Student Handbook of Xian Jiaotong-Liverpool University and as posted on the University Website. This work is my own, original work produced specifically for this assignment. It does not misrepresent the work of another person or institution as my own. Additionally, it is a submission that has not been previously published, or submitted to another module. This work is not the product of unauthorized collaboration between myself and others. This work is free of embellished or fabricated data. I understand that PLAGIARISM, COLLUSION and the FABRICATION OF DATA are serious disciplinary offences. By uploading or submitting this cover sheet, I acknowledge that I am subject to disciplinary action if I am found to have committed such acts. Signature . Date Signature . Date Signature . Date Signature . Date For Academic Office use: Date Received Days Late Penalty
2. 2. Feedback on the strength of the work Feedback on the weakness that needs to be improved 1st Marker Date Mark 2nd Marker Date Mark (if applicable) Students: Please start your assignment on the next
3. 3. 3 SustainableFreshness ReadyforInvestment
4. 4. TableofContents 1.0 Executive Summary................................................................................................5 2.0 Company Description................................................................................................6 2.1Description............................................................................................................................................................................6 2.2Mission....................................................................................................................................................................................6 2.3Values......................................................................................................................................................................................6 3.0 Opportunity Analysis and Research......................................................................6 3.1IndustryAnalysis................................................................................................................................................................6 3.2Environmentalanalysis:PESTLE................................................................................................................................8 3.3Competitiveanalysis:SWOT&PortersFiveForces...........................................................................................8 PortersFiveForces...................................................................................................................................................................9 3.4MarketOpportunity.......................................................................................................................................................10 4.0 Marketing Strategy and Plan................................................................................11 4.1Product.................................................................................................................................................................................11 4.2Price......................................................................................................................................................................................12 4.3Place......................................................................................................................................................................................13 4.4Promotion...........................................................................................................................................................................14 4.5Philanthropy......................................................................................................................................................................15 5.0 Management Team and Operations....................................................................15 5.1ManagementTeam.........................................................................................................................................................15 5.2PhysicalLocation.............................................................................................................................................................17 5.3Facilities..............................................................................................................................................................................17 5.4ProductionandQualityAssurance..........................................................................................................................17 Ourmanufacturingprocess:..............................................................................................................................................19 5.5InventoryandProductDelivery...............................................................................................................................19 6.0 Financial Analysis and Projections......................................................................20 6.1CashFlowProjections...................................................................................................................................................20 6.3BalanceStatementProjections..................................................................................................................................21 6.4IncomeStatementProjections...................................................................................................................................22 6.5BreakevenAnalysis.......................................................................................................................................................22 7.0 Funding......................................................................................................................23 8.0 Appendices................................................................................................................24 Appendix1(RentalspaceinSIP).....................................................................................................................................24 Appendix2(OurMakeyourownpotInitiativeprototype).................................................................................25 Appendix3(MeetingLog)..................................................................................................................................................26 Appendix4(DetailedFinancials)...................................................................................................................................27
5. 5. 5 1.0 Executive Summary E-Vita, a sustainable household products brand headquartered in SIP, Suzhou, is now looking for capital for their new eco-friendly fridge. E-Vita hopes to service happy customers and a happy planet by offering sustainable, attractive and affordable household products. As the large population of Chinese consumers is becoming more and more wealthy, many are starting to follow the green trend that is evident in many Western countries. E-Vita is primarily targeting the increasing middle class consumer who wants to enjoy a cool beverage on their patio, or at a campsite without the need for electricity. E-Vitas FreshBox uses ancient technology of clay and sand to create a natural cooling mechanism that keeps fruits, drinks, even medicine, at cool temperatures while it is hot outside. Many people on the planet are in need of an electricity-free cooling apparatus, such as rural Africa or India, who serve as E-Vitas secondary target market. Using a fridge like FreshBox will enable families to keep produce up to a week and have fewer trips to the distant markets, saving valuable time or them to earn money. E-Vita wants to contribute to society by working with NGOs and local governments to sell FreshBoxes in large quantities and low margins and ultimately helping those in need. Through mainly online channels, E-Vita will sell products directly on an electric storefront and create awareness and buzz for the product through social media. Media coverage can be obtained for free, fueled by a new focus on philanthropic practices and trend for all things green. Secondary sources of distribution are through large supermarkets like IKEA and Auchan that sell a large number of home appliances and can attract customers who are browsing for related products. Another way E-Vita is combining corporate social responsibility with raising awareness is through donating one FreshBox for every 100 sold and initiatives to help bottom of the pyramid populations in the remotest parts of the world create their own. There are very few competitors in this niche market, and none of which have opened sales in China or expanded around Asia. There is an opportunity here to promote green living in the increasingly aware and increasingly concerned Asian middle class, through aesthetically pleasing, functional household products. E-Vitas executive team has each invested 50,000 CNY into the company and is hoping to raise funds to help kick start their first product.
6. 6. 6 2.0 Company Description 2.1 Description E-Vita is a new company that was founded with the hopes of providing high quality eco- friendly products to both middle class markets and people in need around the world. E-Vita is working on strategic alliances with other environmentally friendly companies and NGOs, to strengthen capabilities and flexibility within the market sphere. E-Vita is a partnership firm, each partner with 20% equity with 50,000 yuan invested from personal savings. 2.2 Mission To provide sustainable freshness around the world E-Vita strives to spread sustainability and to inspire environmentally friendly innovation throughout the world by constantly providing high quality products. 2.3 Values Sustainable living We understand that this world we live in is ultimately borrowed and that we need to behave in such a way that will ensure clean air, clean water and a high quality of life for everyone on the planet and for future generations. Equality We believe that everyone and everything on earth is made equal and deserves fair treatment. We encourage female leadership, cultural diversity and always being open to new perspectives. Authenticity and ethical practices We value integrity in every process, and fair treatment of workers, suppliers and customers. From beginning to end, our product will be made without corruption, or exploitation, and with the highest quality materials. Entrepreneurial Spirit We put great importance on entrepreneurial attitudes and traits; being able to think outside the box, willingness to take calculated risks, flexibility when things get rough, and the passion to work extremely hard for what we believe in. 3.0 Opportunity Analysis and Research 3.1 Industry Analysis Our primary industry to focus on when starting up the business will be the Home Appliances, and Outdoor Home Appliances market in China, focusing on a niche of ecofriendly refrigerators.
7. 7. 7 RootCauseAnalysis
8. 8. 8 3.2 Environmental analysis: PESTLE Political Political regulations have some relevant affects on the firms likelihood to succeed. The main issue is that the Chinese Government requires foreign start-ups to initially invest 300 000 Chinese Yuan into the company, the issue being that it may be difficult to raise these kind of funds. On the other hand, China has enjoyed a stabilizing political environment; a great labor force supported by lenient employment laws and good safety regulations to support a stable future for the company in China. Furthermore, trade regulations such as free trade zones as well the high amount of export going out of China make it suitable to distribute our product all over the world. Economical Economically China is a great place to start up this business. Chinas economy has been constantly growing over the past 20 years. The country shows a lot of promise to enjoy a great era of wealth. China also has a great labor force with low wages. Furthermore the Chinese currency has been rising in value, therefore making it a stable and valuable currency to work with in the future. Social Chinas demographics are rapidly changing. The population is aging due to the one child policy, which may not be optimal for our purposes, as our product is more to be appreciated by younger environmentally conformed people. On the upside, Chinese lifestyles have been changing over recent years and consumer habits to purchase have been increasing. Therefore although our product is in many cases not a necessity, people will still want to buy it for convenience. Furthermore our product is environmentally friendly and with the increasing air pollution people are developing an environmental consciousness and will be more likely to purchase environmentally friendly products in the future. Technological As our product is electricity free we will only need a mold and standard production machinery to mass-produce our product. Technological advancements therefore will not affect the companys ability to supply. Furthermore it is unlikely that our product will need technological advancements, as the idea behind it is that it doesnt need electricity. 3.3 Competitive analysis: SWOT & Porters Five Forces SWOT Analysis
9. 9. 9 Strengths The product is environmentally friendly, made from ecological materials and does not require any electricity to operate and can therefore be used anywhere, power consumption is zero when in use and uses water as the refrigerant, as opposed to CFC (Chlorofluorocarbons). Normal refrigerators have compressors, which use a large amount of power, with low efficiency. Ordinary fridges also have higher risk of CFC vapors, which is linked to depleting the ozone layer. Freshbox is cheap to produce in comparison to its electric counterparts and can be bought at lower prices. Weaknesses The product cannot cool down as much as an electric refrigerator and is made of fragile clay components, which require careful handling. Opportunities Growing environmental conscious in the world helps our cause and will likely increase popularity. We are an early mover in the market. China specifically as our first market yields high potential from the growing amount of target consumers. In terms of corporate social responsibility, many new jobs can be created with local production. Threats Easy entrance to market, can lead to high risk of competition. Also, people may not accept that the product doesnt work as well as an electric refrigerator. Porters Five Forces Barriers of entry Low barriers of entry as we do not have any patented technology and the start up cost is reasonably low. This might lead to a lot of competition if our product is successful as people will try and mimic the success. Bargaining power of buyers The product is creative and new with a possibly large market. Many environmentally conscious people may want to purchase one, leading to low bargaining power of buyers. Bargaining power of suppliers There is a low amount of competition in the field. The only serious competition charges high prices and doesnt operate in our initial market. This may lead to a high bargaining power of suppliers Risk of substitutes The risk of substitutes in the industry is relatively low, as it is a niche market
10. 10. 10 Competitor Rivalry As our product serves a niche market in the industry, the number of competitor firms in almost low to non-existent. Therefore, creating brand loyalty at the early stages would prove to be a significant factor towards our growth. 3.4 Market Opportunity Green manufacturing is a relatively new concept developed in recent years. Markets are shifting towards a sustainable and socially responsible development model for modern manufacturing industries. An emerging niche market for innovation and non-electricity based products within the home appliances market. Target Market With improving standards of living and rise in the income, it is observed that the new growing middle class in China follows the new model of buying sustainable and socially responsible products. Access to alternate and cheap sources of energy and products is becoming necessary for Chinas booming population; therefore there is a shift towards eco-friendly products, which are proximate to Chinas culture and heritage which makes middle class families, working class aged 23-35 and students who cannot afford to buy a refrigerator due to its unnecessary operating cost. Our target market is further segmented into people in the BOP (bottom of the pyramid) who live on less than 30 Yuan per day. Our product would be of significant utility for this target market. Lastly, we would also focus on customers involved in outdoor, adventure, military and camping segments. Increasedcostof livingdueto energyconsuming products Explosiveincrease indemandfor GreenProducts Emergenceof Sustainableand Socially responsible industries OurProduct
11. 11. 11 4.0 Marketing Strategy and Plan Goal Bring the right product to the right place at the right price with the right promotion 4.1 Product Brand name: E-Vita Brand Colors: Blue (color of the sky and sea, symbolizes depth, stability, trust, and frostiness) & Green (color of earth and nature, symbolizes ecology, freshness, calm and sustainability) First product name: Freshbox (590mm*300mm*470mm) Our Unique Selling Proposition Giving you effective, elegant and eminently distributable technology and products. Usefulness FreshBox stores up to 30kg food and keeps it fresh up to 20 days, while costing only 120 RMB to produce. This product uses a cooling mechanism that is reliant on nature and has zero energy waste when used. This can be kept outside to keep food or medicine fresh. DesignandTechnology FreshBox is an appliance as well as home dcor, which is recyclable, affordable and saves space. FreshBox is an elegant, stylish and beautiful product with the utility of storing food while being low maintenance. FreshBox has the ability to weather natural disasters and maintain livable conditions in the aftermath of disruptive events. For example, almost all systems require electricity to operate even if their primary fuel is oil, gas, or wood pellets; systems that allow operation even if grid electricity is not available are more resilient in the event of power outages. After a disastrous event where cool storage for a type of medicine or product is required and there is no power, this product proves extremely useful.
12. 12. 12 Quality Our eco-friendly product also strives to minimize the use of any potential toxins or harmful chemicals in the production, which in our case is zero percent. We use terracotta clay, which also provides its natural earthly benefits to the food stored in our product. Normal refrigerators have CFC (chlorofluorocarbons), which are highly toxic and are also one of the major reasons for the ozone layer depletion. We believe in Responsible sourcing creating sustainable industry generating employment in an area where artisans and clay makers are losing their art due to less demand for their handcrafted services. Packaging For our primary market, we would encourage young enthusiastic artists and painters to provide their services in enhancing the aesthetic appearance of our product. Also, we would integrate customization into the mix by offering over thousands of copyrighted abstract paint and spray paints samples and tools which would engage our customers to have their fridge reflect their individual styles. Service/SupportandWarranty Our product is simple to use, thus customers wont need considerable after-sales support. The product is durable and can be used for many years. 4.2 Price Costs Materials used: Machinery to press, shape and mold, Builders sand, Clay, water, Paint Holders, and promotional costs. It takes 7 kg clay & 2kg sand to produce one Freshbox. Cost of clay: Red Earthenware clay=2.5 Yuan/kg Cost of sand: 2 Yuan/kg Average labor cost: 25yuan/hour 2 refrigerators produced per employee per hour Average 100 Refrigerators will be produced per month in Year 1. Glass door: 40 Yuan/unit Estimated production cost incl. labor=120 Yuan/refrigerator Retail price: 299 Yuan Wholesale: 150 Yuan Profit Margin: 249% Competition Mitticool refrigerator: cost = 588 Yuan In comparison to our main competitor, our price point is marginally lower and should give us an competitive cost and differentiation advantage
13. 13. 13 PricingStructure We will use a prestige pricing strategy for our primary market, which sends a message of uniqueness and premium quality to our target customers. The price would be set at 299 RMB, which would also make Freshbox psychologically priced as well due to its 99 factor at the end. For our secondary and tertiary market, a personalized pricing strategy would be used. We want to work with NGOs and other organizations as a part of our corporate strategy; therefore we would offer Cost+ 25% markup pricing, which would be around 150 RMB. 4.3 Place Channelmembers Onlinechannels Primarily the product will be sold online, as the margins are much higher and it is an easy market to enter. Platforms such as Alibaba and Taobao are perfect opportunities to start selling our product. Going into wholesale may become a little more difficult in the Chinese market, as there are limited large wholesalers specified on the outdoor and appliances industry IKEAandAuchan Large supermarkets or retailers would be a perfect place to distribute our product as they sell many appliances of all different kinds and have a very large amount of customers walking through their aisles. Furthermore IKEA would be a perfect place to sell our product as it fits into their model. However in order to get into IKEA, we would have to pass IKEAs testing and go through their channels NonprofitOrganizationsinDevelopingCountries By working with these organizations, there can be a simple channel of product to people in need. The products would be taken from our facilities and sent in bulk straight to the areas in question. MarketCoverage IKEA would cover: Suzhou, WUXI, and their neighboring cities. Online: Specific targeted areas such as major cities in China with high density of our target segments. NGOs and Organizations: Covering global market and poverty driven regions such as South Asia and Africa. For our primary market we would focus on selling directly through our website and various online channels to our customers (B2C). Also, we are in talks with IKEA Wuxi to
14. 14. 14 secure floor space and negotiate terms and conditions with them. IKEA is very close to our suppliers and production facility therefore its very convenient and faster for us to deliver our product. 4.4 Promotion Basically a hybrid push and pull strategy: pushing our products through NGOs and organizations and pulling more and more customers towards our selling channels (online and IKEA) to generate more buzz and garner attention. Our IMC plan would follow the principle of AIDA Attention Interest Desire Action Therefore; We would tactically focus on creating awareness and generating attention about our product. Our most essential tool is that our company is Highly Eco-friendly and socially responsible, we are highly reliant on nature i.e. Going green, supporting CSR, also we are cultivating a sustainable industry and also generating employment in an area where artisans and clay makers are losing their art due to less demand for their handcrafted services. We are also addressing the need for using renewable energy, our leadership focuses on encouraging women to hold core management positions. Therefore, we would use all these to our advantage, which would result in promoting our product free of cost. This would generate more credibility, goodwill and appreciation from the society, which is crucial for our branding. This will spontaneously generate more interest towards our product, thus making it easier for us to engage and partner with distribution channels NGOs and other charitable organizations due to our credibility and goodwill, which we attained in the first stage. We would further use the credibility and reputation of our partner NGOs and charities to our advantage, thus making it easier to build trust with our primary target market and drive traffic through brand spiraling. Our customers by now have became aware and interested in buying our product, they now desire to buy the product and thus to convert this desire into an action, i.e. actual purchase we would use these channels, which we secured in the second stage to make the product available in the market for people to purchase. We also plan to launch Create your own clay pot initiative where we would teach people in the remotest area of the world to create their own pot. The pot is round and smaller in size and the physical prototype can be found in the appendices. Also, for every 100 freshboxes bought one is donated to a family without electricity (serves the purpose of appealing to the ecofriendly market, also serves as a good CSR strategy which can immensely drive publicity as well as sales)
15. 15. 15 Other possible promotions could include green billboards and green ads, which capture the attention of people on social media. Furthermore regular updates and a good social media presence can gain us inexpensive publicity. Lastly we will have to advertise the product at tradeshows regarding the outdoor as well as home appliances market to build a name for the brand in the industry. Thus, this encompasses our PR, publicity and viral marketing strategy. Since our primary market is based in China use of television, radio, magazine and newspaper advertisement would not prove to be fruitful. Therefore, we would use non-paid form of print and non-print; online and offline advertising through the following sources, i.e. using CSR, women in leadership, generating employment, and encouraging sustainability as tools for our PR and publicity campaigns that would highlight us in media, newspapers, and recognized bodies. Marketing budget would include: Website domain purchase, events, guerrilla marketing, trade shows and targeted Internet advertisements other misc. promotional expenses. 4.5 Philanthropy Our product also serves a segmented target market of people in BOP (bottom of the pyramid) who live on 35 RMB a day. Our product would have a significant amount of functional utility for this target market. Therefore, a cause related marketing would be executed in partnership with the NGOs and other charitable organizations, which will not only bring additional customers but also support our CSR policy to ultimately promote our product to the masses for a conveniently affordable discounted price. 5.0 Management Team and Operations 5.1 Management Team CEO Amanda Nguyen is in the middle of completing a Bachelor in International Business all while being a forward thinker and entrepreneur. Amanda has always been interested in socially responsible companies and products. When the idea of bringing ecological, nonelectric fridges came into existence, it was clear that this was a path that needed to be taken by a group that had enough intention to go through with it, and there needed to be someone to help keep clear intentions. Amanda has extensive leadership experience in global organizations and has learned to work on virtual teams. Using her strong interpersonal skills, she will be the glue of the E-Vita team, keeping morale high and always striving for better targets.
16. 16. 16 Marketing & PR Abhishek Patel studies Business Administration in the UK and is currently on exchange in China. He had always known about the concept of clay fridges from his relations with India, but little did he know that this was an opportunity for a three P company. One that benefits all three Ps: Profit, People, and Planet. Abhishek has shown his expert knowledge in business administration and marketing through his exemplar projects, presentations and constant review of current events.. He has been itching to utilize his marketing expertise in Asia and has acknowledged the Green trend that is slowly making its way East from other developed countries. Abhishek has already thought of market campaigns for expansion and seeks to imprint E-Vita as an eco-friendly brand the world will remember. Finance Frederik Rolfes is currently taking a Bachelor in Business Administration in China. Being a critical thinker he understood that this startup venture will be costly and risky, but he believes that he can use his personal experience and mentors to alleviate this risk and make smart decisions and smart budgets. He takes meticulous care into each endeavor and understands the value of money, which makes him most suitable to manage the finances of E-Vita. Operations Chenghao Ma is also taking a Bachelor in Business Administration in China and is prepared to oversee the entire E-Vita process, including supplier management, manufacturing, quality control, and distribution. Throughout Chenghaos academic career, he has proved to be a logical, detail oriented and highly diligent individual. He will use these capabilities and his fluency in Mandarin to create strong relationships with local suppliers and other companies in the industrial areas. He is committed to providing products of the highest quality in the market through thorough testing and ethical methods. Chenghao intends to make sure all operations run smoothly, from beginning to end. Research and Development Steve is an accomplished undergrad of Industrial Design and is seeking to utilize his skills to create an intelligent and attractive product using the new program SolidWorks. He has been commended for his recent public bus handle design for its combination of creativity and functionality. Steve understands the scientific mechanisms of clay refrigerators and has designed a tasteful, economically sized E-Vita for the energy- saving home. Steve will keep improving the design to be as cost efficient in terms of materials, energy efficient in terms of product creation and of course to meet the needs of the consumer.
17. 17. 17 5.2 Physical Location Our headquarters will be in Suzhou, SIP, close to our target market. We believe that this is a prime location where we can conduct our research, meetings, and foster an entrepreneurial community. The physical location of our manufacturing plants will be strategically placed near the target markets in Asia. This is essential as our product has the fragile component of clay and the less geographical distance it has to travel, the better. Many cities in China and other Asian countries have Industrial parks or clusters where businesses are flourishing and can facilitate accessing the local distribution systems. Our first plant will be located as close as possible to headquarters within the constraints of reality, it may be in a neighboring city such as Wuxi. 5.3 Facilities Because we are a start up and doing our best to reduce expenses, we will not have rent an office space, and can use whatever space is available to us without extra expenses. This could mean one of our apartments, a friends apartment or, public spaces such as coffee shops or libraries. The space we need can be modest in size and interior, there only needs to be a space to make and field calls, and work efficiently on our own personal devices so no need for much office equipment or office supply investment. The first step in the process of creating the E-Vita fridge is to use the molds to make the clay shells, and plastic components. Then there is assembly, testing, and painting the outer shell of aesthetic purposes. There needs to be a section of the facilities for each step and enough space for a smooth workflow. A suitable space was found for rent in SIP at a reasonable price. 5.4 Production and Quality Assurance PotMechanism As water from the wet sand slowly diffuses through the porous outer part, the water evaporates into the drier outside air and cools the system. For this to work effectively, the fridge must be placed in a dry, ventilated space. This cooling effect keeps the food in the smaller pot fresh by slowing decomposition and thus keeping nutrients intact. However the mechanisms of a simple looking device can be quite complex based on principles of evaporation and thermodynamics Sweat evaporation occurs from the surface of a liquid into a gaseous phase that is not saturated with the evaporating substance. The amount of heat that is needed to evaporate the liquid is drawn partly from the air and evaporating surface. Thus the surface becomes cooler. Evaporative cooling occurs at the surface. The heat needed to change phase is drawn from the surface and thus it can be used to cool without using much energy like common refrigerators.
18. 18. 18 ProductResearch Our scientific research concluded answers to the following questions: How long will food stay fresh in our product compared to an electric refrigerator? Does the size of our product make a difference in the lowest temperature achieved? How does the amount of water in the sand affect the temperature? What effect does the amount of sand have on the temperature? How does increasing the surface area of the outer part affect the temperature change?
19. 19. 19 Our manufacturing process: We will purchase two metal mold to create the two different sized clay shells. Then, it shall be assembled together with the sand and other components, painted for aesthetic reasons and sent to quality testing. Our product performs its cooling function under certain humidity. We will take one from every ten fridges and perform a quick cooling exam to verify that our fridges meet working conditions. We will check what temperature the fridge is able to achieve and it passes the test, it moves on to packaging. 5.5 Inventory and Product Delivery In order to deliver high quality products, we will focus on carefully selecting our materials, employees, suppliers, and delivery methods. To meet customer demands we will have __ amount of pieces in inventory at all times. The products in inventory will be kept stacked to the side of our rented facility. The clay and materials will be kept safe with foam/ paper and covered in plastic to prevent dust. Further packaging with air filled plastic packaging will be used to encase the final product during transport. The product will be fitted inside labeled and branded cardboard boxes and shipped directly to customers buying through the online shop or in large quantities to partnering NGOs. Our company email will be constantly monitored for valuable complaints and feedback that will help us pinpoint weak spots in our product or customer service. Moldclayshells Assembleclay shellswithsand Assembleplastic components ontofridge Paintclay exterior Qualitytesting Engage suppliers Create Product Delight Customer Gain pro]its Investand innovate
20. 20. 20 6.0 Financial Analysis and Projections 6.1 Cash Flow Projections E-Vita Cash Flow Projections Year 1 Year 2 Year 3 CASH RECEIPTS Total Total Total Cash Sales 287,040 344,448 413,338 Collection of Accounts Receivable Loan Proceeds Owner's Equity Contributions 250,000 Sales of Assets Other Total Cash Receipts 537,040 344,448 413,338 CASH DISBURSEMENTS Purchase of Material Assets 79,950 95,940 115,128 Purchase of Fixed Assets 120,000 Owner's Salaries Employee Wages 72,000 72,000 72,000 Employee Benefits Advertising and Promotion 75,000 75,000 75,000 Rent 24,000 24,000 24,000 Utilities 3,000 3,000 3,000 Other Office Expenses Income Tax Payments 93,488 67,485 43,500 Other Total Cash Disbursements 467,438 337,425 332,628 Increase (Decrease) in Cash 69,602 7,023 80,711 Opening Cash Balance 98,107 77,890 86,041 Closing Cash Balance 76,536 86,041 166,753
21. 21. 21 6.3 Balance Statement Projections EVita Expected Balance Sheet Assets() Beginning Year 1 Year 2 Year 3 Current Assets: Accounts Receivable 0 143520 107640 71760 Cash 250000 120500 321160 530000 Inventories 0 28800 0 15840 Other Current Assets 0 25800 25800 32250 Total Current Assets 0 318620 346960 722050 PROPERTY & EQUITPMENT 0 120000 120000 120000 Total assets: 250000 438620 466960 842050 Liabilities() 2015.01 2015.12 2016.12 2017.12 Current Liabilities: Short-Term Debt 0 0 0 0 Accounts Payable & Accrued Expenses 0 0 0 0 Other Current Liabilities 0 0 0 0 Current Portion of Long-Term Debt 0 0 0 0 Total Current Liabilities 0 0 0 0 LONG-TERM DEBT 0 0 0 0 Short-Term Debt 0 0 0 0 Accounts Payable & Accrued Expenses 0 0 0 0 Other Current Liabilities 0 0 0 0 Owner's Equity() Retained earnings 250000 438620 466960 842050 Total Equity: 250000 438620 466960 842050 Total Equity and liabilities: 250000 438620 466960 842050
22. 22. 22 6.4 Income Statement Projections Projected Income Statement YEAR 1 YEAR 2 YEAR 3 INCOME Revenues Sales 287,040.00 344,448.00 413,218.00 Net sales revenue 287,040.00 344,448.00 413,218.00 Less COGS Opening stock 287,040.00 344,448.00 413,218.00 Cost of Goods Sold 129,600.00 141,120.00 154,920.00 Gross profit 157,440.00 203,328.00 258,298.00 EXPENSES Equipment 120,000.00 0.00 0.00 Depreciation 12,000.00 10,800.00 9,720.00 Advertising/promotions 75,000.00 75,000.00 75,000.00 Utilities 3,000.00 3,000.00 3,000.00 Rent 24,000.00 24,000.00 24,000.00 Total Expenses 234,000.00 112,800.00 111,720.00 Net Profit -76,560.00 90,528.00 146,578.00 6. 5 Breakeven Analysis GraphofBreakEvenAnalysis Figure 6.5.1 is the calculation for how many units it would take to breakeven. Figure 6.5.2 is the visual representation of the slow rise to profitability. 0 100000 200000 300000 400000 500000 600000 700000 800000 900000 80 480 880 1280 1680 2080 2480 Fixedcost TotalCost Salesrevenue
23. 23. 23 BreakevenAnalysis Sales SalesPriceperUnit 299 SalesVolumeperPeriod 80 TotalSalesAmount 3000 Variablecosts RawMaterials 60 TotalVariablecostperUnit 60 TotalVariablecostperPeriod 4800 ContributionperUnit 239 GrossMargin 19120 FixedCostperPeriod Salary 6000 Rent 2000 Marketingexpenses 6250 TotalFixedCostperPeriod 14250 NetProfit(Loss) 4870 TotalFixedcost Equipment&Machinery 120000 Total 120000 BreakevenPoint(Units) 1972 7.0 Funding Internal funding The five owners of E-Vita will each contribute equal amounts of 50,000 CNY to the company each buying 20% of the company. External Funding There are many grants to apply for when starting a business. One that we could meet the criteria for is the Leadership Grants for small businesses, which goes to Canadian or American Citizens. The grants range from $1000 to $100000, depending on the business and if the company has the ability to match the grant funds. This amount is uncertain but will hopefully help fund E-Vita. Apart from that we also look forward to apply for women in leadership grants, sustainable businesses grants and so on. 20% (4% from each owner) of the business is left for investors looking to collaborate and engage in this emerging sustainable enterprise.
24. 24. 24 8.0 Appendices Appendix 1 (Rental space in SIP) Space rental for a reasonable price http://su.58.com/fangchan/21787890363426x.shtml?PGTID=14309030173660.9753443623662 951&ClickID=2&adtype=3 (Accessed: 05 May 2015) Funding Request Leadership Grants for Canadians and Americans http://www.leadershipgrants.com/smallbusiness/funding_guidelines.jsp (Accessed: 09 May 2015)
25. 25. 25 Appendix 2 (Our Make your own pot Initiative prototype)
26. 26. 26 Appendix 3 (Meeting Log) Date Duration Attendance Whatwasdiscussed? 25thofMarch 1.5hours Everyone Brainstormingviableproductideas, Researchbestideastillnextweek 31stofMarch 1hour Everyone Discussresearchanddecideonone product,separateresearchtaskstill nextweek 5thofApril 2hours Everyone DiscussedOpportunityanalysisand researchaswellasmanagement andoperationssections,decided whatwasnecessary,splitworkinto teamsAbhishekandFrederik OpportunityAnalysisandAmanda withChenghaoManagement& Operations 14thofApril 2hours Everyone Discussedresultsofworkprepared andagreeduponwhatneedtobe improved.Thendiscussed marketingsectionandeachmember istofulfillthemarketingsectiontill nextweek. 22ndofApril 1.5hours Everyone DiscussedImprovementsof Opportunityanalysisandcompared Marketingsectiondecidedwhich werethebestideastousefor report,assignedfinancialsectiontill nextweek 3rdofMay 2hours Everyone Agreeduponfinancialsinorderto beabletoproduceahomogenous financialreport 6thofMay 1hour Everyone ComparedFinancialdata,discussed difficultiesanddecidedwhat neededtobeimprovedupon. AmandawasassignedExecutive Summary,Mission,Companyand description. 13thofMay 2Hours Everyone ReviewedtheReport,discussedany possibleimprovements,discussed fishbonediagram.
27. 27. 27 Appendix 4 (Detailed Financials)
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30. 30. 30