BUSINESS PLAN FOR ARUMAH SOFT TOY COMPANY
BUSINESS PLAN FOR ARUMAH SOFT TOY COMPANY
Executive summary
Objective
The objectives of Arumah are as follows:
. Maintain product quality
2. Provide excellent customer services
3. Generate reasonable profit by the end of the first two years to finance other growth
4. Fast services
Mission statement
Arumah is to produce quality products and provide to its customers with the least price.
Keys to success:
* Dedication and hard work
* Lowering overall cost
* Recruitment of experienced and qualified staff
Start-up costs
Arumah will require approximately £26400to start up my business with £7920 as contribution from family and £18480 as a bank loan.
Business description
Business ownership
Arumah would be a privately owned business. I will own all shares of the business and take the financial, marketing, operational decision making processes.
Business summary
Arumah Toy Company will engage in the field of satisfying all age groups from 2 to 40 years of age. The company shall start up with stuffed handcrafted toys and expand into other toy products in the next three years. Our products will range from wildlife, extinct animals, bears, pets, rural animals, sea creatures, chimps, exotic creatures, puppet horses to bird creatures.
Business location
Arumah company will be based in Kingsbury 20, Church lane NW9 8DT .this will be a small rented premise where the products will be made as then they will transported to the store as st. Ann shopping centre at Harrow on the hill. However, wholesales will be getting the products from the factory.
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Product Production
Steps of production
After getting the finance Arumah needed, the business would need approximately two month to purchase and set up all machines needed for production.
January: - Getting all the financial
- Legal documentation and
- Ordering of raw materials and renting premises
February: - Buy equipments needed for factory
- Store and decoration of both of them.
- Installation of machines and other equipments
- Training of all production staffs
March: - production of first product and testing
- opening the store and start selling
Competitive comparison
Arumah will need to differentiate its product from other competitors such as Quality
* Speed (competitor import from China whilst I produce here)
Marketing Analysis
In order for businesses to flourish, Arumah needs to open eyes widely and consider some changes that keep cropping up in the business scenario. Arumah will analyze the market using SWOT and PEST factors.
SWOT Analysis:
Strength
Most of the business strength lies in the quality of the product and the speed of deliveries. Though Arumah will be specialized in stuffed animals, it has such a variety of them in beautiful and attractive colours that will be suitable for different age groups.
Creativity is another important issue and Arumah designer is quite skilled after working a reputable toy company for ten years. She knows what people want and how to meet their needs.
The sales assistants have excellent customer service qualities as they are very familiar with this kind of job. The whole set up of the store displays great expertise. The window display catches the eye and children will not resist dragging their parents into the shop to buy for them toys.
The eyes and noses of the toys will be embroidered to ensure safety ...
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Creativity is another important issue and Arumah designer is quite skilled after working a reputable toy company for ten years. She knows what people want and how to meet their needs.
The sales assistants have excellent customer service qualities as they are very familiar with this kind of job. The whole set up of the store displays great expertise. The window display catches the eye and children will not resist dragging their parents into the shop to buy for them toys.
The eyes and noses of the toys will be embroidered to ensure safety and softness and can also be machine washable.
Weaknesses
Though Arumah's product will not be new on the market, there will be custmers outside there who will be looking for a known brand name. it will take approximately 5 years until Arumah products will be recognized. Also since Arumah will be specialized in stuffed animals, some of the customers might be interested in other soft toys that Arumah may not have.
Opportunities
The ability to sale the products at a relative price than Arumah competitors will be another advantage. The store being a such a strategic palace (St Ann shopping Centre Harrow-on-the-Hill) where hundreds of people come for shopping will enhance sales.
Threats
It will be disastrous if the demand is under estimated where by the factory may run out of raw materials due to high demand especially during special occasion hence creating gaps as far as reliability is concerned. Additionally, a new creative design may be put on the market and may not stimulate the customers interests where by a lot of resources will be wasted.
PEST Factors:
Political factors
One of the major political factors that may affect the company are terrorism threats. Since the store will be opened in a big shopping centre where big numbers of people visit, this could become a target by terrorisms.
Another aspect is the political instability where the raw materials purchased. In such a case, there maybe delays and this may paralyze the production.
Economical
Inflation can raise up any time causing all prices of raw materials to go up which will leave the business with no choice other than raising the price of the product in order to meet the costs.
Social
Some people have a concept that, the more expensive the product is, the better the quality. This is a stereotype in many people's minds and it may affect my products Arumah strives to use penetration pricing to grab market share.
Technological factors
With the up coming technology, many of the children and adults are turning away from toys and are more interest in computer games and the internet. Technological advances are also of great effect in that; the more the machine is advanced the expensive it is.
Health and Safety
This will be according to the heath and safety at work Act 1974 which requires employees to take reasonable care for the health and safety at work. This extends to cooperating to enable their employer to fulfil their legal duties.
Procedures of healthy & safety
Arumah employees will be subject to this act prior to start up of production all employees will go under training.
- Necessary information to enable employees safety representatives to precipitate in the consolidation would be given.
- Giving sufficient information to the representatives to carry out their actions and regulations.
Market research (demand)
I conducted a primary market research where I used the method of a questionnaire to identify the market needs. According to my research, toys are sold throughout the year however ducklings revenue is high during the Easter periods. I will need to produce more of these during this particular period. During valentine season I will produce something unique such as a cat, a dog or even a horse covered in satin material bags with beautiful design specially made to be given out as presents.
Bears are sold throughout the year; a teddy bear will bring a smile to a small child and can still bring out the kid in everybody irrespective of their age. Nevertheless they are mostly sold on birthdays, anniversary, valentines day , Easter , mothers day , Christmas day , congratulatory occasions such as new born baby. I will therefore target these special days and have enough items in stock to match the demand.
Target market
My target market is basically children from 2yrs to even above 40. The children can play with them and cuddle them to bed while adults can keep them in their cars, houses or even give them as presents on special occasions. However, I will concentrate on children from the age of two to thirteen and demand a few pieces for the adults.
Competitors
Arumah's competitors are based in the Harlesden and Ealing Broadway and as far as I am concerned there is no other toy manufacturing business and shop in either of the surrounding areas. Furthermore, my competitors import their toys from China which forces their prices to go up and late deliveries to customers at the right time.
Arumah's competitors sell their toys at a minimum of £10 and maximum of £80, whilst Arumah's will be a minimum of £6 and a maximum of£ 40 because there will be no shipping expenses incurred.
Arumah will employ highly qualified staffs who will produce quality work. Also since there is no distance involved between the factory and the store there will be no problem of delayed delivery.
Marketing strategy
Promotion
As a start up I will promote my products by putting postures in strategic places, distributing them on the streets, train station, and other busy places. I will also use door to door promotion were a leaflets will be delivered to the nearby homes. Additionally I will use magazines to promote my products. I will set up a web address for my customers most especially for making orders and a special page for customers to make their views. This will help me greatly to improve on my products.
To attract customers, I will sell my products at a relatively low price until I have grasped a good number of customers though I will have to raise the price a bit to maintain the flow of the business.
Deliveries will be made to the orders made through the internet and by phone within two working days. To people who like home shopping this will be an added advantage. These offers will outwit my competitors who use promotion by posters and magazines only and also do not deliver products one has to go to the shop and buy.
Also I will make a creative and attractive window display to attract my customers for promotion start I will offer a basket of six puppies, cats, ducklings, horses at a reasonable price.
Pricing
Arumah will enter the market using penetration pricing where it will charge very low prices in order to get the name outside there and grab market share. Most toys would be sold at almost same price as they will cost the same in the production process.
Time
Average Price (£)
Toys sold
Total
First month
0
Second month
0
Third month
8
00
800
Fourth month
8
200
600
Fith month
0
350
3500
Sixth month
2
500
6000
Sales forecast
Management teams
Number of staffs
As Arumah will be a small scale business, I will employ the following:
- 1 Manager (myself)
- 1 fulltime designer
- 3 fulltime line production workers
- 1 van driver
- 1 fulltime sales assistant
- 1 part-time sales assistant
- 1 part-time cleaner
Teams and structure
For a start-up there would be no particular teams though this will take palce in the future as the company expands. The proprietor will be the overall manager shouldering all supervision and marketing the product. Nonetheless, the process of the production will be coordinated right from fluffing, designing, patterning, joining, filling and finishing.
Production plan
After all equipments and machinery has been installed, this would be the process of the production:
- Fluffing of wool
- Design made in a computer
- Design fed in the designing Machine with wool
- Patterns of toys and bags
- Cloth, wool and cut
- Joining the pieces of wool/cloth
- Filling cotton
- Finishing
Capital needed
EQUIPMENT:
For the start I will need approximately £28,000:
Item
Quantity
@ Price £
Total
Sewing machine
2
200
400
Filling machine
80
80
Fluffing machine
80
80
Cash register
00
00
Computer
500
500
Designing machine
200
200
Delivery Vehicle
5500
5500
Others
300
Total
7160
Depreciation
Item: Vehicle
Rate: 20%
Formula: vehicle cost x 20%
5500 x 20% = £1100 every year.
IT facilities:
For my office I will need one computer where designs will be made up of one computer where designs will be made and for other office use. Also one telephone line, one computer table and chair at approximately £500.
Vehicles
Arumah Toy Company will purchase a delivery van at an approximate price of £5,500
With an expected life of three years and depreciation will be 10% straight-line.
Raw materials:
The materials will mainly include wool, and cotton. These will be purchased from Australia, China, and Egypt. The value for the raw material will be approximately £0.80 for every kilo of wool, cotton and cloth.
Raw materials:
Price/kg
Total costs/toy
Cotton
£0.12
£0.90
Wool
£0.48
Cloth material
£0.20
Others
£0.10
Labours costs:
For my factory and store I will need eight staffs:
fulltime designer (artist) £800 a month
3 fulltime line production workers £2100 a month
driver £750 a month
fulltime sales assistant £800 a month
part time sales assistant £400 a month
part time cleaner £200 a month
Financial analysis
Operating Expenses for Arumah
Rent
500
500
500
500
500
500
Wages & Salaries
4700
4700
4700
4700
4700
4700
Raw materials
80
40
230
340
Legal document
200
Operating expenses:
Website set-up
00
Advertising
50
00
50
Heat & Light
0
0
20
30
40
50
Phone bill
20
20
30
35
35
30
Cash flow
Receipts
First month £
Second month
Three month
Fourth month
Fifth month
Sixth month
Sales
0
0
800
600
3500
6624
Payments:
Equipments
7160
Rent
500
500
500
500
500
500
Wages & Salaries
4700
4700
4700
4700
4700
4700
Raw materials
80
40
230
340
Legal document
200
Operating expenses:
Website set-up
00
Advertising
50
00
50
Heat & Light
0
0
20
30
40
50
Phone bill
20
20
30
35
35
30
Total payments:
6680
6330
6380
6405
6505
6620
Investment
26400
B/F
26400
9720
3390
7810
3005
0
Net Flow
-6680
-6330
-5580
-4805
-3005
4
C/F
9720
3390
7810
3005
0
4
Profit and Loss Account
Profit and Loss account for Arumah for the first year
(£)
(£)
Sales
76783
Purchases
7160
Operating expenses
83000
Gross profit
(13377)
Depreciation
100
Taxation (nil%)
-
Profit after tax
(14477)
Profit / Loss
(14477)
Conclusion
Arumah toy company will have recovered some of its costs by the end of the six month. After that the company will be able to make profits.
Dependable and quality experienced staff as stated in the keys of success will enhance profitability. As demand increases, so will staffing and production.
Payment of the loan will be possible since the first installment will not be paid until the sixth month.
