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Business Plan for Healthy-Mart Organic Supermarket Essay

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Updated: Jan 10th, 2022

Executive Summary

The demand for chemical-free foods with no additives has risen over the past few years as a result of the ‘Eat Healthy’ policy. Healthy-Mart Organic Food Supermarket will satisfy the demands of consumers by offering them pure healthy products free of chemicals that have been locally produced. The products available in Healthy-Mart will be body-friendly to the consumers and an alternative to the chemical-grown foods available in the nearby food stores.

Located in the heart of Jeddah city in Saudi Arabia, Healthy-Mart will serve all genres of customers. The first target group will be women who comprise 40% of the city’s population. The second group will be the rich youngsters yearning to keep healthy by eating organic foods. They comprise over 30% of the city’s population. The last group that will particularly be interested in shopping in Healthy-Mart will be the rising number of dieting women in Jeddah.

Healthy-Mart

Healthy-Mart is bound to be financially successful with its only competitor located 10 kilometers away. The management will ensure that strict financial control is followed and excellent services offered at the supermarket to maintain its high standard. The financial analysis indicates a possible net profit of over 7% within the first year with projected sales estimated to shoot up in a short period. With a start-up capital of $100,000, Healthy-Mart is estimated to generate sales of over $ 300,000 within the first year and $500,000 sales by the second year. It is therefore possible that Healthy-Mart will become profitable by the second year.

Objectives

  • To become a household name as the best organic food store in the city.
  • To satisfy the consumer’s needs by offering fresh, whole and chemical-free products.
  • To offer organic products grown locally with no additives like chemical preservatives.
  • To support environmental policy by supporting earth-friendly products from organic farms.
  • To maintain a corporate international brand name synonymous with being the best natural food retailer.
  • To realize the company’s dream of achieving high-profit margin through considerable growth in sales.
  • To open more branches of Healthy-Mart Organic Supermarkets in other cities of Saudi Arabia.

Mission

Healthy-Mart is an alternative to unhealthy feeding and our main aim is to ensure healthy feeding. Working as a team, we commit ourselves to work together and giving our best to our esteemed clients and making sure we are at their service at all times. We are therefore committed to offering the best quality services to the clients. The intriguing atmosphere combined with an enticing ambiance will make shopping at Healthy-Mart a thrilling experience. The trained staff and management at Healthy-Mart are eager to make shopping at Healthy-Mart easy and satisfying to all our consumers. We vow to play an important role in the community by offering the highest quality of natural foods. By promoting non-toxic products, we are promoters of eco-friendly living.

Company Summary

Healthy-Mart is a medium-sized supermarket focused on dealing with wholesome and natural organic foods. The supermarket will be situated at the heart of the bursting city of Jeddah. Our clients are the most important component of our business and we are dedicated to offering the best service in this prime neighborhood. Healthy-Mart’s main goal is to achieve our financial success through maintaining high standards in this neighborhood.

Healthy-Mart will source its products locally hence promoting the local industry and will make the products accessible to everybody at an affordable price. The company respects everybody and does not discriminate. Each and every member of the community is welcome to experience the friendly nature as they shop in our supermarket. Armed with all the legal documents, we have been authorized to run this business in this city and contribute to its welfare. Community progress has always been an important aspect of our company and we are willing to get involved in various community events.

Company Ownership

Healthy-Mart is a partnership business owned by two partners Josh Williams and David Jones. They will be in charge of financial running and personnel issues of the company respectively. Josh Williams is a qualified accountant and has graduated with a Degree in the field. He has practiced in this field for more than ten years before deciding to run his own business. David Jones on the other hand has specialized in Human resources and therefore knows how to handle the personnel. The combination of these two individuals is an ultimate success story for Healthy-Mart.

Start-up Summary

The start-up cost of Healthy-Mart comprises both inventory and display equipment. The Co-founders plan to invest $50,000 as start-up capital and secure a loan of $50,000. The loan will be secured from a local bank and through our sales projections; it will be repaid in five years. The loan will be used to set up the business premise to the required standard.

Start-up Funding

Start-up Expenses Required to be funded $2,000
Start-up Assets Required to be funded $100,000
Total Funding Required $102,000
Assets
Start-up Non-cash Assets $30,000
Start-up Cash Requirements $77,000
Additional Cash Raised $0
Cash Balance Available on Start Date $77,000
Total Assets $107,000
Liabilities and Capital
Current Borrowing $0
Long-term Liabilities $90,000
Outstanding Bills $1,000
Other Current Liabilities $0
Total Liabilities $100,000
Capital
Planned Investment
Investor 1 $25,000
Investor 2 $25,000
Additional Investment Requirement $0
Total Planned Investment $50,000
Start-up Expenses $2,000
Total Capital $48,000
Total Capital and Liabilities $107,000
Total Funding $102,000

Products and Services

Healthy-Mart will offer the best products and services to the satisfaction of the consumers.

Products

The products that will be sold at Healthy-Mart will be free from any chemical additives. The products will be locally sourced hence making them the best body care products. The organic products displayed in the supermarket will be fresh and preserved in their natural state. Healthy-Mart will start by displaying the following organic products as a start-up;

  • Organic raw fruits such as mangoes, apples, bananas and variety of other available organic fruits.
  • Organic cereals
  • Organic vegetables such as kales
  • Organic locally made beverages such as creamed coconut milt
  • Organic sea salt

Healthy-Mart will ensure that the products have a clearance health certificate as a confirmation that they are fit for human consumption. The company will only accept products that have been properly sealed to avoid contamination. The raw fruits and vegetables will be tested for their freshness and purity before being sold to the clients. The locally-made beverages should be made using the required ratio and no preservatives added whatsoever. The company will therefore be very careful in its supplier selection process to ensure that only qualified suppliers are given tenders. Product testing and hygienic preservation will be the key aspect of our company to ensure that our clients keep streaming back.

Services

Our main goal is to offer the best service and product in Jeddah. The company will employ fully trained staff to cater to the needs of the consumers. All the staff will have to undergo medical tests to ensure that they are medically fit to handle foodstuff. Cleanliness should be maintained at all times and the staff should always be in their appropriate uniforms with their name tags on for easy recognition by the customers. In addition to friendly staff, Healthy-Mart will offer other services such as an attractive display of organic products, self-service for the customers, transportation services from the supermarket to the car and shopping vouchers to our loyal customers. Utmost respect will be accorded to our clients and any problem will be handled promptly. This is why it will be necessary for the company to erect a suggestion or complaints box at the exit door in case there are problems that the customers wish to address. Healthy-Mart does not tolerate any rudeness by our staff and a breach will lead to the culprit being punished. Our service will be the best in the hospitality industry.

Sales Literature

There will be need to communicate to our clients about the services offered at Healthy-Mart. Sales literature will be the ideal mode of communication to rely on. The company intends to use copies of service advertisements, well-structured and attractive brochures, catalogs, use of direct mail and some technical specifications. Sales literature is the most appropriate and cheapest form of advertisement as the clients are able to see pictures of the products and the price of each. Brochures are especially preferred and as they offer detailed information. The sales literature will keep our consumers in the ‘know-how’ of what Healthy-Mart has to offer and its unique nature (Kessler and Heimberg, 2001).

Sourcing and Fulfillment

The company intends to source its products mainly from the local farmers. It will also rely on major organic distributors to source organic beverage and salt products for sale. Both the farmers and distributors will present the company with a spreadsheet showing their discounts and margins offered. They will also be required to present additional documents such as legal documents for companies, health clearance certificates for individual suppliers and any other necessary document. This will be the best mode of choosing the ideal candidates to source the organic products from. It will also help the customers to trust our products for good quality and that they are paying for value.

Technology

Technology will play a vital role in our company and the services it intends to offer. Cellular phones and DVDs will be used to educate the consumers on the nature of goods available at Healthy-Mart. A business website professionally done will also improve the perceptions of many consumers about the importance of eating healthy. Use of social media such as Facebook or Twitter will help in creating awareness of our products (Karen 2000). Social media is currently the best tool for communication and advertisement.

Future Products and Services

Healthy-Mart will introduce more products and services in the future. It is projected that the first profitability will be achieved in the second year and therefore this will be the perfect time to introduce new organic products such as organic chocolate and organic yogurt in our product line. The supermarket will also set up a place for people to relax outside and enjoy fruit salad made from the organic fruits and beverages. This will attract more clients who end buying more products while relaxing. Implementation of other services such as home-or-office delivery is underway. The service will require customers to call the shop and order the products they want. The products will then be delivered to their homes or offices. Introduction of these products and services will depend on the performance and reception of the company within the first three years.

Market Analysis Summary

Jeddah is the second-largest city in Saudi Arabia and the main gateway to Mecca, the holy city. Located along the coast of Red Sea, it has a population of about 3.2 million, most of who adhere to Islamic teachings. The city has thousands of tourists who stopover on their way to Mecca and therefore an ideal place to locate the business. It is also located near two major institutions of learning, King Abdul-Aziz and Jeddah College of Technology. Muslims are very strict with their health and hygiene and therefore, it will be very easy to convince them about the importance of organic foods. The large community combined with visitors from all over the world will be a perfect clientele base for Healthy-Mart Supermarket.

Currently, there are about 15 major supermarkets serving the city of Jeddah though none of them deal with organic foods. The nearest organic food store is quite a distance away and therefore, Healthy-Mart will fill the void through its unique products to the people of Jeddah. The area is inhabited by rich people due to their involvement in the oil business hence booming business.

Market Segmentation

Health-Market will mainly focus on the following important customer group:

  • Dieting Women – Due to the presence of junk food containing high fat, ladies have embarked on a diet program worldwide and this is no difference in Jeddah. A large section of women in Jeddah is on a crushed diet to reduce their weight and this will serve as a very good opportunity to introduce them to our products. Organic foods are very healthy and hence ideal for dieting women.
  • Families – Families living in Jeddah city will form an important clientele base for Healthy-Mart. Mothers will be keen to maintain proper and healthy feeding in their families and will therefore become our main shoppers. Our products will be of high quality which will keep the family members coming back. Expectant mothers will especially become very regular customers at Healthy-Mart with a quest of maintaining an appropriate healthy diet.
  • The rich youngsters – Jeddah is also a home of upcoming rich employed youngsters who are seen around driving their expensive vehicles. The rich who are easily influenced are currently spending most of their free time in the gym to keep fit. By introducing organic foods as a supplement to healthy eating, will influence this group of youngsters to buy organic foods.
  • Students – Located near two learning institutions with a big population of students, they will serve as our important customers. Students are known to be a curious breed and are therefore bound to be attracted by the unique nature of products offered at Healthy-Mart supermarket.

Target Market Segmentation Strategy

As an organic foods business, we need to rely on word of mouth by our clients to spread the word about our products. This will be possible through our excellent services to our clients and the quality of our products. Other strategies likely to be adopted include use of flyers especially around the learning institutions to raise awareness. Offering discounts to our clients will also be a good strategy as this will make more customers stream in. Advertising through billboards will also raise awareness of our existence hence becoming a major marketing strategy. Free health DVDs to our shoppers will also boost our sales. Use of local print media and broadcast media will also be an excellent strategy. The companies do not have an internal public relations department and will therefore outsource the service to perform the necessary promotional activities.

The marketing strategy will be divided into three main stages:

  • Opening – The Company intends to have a grand opening and will therefore send notices to all media companies to cover the event. This will make customers aware of the existence of Healthy-Mart.
  • Ongoing – After the grand opening, Healthy-Mart will adopt other advertising measures such as print media advertisement.
  • Point of sale – Once Healthy-Mart gains the trust of the people; it can now rely on cheaper methods of advertisement such as word of mouth and use of flyers.

Market Needs

As earlier stated, customers’ desire for healthy foods that will supplement their healthy eating is growing and hence the need to satisfy this need. With a variety of organic products available at Healthy-Mart, the customers will choose what they desire to carry home. Self-selection service therefore becomes very important to the customer for them to pick the product that will satisfy their needs at their own pleasure. By offering the above services, Healthy-Mart will therefore be fulfilling its goal of meeting the market needs.

Market Trends

The current market trend is the quest to eat healthy food and this has taken a shift towards consumption of organic foods. This is due to numerous documentaries being aired on media about the negative impact that chemically treated and refined foods have on our bodies. The increase in obesity and other sickness brought about by unhealthy eating has seen a rise in demand for natural foods with no chemicals. Jeddah’s population is no exemption and thousands of people are already adopting this new trend of healthy eating. The company is therefore at an advantage of being the first to offer this demanding service of bringing healthy foodstuffs to the doorstep of the people of Jeddah.

Market Growth

With the population comprising of well-to-do people, there is an indication of market growth in the city of Jeddah. Though we do not have the exact growth statistics to prove this fact, a survey of the area and the business located here gives an indication of growth. The classy population of Jeddah requires a combination of quality service and excellent product choices for the business to succeed.

Industry Analysis

Organic Foods Supermarket relies on consumers to shop from the various products available in the shop. The supermarket industry is highly competitive and requires creativity to set it apart from other competitors in the region. It relies on products brought in by suppliers and therefore should be very particular with the quality of products displayed on the shelves for sale. The display should be very attractive as the clients serve themselves. Care should be taken especially when selling organic products as they should be kept fresh and high standards of hygiene maintained.

Supermarkets set their own prices for the products and ensure that they make favorable profits. Maintaining customers is the key agenda of any organic food supermarket. Healthy-Mart is no exception.

Industry Participants

This industry is dominated by particular groups of people who keep the business running.

  • Staff – the supermarket’s attendants, cashiers, storekeepers and other members of staff help in the smooth running of the business. They offer quality services to customers and help them where necessary.
  • Suppliers –Supermarkets source their products from suppliers and this may include local farmers and authorized distributors for organic products. The suppliers sell the supermarkets the products at a certain lower price and they in turn sell to the consumers at a higher level thus realizing their profit margin. Suppliers should be certified and issued with a clean hygiene certificate so as not to compromise the health of the client.
  • Customers – they are the main key players in the industry. They form the platform of the business and should therefore be treated with utmost respect.

Without customers, a business ceases to operate and maintaining these key players should be the main priority of the business.

Distribution Patterns

Supermarkets rely on a particular distribution pattern to sell its products (Holinger 1996). The pattern is therefore referred to as a chain of distribution.

  • The Manufacturer – they top the chain of distribution. The manufacturers are the people who manufacture the organic products or grow them. A farmer in our case can be a manufacturer as they grow organic raw products such as fruits and vegetables.
  • Suppliers – they buy the products from the manufacturers for distribution. It should however be noted that currently, most manufacturers have become the suppliers themselves and thus very difficult to differentiate the two. A good example is the local farmer who is both a manufacturer and supplier.
  • Retailer – supermarkets fall in this category. They buy the products from the suppliers at wholesale prices and sell to the consumer.
  • Consumer – they complete the distribution chain by buying the products from the retailers who in this case will be Healthy-Mart Organic Food Supermarket.

Competition and Buying Patterns

Healthy-Mart will offer unique, fresh and natural organic products mostly locally grown. The customers will feel that their money is worth the purchase from our store as we will be a niche higher than any of our competitors. Customers in Jeddah favor shopping at places that are convenient, offer a wide range of selections and standard prices. Not only does Healthy-Mart fulfill these obligations but also offers natural health products to the satisfaction of the customer. Healthy-Mart will face no rigid competition as all the other nearby supermarkets do not deal with organic products.

  • Our store is located in a convenient place where our customers can easily access without walking a long distance. This will therefore make Healthy-Mart an interesting shopping spree ahead of the other competitors. In a nutshell, Healthy-Mart seeks to achieve the following factors to stay ahead of the pack:
  • Ideal location – as earlier said, this is very critical to any success of a business. It should have an ample parking space to avoid inconveniences.
  • Price – Pricing the products in Healthy-Mart will be essential. The prices should not be too high and neither should they be too low. People in Jeddah are wary of cheap products.
  • Quality – Freshness and first-class-rated organic products will increase the customer base through repeat business.
  • Focus – By staying focused and providing the best for our clientele, we will keep them away from shopping at our competitors.

Main Competitors

As earlier said, our main competitor is a distance away and the other supermarkets nearby are not in our line of business.

However, our competitor has a lot of money and can afford to move his store nearby if he so wishes. It is therefore wise for Healthy-Mart to acquire a good and solid client base and maintain them.

Strategy and Implementation Summary

The main agenda of our company is to increase sales to realize higher profits. The strategy to be adopted should focus on the underlying needs of the customer and give them what they desire.

Strategy Pyramids

Our main strategy is the increase of consumers for our organic foods. A large clientele base gives the business revenue to further its operations and helps to create more employment. The tactics to increase the client base are:

  • Creating awareness of the need of feeding on healthy products and more so, the organic products.
  • Consistent provision of high-quality products to meet the needs of all our customers.

Offering good service value to our clients who in turn will be happy to spend in our supermarket.

These tactics will be supported by programs such as promotions to keep the flow of the customers steady.

Value Proposition

Although selling organic products will offer competitive prices, the core benefit of Healthy-Mart will be to ensure that the customers get value for their money. Not only will they feed on natural products but will also live a healthy life. Our service will therefore reduce unnecessary sicknesses as a result of unhealthy eating to the locals of Jeddah.

Competitive Edge

Healthy-Mart has the capability of providing high-quality organic products to its customers at a competitive price. The reason behind this is the fact that our workforce is well trained and we have further employed a quality controller to ensure that the quality of our products is maintained. Though the workforce will initially face a challenge of handling first-time clients and maintaining a high level of quality service, we have the confidence that they will slowly master the art. Their commitment is one of the main keys to success.

Marketing Strategy

Most of our marketing strategies have been discussed throughout the entire business plan. However, to add to the main marketing strategies, the company will rely on advertisement through the media as it will not only reach Jeddah residents and visitors but beyond. This will help create awareness to the citizens of Jeddah and others of the existence of Healthy-Mart and the unique products it will be selling.

Local marketing will also be adopted and this will be achieved through circulation of flyers, an opening party and promotions.

Positioning Statements

The business segment will be the most important aspect of how Healthy-Mart will operate. Customers will receive quick service and will be bound to pay for the products through various modes of payments such as cash, credit and debit card. Healthy-Mart will wish to satisfy their desires by keeping a wide variety of organic products in the store at all times. Healthy-Mart will be able to provide and satisfy the entire customer’s demands better than any other supermarket in the city. New organic products will be added to the display adding to the uniqueness of the store.

Pricing Strategy

Faced with a possible notion that we are the only organic food chain in the city, we are at liberty to set our own prices. However, care will be taken not to overprice as this will put off customers. Our pricing strategy will be based on various factors (McKeever, 2010):

  • Profit margin – pricing will be based on the profit margin to be achieved from purchasing the products from the suppliers.
  • Expenses- the profit should be able to take care of the running expenses of the business and care should be taken to avoid losses.

Promotion Strategy

The company is planning to use a local radio program to promote the business. It will also have a short but catchy television advert running on the local television channels. A grand opening party is also being arranged that will ensure that locals have been invited and the event aired over the local radio station. The company also intends to use billboards and flyers.

Advertisement through the billboards and radio will run for five months to raise awareness. The flyers and another promotional strategies like mailings will thereafter be used to promote sales.

Though promotion strategies to be used will be very expensive, Healthy-Mart has the confidence that once it wins over the customers, chances of them leaving to shop at any other supermarket will be impossible. The future sales will therefore pay off due to these strategies.

Distribution Patterns

Healthy-Mart intends to rely on several distribution patterns:

  • Fresh organic products whose quality has not been compromised by time in transit.
  • Prioritization of customers’ needs and demands.
  • Convenient timely sale hours.

Marketing Programs

Our most important program is creating a database for the most qualified suppliers to deliver quality organic products. This will ensure that fresh products are delivered to meet the demands of the customers. The data creation program is aimed at cultivating a large supplier and customer base that will increase the sales at Healthy-Mart. The success of the program will be measured by the steady customer growth and the ability to achieve profitability by the end of second year.

Sales Strategy

Our main aim is to keep our clients satisfied with our services. Crowd balance is an important sales strategy where the company ensures that there is movement in and out of the store. However, care should be taken not to overcrowd the shop by ensuring that lines at the cashier move fast. A variety and quality selection of convenient organic foods should always be available. Clients are put off when they occasionally fail to find their favorite product on the shelves.

The other sales strategy is the development of repeat business, where clients who walk in to do shopping are bound to return. To ensure that this happens, sales promotions such as discounts and free incentives to the customers will be encouraged.

A suggestion box will also be placed at the exit door of the supermarket to get feedback from the clients. The suggestions offered by the clients will help improve the services of Healthy-Mart.

We will further develop a free delivery system that will allow clients to order products from the comfort of their homes and offices and the products delivered to their doorstep.

Sales Forecast

Healthy-Mart predicts an increased growth of sales over the next few months. This posed a challenge as we have never done business in Jeddah and it was impossible to predict the market. However, the market seems to be stable and this is good news to Healthy-Mart. Being the only organic shop in the city, it will aim at first acquiring the loyalty of the citizens. The sales are expected to have risen higher by the eleventh month.

Sales Programs

To improve the sales in the company over the years, Healthy-Mart will have to implement some sales programs.

  • Sales Incentive Program – The Company will give incentives to salespeople who will zealously market our products. The incentive will be simple and attainable and will not cost the Company a lot of money. Incentive sale programs always bring back positive results.
  • Up-selling Sales Program – This requires Health-Mart to add more products to the display in addition to the existing ones. Customers are wary of new products especially those that they have never eaten before. This program ensures that customers are slowly introduced to a new product.
  • Customer Rewards Program – these programs help create loyalty among customers hence increasing the sales volume. Customer rewards can be in form of discounts, gifts and free samples. Customer rewards also increase client spending in cases where they like the new sample product and end up buying some of them too.

Strategic Alliances

The company is already seeking to create strategic alliances with the suppliers. This will help enlarge our product portfolio and to have the best organic products that the suppliers can offer. We also seek an alliance with the local media promoters so as to advertise our company to the people of Jeddah. The strategic alliances will be a boost to our sales as people will be made more aware of the quality healthy foods available at Healthy-Mart.

Milestones

Healthy-Mart has come up with a milestone schedule that emphasizes the planning for implementation. It will help the company be aware of all the important events set to take place in the course of the business planning. It includes the plan, the duration, and the estimated budget.

Milestone Start Date End Date Budget
Business Plan 15/06/2011 15/07/2011 $1,000
Legal Documentation 20/06/2011 1/07/2011 $10,000
Equipment Purchase 1/07/2011 1/08/2011 $40,000
Website Registration 2/08/2011 15/08/2011 $10,000
Corporate Identity 14/08/2011 16/08/2011 $8,000

Web Plan Summary

Technology has made advertising easier and a web plan should therefore be included in the business plan. The company can come up with a website page for Healthy-Mart which will have an easy-to-use interface by non-technical users. A console for administrative management work will be needed for easy input and recordings of accounts.

Website Marketing Strategy

Besides creating a company website page, information pertaining Healthy-Mart products will be posted in search engines popularly recognized. These search engines include Google, Yahoo search and many other search engines available. Certain keywords like ‘healthy foods’ or ‘organic products will be used to make the search easier. The use of social media such as Facebook and Twitter will also be another website strategy. This strategy is very cheap yet it has the capability of reaching out to many people from all over the world. Healthy-Mart will therefore become a brand name.

Development Requirements

Healthy-Mart’s interface should be easy to use to serve the clients’ demands. The company will therefore work hard to identify, develop and implement various solutions to the clients’ obstacles. This will help understand and integrate the market base into the system of the company. A comprehensive solution to easily access the site on the internet will be developed.

Management Summary

The co-owners, Josh Williams and David Jones, are qualified food analysts with over ten years of experience. They have a similar store in New York which is doing very well and have managed to get a huge customer base. The company, being a medium-sized company will include other employees to help run the business. We assume ten employees in total.

The working hours will be from 7 a.m. to 6.30 p.m. on weekdays and from 8 a.m. to 4 p.m. during the weekend and public holidays. The co-founders will be present all day to supervise the running of the store to ensure that everything is smooth.

Organizational Structure

Healthy-Mart will have a workforce of fewer than fifteen people hence no structured organizational structure. However, for purposes of management, the structure will comprise of the two co-founders as the directors, the quality controller, the cashiers and the attendants. Healthy-Mart’s goal is to expand over the years and include more departments in the company like the finance department, sales and marketing department and procurement.

Management Team

The management team will consist of Mr. Ericson Daniels, a quality control analyst who will ensure that the desired quality of the organic products has been met. Mr. Ericson has a degree in that particular field and has worked in a similar position for over 30 years. He is therefore the ideal person to include in the management team as his services will be vital to determine the quality and value of the products on display. Fresh and quality organic products will be the main reason for retaining our clients and be ahead of our competitors.

Management Team Gaps

There are certain management team gaps that will require to be filled in the near future. The company lacks a Marketing and Sales manager to market the company’s products. The company will outsource a Public relations company to conduct the sales of the company and to come up implement the proposed marketing strategies. It also lacks the services of an Accountant to handle the accounts but Josh Williams, a qualified accountant and one of the co-owners, will be of great assistance.

The company will outsource these services until we get the qualified personnel to fill in the vacancies.

Personnel Plan

Besides the co-founders and the quality control analysts, it was earlier stated that the company will seek services often other employees. The ten employees will include four attendants to help the clients pick out their products, three cashiers to avoid overcrowding, two storekeepers and finally a customer service employee to handle rising complaints of the clients.

Financial Plan

We expect to raise a start-up capital of $50,000 on our own and to borrow a further $50,000 loan from a bank with a view to repaying it within five years.

Important Assumptions

A financial plan relies on important assumptions that relate to the operations of the business. Some of the key assumptions regarding Healthy-Mart will be:

  • An assumption is that the economy will assume a slow-growth without recession.
  • An assumption that the quality of the product will be maintained throughout.
  • An assumption is that the sales will grow leading to the expansion of the supermarket.
  • An assumption that the organic products will sell themselves.
  • An assumption is that the staff will be dedicated to making Healthy-Mart a success.
  • An assumption is that the interest rates will reduce over the months.
  • An assumption that we will not suffer any losses.

Key Financial Indicators

The following table gives an indication of our key financial indicators for the first three years of operation. Healthy-Mart foresees massive growth and increased sales as shown in the table. There should be steady flow of income.

Indicators Year 1 Year 2 Year 3
Profit Margin Ratio -2.0% 6.1% 9%
Total Sales Turnover Ratio 5.2% 60% 75%
Current Ratio 0.04% 0.75% 12%
Quick Ratio (Acid Test) 0.05% 0.75% 13.5%
Total Debt to Equity Ratio 15% 9% 1%

Break-even Analysis

Based on the normal scenario, we can assume that year 3 will be the year that we will attain normal sales. With adjustable monthly pricing strategy, and the sales turnover of our products, it is possible that Healthy-Mart will break even within its first year. The calculated profit margin indicates that the company will be able to meet all its expenses.

Projected Profit and Loss

The projected profit and loss are as indicated in the following table. Sales are bound to increase within the first year and will maintain the trend after the third year of operation. A net profit is seen in the second year of operation. The aggressive projection will aid us to maintain a low total cost of sales while at the same time increasing the gross margin. The marketing expenditure will also be below as the company intends to rely on cheaper marketing strategies such as word of mouth.

Pro Forma Profit and Loss

2011 2012 2013
Sales $350,000 $500,000 $750,000
Direct Cost of Sales $50,000 $70,000 $100,000
Other $0 $0 $0
Total Cost of Sales $50,000 $70,000 $100,000
Gross Margin $300,000 $430,000 $650000
Expenses
Payroll $60,000 $120,000 $240,000
Sales and Marketing and other expenses $20,000 35,000 $15,000
Depreciation $1,000 $1,050 $1,100
Utilities $1,200 $1,000 $1,300
Payroll Taxes $20,000 $42,000 $53,000
Other $0 $0 $0
Total Operating Expenses $84,200 $199,050 $310,400
Profit before interest and taxes $215,800 $230,950 $339,600
Taxes Incurred $0 $0 $0
Interest expense $8,000 $7,500 $6,000
Net Profit 207,800 223,450 333,600

Projected Cash Flow

A projection of cash flow is an important key indicator of Healthy-Mart’s early success. The cash flow per month is indicated in the illustration below highlighting the monthly cash flow and monthly balance.

Pro Forma Cash Flow

2011 2012 2013
Cash received
Cash from operations
Cash sales
$350,000 $500,000 $750,000
Cash from receivables $0 $0 $0
Subtotal Cash from operations $350,000 $500,000 $750,000
Additional Cash received
Sales Tax, VAT received
$0 $0 $0
New current borrowing $0 $0 $0
New interest liabilities $0 $0 $0
Long-term liabilities $0 $0 $0
Assets $0 $0 $0
Long-term Assets $0 $0 $0
Subtotal cash received $350,000 $500,000 $750,000

Projected Balance Sheet

The projected balance for the next three years for Healthy-Mart will be as follows:

Pro Forma Balance Sheet

Assets Year 1 Year 2 Year 3
Current Assets
Cash $6,614 $4,099 $7,200
Other Current Assets $64,675 $71,972 $79,735
Long-term Assets $0 $0 $0
Total Current Assets $71,289 $76,071 $86,935
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $20,164 $18,330 $20,000
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $20,164 $18,330 $20,000
Long-term Liabilities $39,000 $29,009 $19,012
Total Liabilities $59,164 $47,339 $39,012
Paid-in-capital $83,000 $83,000 $83,000
Retained Earnings ($76,800) ($62,519) ($47,147)
Earnings $13,281 $14,372 $15,981
Total Capital $19,481 $34,567 $51,734
Total Liabilities and Capital $80.849 $84,191 $93,674
Net worth $19,481 $34,567 $51,734

Business Ratios

The following is a table showing the business ratio for the three years.

Ration Analysis

Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.01% 10.11% 12.11% 4.50%
% of Total Assets
Accounts Receivable 80.34% 85.00% 85.25% 35.22%
Other Current Assets 0.00% 0.00% 0.00% 20.00%
Total Current Assets 89.50% 91.69% 94.00% 80.20%
Long-term Assets 10.40% 8.40% 6.23% 20.89%
Total Assets 100% 100% 100% 100%
Current Liabilities 25.10% 21.69% 22.06% 44.20%
Long-term Liabilities 47.88% 34.22% 20.14% 9.00%
Net Worth 24.02% 41.08% 54.81 43.80
% of Sales 24.02% 41.08% 54.81% 43.80%
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 68.69% 67.09% 65.35% 43.10%
Selling, General and Administrative Expenses 65.31% 63.81% 62.08% 25.70%
Profit before Interest and Taxes 4.88% 5.42% 4.15% 0.80%
Main Ratio
Current 2.43% 3.04% 3.08% 0.69%
Quick 2.43% 3.04% 3.08% 0.69%
Total Debt to Total assets 73.98% 56.92% 43.19% 54.20%
Pre-tax return on net worth 98.61% 60.25% 44.90% 54.20%
Pre-tax return on Assets 23.93% 24.78% 25.24% 8.00%
Additional ratios Year 1 Year 2 Year 3
Net Profit Margin 2.38% 2.27% 2.27% n.a
Return on Equity 68.73% 41.87% 31.14% n.a
Activity Ratios
Accounts Receivable Turnover 3.83% 3.83% 3.83% n.a
Collection Days 56% 71% 71% n.a
Accounts Payable Turnover 8.74% 11.17% 11.17% n.a
Payment Days 26% 31% 27% n.a
Total Asset Turnover 4.17% 4.52% 4.49% n.a
Debt Ratios
Debt to Net Worth 2.00% 0.38% 0.79% n.a
Current Liability to Liability 0.35% 0.38% 0.51% n.a
Liquidity Ratios
Net Working Capital $50,000 $57,741 $67,166 n.a
Interest Coverage 4.58% 6.27% 9.70% n.a
Additional Ratios
Assets to Sales 0.19 0.17 0.17 n.a
Current Debt/Total Assets 25% 22% 22% n.a
Acid Test 0.35 0.25 0.37 n.a
Sales/Net Worth 19.65 12.11 8.84 n.a
Dividend Payout 0.00 0.00 0.00 n.a

Long-term Plan

The last aspect of our business plan is to come up with a long-term plan for Healthy-Mart. The long term plan will include the following aspects (Abrams and Kleiner, 2003):

  • Goals – Healthy-Mart is set to target a growing market and the assumption made is that the market will respond quickly to our products hence realizing our ultimate goal in the next three years.
  • Strategies – our sales strategies are bound to change as the market grows to include other long-term strategies such as home-and-office delivery, sponsoring community events and involvement in various promotions. This will help to widen our client portfolio over the years.
  • Milestones – After opening the supermarket, the management will monitor the sales and profits for the first year. If the business seems to be on target, then expansion of Healthy-Mart will be necessary through the introduction of new organic products.
  • Risk evaluation – When setting up a new business, there are possible risks that come with it. Some of the risks may include resistance by customers in trying out the new organic foods, recession and possible competition dealing in the same line of business over time. Healthy-Mart is aware of these risks and has come with risks management scheme to avoid being caught offside.
  • Customer tier – regular customers will need to be identified and treated differently from other customers. A customer who comes to the shop on a daily basis becomes a loyal customer and the company needs to work out a plan to show gratitude to those customers. This becomes a long-term plan as the company will be required to use the extra money for incentives.

References

Abrams, R and Kleiner, E (2003) The successful Business Plan: Secrets and Strategies. Washington: The Planning Shop.

Holinger, T (1996) Business Plan: Keys to consider. New York: McGraw Publishers.

Karen, D (2000) Use of Social Media as a Marketing Strategy. USA: Amazon Publishers.

Kessler, L and Heimberg, P (2001) Marketing Strategy. New York: McGraw Publishers.

McKeever, M (2010) How to Write Business Plan. London: Nolo.

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