Professional Documents
Culture Documents
Infusions Business Plan - Revised Version - February 16 2012
Infusions Business Plan - Revised Version - February 16 2012
College of Management
University of Massachusetts - Boston
Principal Investigator: Xingyuan Fei
Project Team Members:
Diana Kohlhagen, Pojaman Thasana-ekachit and Ying Zhao
Significant Contributor:
Yu Zhang
Project Supervisor:
Arindam Bandopadhyaya
Business Name:
Infusions
Address:
6988 McKinley
Sebastopol, CA 95472
Telephone:
Email:
info@sonomachocolatiers.com
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Experienced Owners: David Gambill and Susan McCarn have years of experience in
these industries.
Product Quality: Sonoma Chocolatiers sells the finest organic teas and chocolates.
Sonoma Chocolatiers has been voted as the best chocolatier in Sonoma County for the
last three years by the North Bays largest newspaper, The Bohemian.
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Sonoma Chocolatiers has added about two new wholesale customers a week for the last
year.
Highlights
Sonoma Chocolatiers, comprising of Infusions Teahouse and Sonoma
Chocolatiers, is a start-up in the Sebastopol area of Sonoma County, California. It is
a privately held corporation, managed by its owners, David Gambill and Susan
McCarn.
Sonoma Chocolatiers offers over 100 kinds of organic teas, tea wares, and light food,
and nearly 90 flavors of dark chocolates. Sonoma Chocolatiers has three main market
segments: Internet sales, sales to local upper-middle class residents, and sales to
tourists. Infusions Teahouse also serves business people in Sonoma County as a
place to hold meetings and conduct business away from a home office.
Sonoma Chocolatiers will expand both Internet sales and in-store sales to increase our
market share. Sonoma Chocolatiers aims to expand into Whole Foods stores and
other high-end retail outlets in the next year.
Sonoma Chocolatiers has competitive advantages over other competitors due to its
organic ingredients, environmental consideration, excellent reputation, and unusual
product quality and flavors.
Sonoma Chocolatiers projects a positive net profit in the year 2013 of $20,523.31,
with steadily increasing net income for the foreseeable future. Net profit is projected
to approach $550,000 in 2016.
Sonoma Chocolatiers is seeking two long-term small business loans provided by
Slow Money investors to finance its cash flows and expand the business size. The
first loan is $75,000. The second loan is $2,000,000.
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Highlights:
Sales increased 17% from $210k in 2010 to $244k in 2011. At the same time,
Sonoma Chocolatiers expanded staff, increased staff wages, and was still able to cut
expenses from 101% of income to 88% of income. The relative decline in expenses
resulted from focused efforts to cut waste and lower overall expenses.
The increase in salaries has allowed Sonoma Chocolatiers to attract and retain higherskilled staff. The skilled staff has significantly improved customer service in the
Teahouse and enabled the Teahouse to increase our customer base. More chocolatemaking staff has allowed Sonoma Chocolatiers to expand wholesale production and
to ensure a more reliable product supply for our wholesale customers.
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Highlights:
Net income is increasing over years 2012 to 2016, and expected to become positive in
2013.
Our improved staff has significantly improved the profitability of the teahouse.
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Sonoma county residents who know the Teahouse as the most relaxed place to meet
and socialize.
Sonoma County and Bay area residents who are learning the reputation of Sonoma
Chocolatiers.
Western Sonoma County business people who want to work outside their office or
home.
Western Sonoma County residents who enjoy live music on weekend evenings.
Customers and retailers who buy teas and chocolates via Internet.
Wine tourists who want to add something special to their wine trips.
Almost 100 high-end retail outlets across Sonoma County, Marin County, the Santa
Cruz area, Davis, CA, and San Francisco. We have been picked up by two of the
toniest grocery markets chains in Marin County.
Western Sonoma County business people looking for a meeting space, especially
morning meetings.
More weekend music lovers through a more aggressive event planning campaign.
Locals
Sonoma County's population was estimated as 483,878 people in 2010, of which 7,379
people are living in the city of Sebastopol. Many people in Sonoma County are well
educated. Most of the current customers for the dark chocolates tend to be women, age
twenty-five or up, within the middle- to upper-income bracket. Sonoma Chocolatiers food
and tea selection and prices are upscale. From U.S. census data for local income levels, we
thus estimate that roughly two-thirds of Sonoma Countys residents have pre-existing brand
loyalties or economic constraints that would discourage them from visiting our teahouse. Our
local target market is therefore about 161,290 people.
Tourists
Sonoma County is the heart of Californias wine industry. Wine tourists tend to be educated,
high-end, and with middle to upper class incomes. Most wine tourists are looking for
something extra to add to the wine trip such as buying the finest organic chocolates. Sonoma
Chocolatiers benefits economically from tourist visits all year round, with our combination
of seasonal cultural events. There are about 7.4 million tourists a year in Sonoma County. We
estimate a potential market of at least 100,000 tourists annually for our business.
Internet Sales
Internet sale of teas and chocolates accounts for about 35% of the total sales. Internet sales
are more profitable because the marketing expenses are much lower and the buyers cover the
shipping costs. More importantly, 15% of the Internet sales revenue for the wholesale is
exempt from income taxes. Since Internet sales generate much higher profits, Sonoma
Chocolatiers is currently working on a marketing campaign that would expand their Internet
sales. As part of this campaign Sonoma Chocolatiers has redesigned its website and many
customers have commented that is very impressive. We have a social marketing campaign to
drive customers to the new website. We have redesigned a new tea website in February
2012.
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A number of wineries in Sonoma County that have expressed interest in our product
or that we have done business with. We will approach them to carry our products in
their tasting room. Late in 2011 we picked up Korbel winery; we added three major
wineries in a week aloneBenzinger and Chateau St. Jean in the Valley of the Moon
and Viansa in Sonoma Valley. We can only market to 2-4 wineries in any valley,
depending on the size of the valley. We want one more winery in Sonoma Valley, one
more in Valley of the Moon, 2-3 in Alexandria Valley, and 3 more in Dry Creek
Valley where we already work with Kachina Vineyards. Accordingly, this marketing
strategy is well on the way.
Whole Foods stores across the Bay area and Raleys in parts of the Bay area.
High-end food and cheese outlets and renowned chocolate stores in San Francisco
and the East Bay that feature high-end chocolates. And within 2012, we will expand
our targets to high-end retail outlets.
Tea and dark chocolate lovers who like shopping through the Internet.
Middle- and upper-income West Sonoma County residents who work outside their
homes and need a place to hold 1-on-1 (or -2 or -3) business meetings.
Moreover, we have our Butts-on-seats campaign, which is gearing up to get more people in
the doors of the teahouse during the day, especially in the morning. If we can get 12 more
people a day to spend $5 each, our financial health will change radically. We are also
working on a social marketing campaign to do this, with rewards for current customers to
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Davids lifetime of experience in fine dining and exploring new flavors in his own
cooking helps him develop unexpected and unique flavor combinations.
Sonoma Chocolatiers has the best name recognition in the Sonoma County.
Sonoma Chocolatiers has products in almost all the high-end stores in the County.
Sonoma Chocolatiers is the only retailer offering such a wide array of premium
chocolates in the Sebastopol and West County area.
Competitive Weaknesses:
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2012
$303,594.00
$106,257.90
2013
$405,007.00
$141,752.45
2014
$587,617.00
$205,665.95
2015
2016
$851,648.00 $1,288,558.00
$298,076.80
$450,995.30
2012
75%
13%
$224,644
2013
100%
10%
$247,108
2014
100%
10%
$271,819
2015
75%
10%
$299,001
2016
75%
8%
$321,426
$78,950
$303,594
$157,899
$405,007
$315,798
$587,617
$552,647
$851,648
$967,131
$1,288,558
Highlights:
Both sales and cost of sales are assumed to be increasing at the growth rate of 24%-50%.
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Premium chocolates will continue to symbolize luxury and romance as gift choices.
$404,550
Assumptions:
Average Percent Variable Cost
2013 Fixed Cost
40%
$242,730
Highlights:
Based on the numbers above, the net profit will equal zero when sales reach $404,550, which
is break-even point. The net income is negative when sales are below $404,550. The net
profit will become positive as sales increase above $404,550.
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Highlights:
Net income keeps increasing every year, and becomes positive during 2013.
Based on the overall performance, the companys profit trend would become gradually
better because of its excellent product.
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Highlights:
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2012
$303,594.00
$106,257.90
2013
$405,007.00
$141,752.45
2014
$587,617.00
$205,665.95
2015
$851,648.00
$298,076.80
2016
$1,288,558.00
$450,995.30
Gross Margin
$197,336.10
$263,254.55
$381,951.05
$553,571.20
$837,562.70
Expenses
General &
Administrative
Chocolate supplies
Marketing
Operating
Wages & Salaries
Employee benefits
Occupancy costs
$21,615.31
$350.00
$7,589.85
$14,418.66
$149,283.20
$12,381.68
$22,512.59
$22,696.07
$371.00
$10,125.18
$15,139.60
$156,747.36
$13,000.77
$23,638.22
$23,830.88
$393.26
$14,690.45
$15,896.58
$164,584.73
$13,650.81
$24,820.13
$25,022.42
$416.86
$21,291.20
$16,691.40
$172,813.96
$14,333.35
$26,061.13
$26,273.54
$441.87
$32,213.95
$17,525.97
$181,454.66
$15,050.01
$27,364.19
Total Operating
Expenses
$228,151.29
$239,558.86
$251,536.80
$264,113.64
$277,319.32
Operating profit
Other expenses
($30,815.19)
$3,172.38
$23,695.69
$3,172.38
$130,414.25
$3,172.38
$289,457.56
$3,172.38
$560,243.38
$3,026.37
Net Profit
Net Profit/Sales
($33,987.57)
-11.20%
$20,523.31
5.07%
$127,241.87
21.65%
$286,285.18
33.62%
$557,217.01
43.24%
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2013
2014
2015
2016
Assets
Current Assets
Cash
Inventory
Other Current Assets
Total Current Assets
($13,645.24)
$21,850.00
$27,057.45
$35,262.21
($15,692.03)
$25,127.50
$31,116.07
$40,551.54
($18,045.84)
$28,896.63
$35,783.48
$46,634.27
($20,752.71)
$33,231.12
$41,151.00
$53,629.41
($23,865.62)
$38,215.79
$47,323.65
$61,673.82
$133,260.34
$153,249.40
$176,236.80
$202,672.33
$233,073.17
Total Intangible
Assets
Total Assets
$116,792.62
$285,315.17
$134,311.51
$328,112.45
$154,458.24
$377,329.32
$177,626.98
$433,928.71
$204,271.02
$499,018.02
2012
2013
2014
2015
2016
$8,945.77
$7,055.22
$10,287.63
$8,113.50
$11,830.78
$9,330.52
$13,605.40
$10,730.10
$15,646.21
$12,339.62
($62,882.47)
($72,314.84)
($83,162.07)
($95,636.38)
($109,981.84)
($46,881.49)
($53,913.71)
($62,000.77)
($71,300.88)
($81,996.01)
$307,006.96
$353,058.00
$406,016.70
$466,919.20
$536,957.08
$17,045.30
$277,170.77
$19,602.10
$318,746.38
$22,542.41
$366,558.34
$25,923.77
$421,542.09
$29,812.34
$484,773.41
$403,820.69
($395,676.29)
$8,144.40
$464,393.80
($455,027.73)
$9,366.06
$534,052.87
($523,281.89)
$10,770.97
$614,160.80
($601,774.18)
$12,386.62
$706,284.92
($692,040.31)
$14,244.61
$285,315.17
$328,112.45
$377,329.32
$433,928.71
$499,018.02
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Total Revenue
Cost of Sales
Actual
2010
2011
$208,410.31
$244,041.52
$75,554.80
$95,243.38
2012E
$303,594.00
$106,257.90
2013E
$405,007.00
$141,752.45
Projected
2014E
$587,617.00
$205,665.95
2015E
$851,648.00
$298,076.80
2016E
$1,288,558.00
$450,995.30
Gross Profit
$132,855.51
$148,798.14
$197,336.10
$263,254.55
$381,951.05
$553,571.20
$837,562.70
G&A Expense
$21,082.08
$20,391.80
$21,615.31
$22,696.07
$23,830.88
$25,022.42
$26,273.54
$8,482.39
$3,172.38
$3,172.38
$3,172.38
$3,172.38
$3,172.38
$3,026.37
($77,826.48)
($67,658.38)
($33,987.57)
$20,523.31
$127,241.87
$286,285.18
$557,217.01
($69,344.09)
($64,486.00)
($30,815.19)
$23,695.69
$130,414.25
$289,457.56
$560,243.38
Taxes
($20,803.23)
($19,345.80)
($9,244.56)
$7,108.71
$39,124.28
$86,837.27
$168,073.01
($48,540.86)
($45,140.20)
($21,570.63)
$16,586.98
$91,289.98
$202,620.29
$392,170.37
$14,822.00
$18,563.00
$2,784.45
$25,409.14
$31,822.29
$4,773.34
$1,983.45
$24,287.52
$45,539.10
$6,830.87
$2,200.18
$32,400.56
$60,751.05
$9,112.66
$3,903.75
$41,133.19
$88,142.55
$13,221.38
$6,319.29
$59,615.36
$127,747.20
$19,162.08
$8,743.73
$77,313.48
$193,283.70
$28,992.56
$13,826.01
($17,940.31)
$5,334.44
$39,224.94
$96,722.18
$201,025.04
$362,077.04
$619,948.98
NOPAT
Amortization
Deprecation
Net Capital Investment
Change Net Working Capital
Free Cash Flow
Page 29
EBIT
EBITDA
NOPAT
Plus: Depreciation & Amortization
Less: CapEX
Less: Net Working Capital
Unlevered Free Cash Flow
($36,503.31)
WACC
2012E
($33,987.57)
$35,839.05
($21,570.63)
69,826.62
52,370
2,200.18
($6,314.16)
2013E
$20,523.31
$113,674.92
$16,586.98
93,151.61
69,864
3,903.75
$35,971.13
2014E
$127,241.87
$256,517.61
$91,289.98
129,275.74
101,364
6,319.29
$112,882.49
2015E
$286,285.18
$473,647.74
$202,620.29
187,362.56
146,909
8,743.73
$234,329.84
2016E
$557,217.01
$827,814.19
$392,170.37
270,597.18
222,276
13,826.01
$426,665.28
0.9442
0.072
Projected
2011
($67,658.38)
($10,426.95)
($45,140.20)
57,231.43
36,596
1,983.45
($26,487.85)
$595,860.36
3.00%
Undiscounted TV
Discounted TV
$10,463,458.10
$7,390,967.84
$7,986,828.20
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2011
2012
2013
2014
2015
2016
-0.38
-0.17
-0.12
0.06
0.34
0.66
1.12
-6.19
-9.55
-4.17
2.19
11.81
23.11
39.12
Profit margin
-0.37
-0.28
-0.11
0.05
0.22
0.34
0.43
1.02
0.63
1.06
1.23
1.56
1.96
2.58
43.37
17.45
18.42
21.37
26.96
33.97
44.70
3.98
2.92
4.86
5.64
7.12
8.97
11.80
Return on assets is expected to be increasing and positive over year 2013 to 2016.
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Return on equity is expected to be increasing and positive through year 2013 and 2016.
Figure 9: Profit Margin
Profit margin is expected to be increasing and become positive through year 2013 and 2016.
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Inventory turnover ratio turns on an increasing trend over years 2011 to 2016.
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Appendix
Project Team Member Bios
Arindam Bandopadhyaya
Dr. Arindam Bandopadhyaya received his PhD in Economics and Finance from Indiana University,
Bloomington. He is currently the Chair and Professor of Finance in the Accounting and Finance
Department at UMASS-Boston. A two-time recipient of the Deans Award for Distinguished Research,
Dr. Bandopadhyaya has published in journals like the Journal of International Money and Finance,
Journal of Empirical Finance, Journal of Banking and Finance, and Review of Economics and Statistics.
Dr. Bandopadhyaya teaches courses in the areas of corporate finance, international finance, managerial
economics and portfolio management. He has received coveted teaching awards in the College of
Management, including two-times the Professor of the Year Award and the Betty Diener Award for
Teaching Excellence. He was the College of Management nominee for the Chancellors Award for
Distinguished Teaching several times in recent years.
Dr. Bandopadhyaya is also the Director of the College of Managements Financial Services Forum (FSF),
which is a source of current information and commentary on the health and critical issues facing the
financial services industry. The FSF produces a semi-annual report, has a working paper series, hosts
speakers from the industry, and has created and publishes every month an index that measures investment
sentiment in financial markets.
Xingyuan Fei
Xingyuan Fei has been a graduate student in the MSA program at UMass Boston since Fall 2010. Earlier,
she received her BS in Education, Beijing Broadcasting Institute, Beijing, China. After graduation,
Xingyuan passed the National Judicial Examination and became a lawyer in China. Her objective is to
develop the professional knowledge about business and accounting which is required in the competitive
world today.
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Disclaimer
The financial projections that appear in this Business Plan are estimated revenues, expenses, and cash
flow, which are based on research, market movement and the assumptions discussed throughout this
Business Plan. The assumptions disclosed herein are those that management believes are significant to the
projections. They represent the best estimate of the owners and our knowledge and beliefs, and are also
based on actual operations from previous years. The Company's expected revenues, expenses, and cash
flow for the projected periods are subject to the Company's ability to develop sales and production levels
at the price and costs estimated by management. Accordingly, these projections reflect management's
estimates as of February 2012 and its expected course of action if such sales and production levels are
attained at the anticipated price and costs.
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References
Marketwire, Tea Market Thrives Despite Tough Economy, December 05, 2011.
http://www.marketwire.com/press-release/tea-market-thrives-despite-tough-economy-1594664.htm
TeaTrends, US retail tea industry reaches $6.5 billion in sales, December 2011.
http://www.teatrends.com/article.html?category=Industry
Packagedfact, The U.S. Market for Chocolate, February 2005.
http://www.packagedfacts.com/sitemap/product.asp?productid=1037709;
Story of Chocolate, Profile of the U.S. Chocolate Industry, August, 2011.
http://thestoryofchocolate.com/About/content.cfm?ItemNumber=3623
Infusions Teahouse, http://www.infusionsteashop.com
Sonoma Chocolatiers, http://www.sonomachocolatiers.com
Information provided by interview between David Gambill and Financial Services Forum Consulting
Group
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