Best Ice CreamThere’s Best and then there’s the rest. Business Plan April 2013 Sherif Alghali Owner & Founder TABLE OF CONTENTS EXECUTIVE SUMMARY ....................................................................................................................1 LEADERSHIP ....................................................................................................................................2 PRODUCT OFFERING .......................................................................................................................2 MARKET ..........................................................................................................................................2 COMPETITION ..................................................................................................................................3 DIFFERENTIATION ...........................................................................................................................3 MARKETING STRATEGY ..................................................................................................................3 VISION AND OBJECTIVES.................................................................................................................4 FINANCIAL SUMMARY .....................................................................................................................6 FINANCING STRATEGY ....................................................................................................................6 FINANCIAL PROJECTIONS .............................................................................................. ATTACHED EXECUTIVE SUMMARY Overview: Best Ice Cream is an ice cream truck that focuses on festivals, high-traffic parks, and special events in Dallas, Texas. We provide an alternative to the high-end Best Ice Cream specialty ice cream trucks in Dallas, in which patrons are Company Name: charged upwards of $5 for ice cream. We will provide Mobile Food Service traditional ice cream novelties at a price point of $3. We Industry: believe that there is a large market of families that want Owner investment - cash $ 1,000 simple and affordable ice cream at fairs, festivals, and Owner investment - equipment 2,000 special events. This will be a part- time business that operates on weekends and holidays. Vehicle and/or equipment loan Start up financing 5,000 Product Offering: Best Ice Cream provides packaged ice Total start up costs: $ 8,000 cream, chips, sodas, bottled water, pickles, and candy at high traffic parks and special events in Dallas, Texas. Our Business advisors and main focus will be traditional ice cream treats like ice cream Plan Purpose: debt funding sandwiches, popsicles, fruit bars, and packaged cones. Market: The packaged ice cream market has been growing steadily year over year. This is an industry with a history of consistent growth that is projected to continue in the future. Best Ice Cream’s target markets are middle to upper-middle class families that attend fairs, special events and high-traffic parks in Dallas, Texas. Competition: Local direct competitors include Gypsy Scoops, Short-n-Sweet Ice Cream, and Coolhaus to name a few. These companies all have a social media presence and are found at the special events and festivals that we target. The barriers to entry are medium; to begin operations a modest capital outlay is required. To be successful, networking and social media skills are essential. Differentiation: At Best Ice Cream we differentiate ourselves from the competition through our use of technology, our simple approach to ice cream, and our service. We will make use of Square Register to drive our analytics and customer loyalty strategy. We will offer simple, traditional ice cream that our competitors do not offer. We will make a point to provide quick and friendly service. Marketing Strategy: Our ice cream novelties will be sold at an average price of $3. Best Ice Cream will be located in and serve Dallas, Texas. To reach our target market, we will heavily use Social Media and the web. We will develop pages on Twitter, LinkedIn, Facebook, Google+, and Yelp, as well as our own Webpage. Sherif Alghali Management: Revenue Model and Financial Projections: Ice Cream Novelties Per Unit Dollars Sales price Non-owner labor cost Other variable costs Fin. stmt. gross profit Owner labor value Pro forma gross profit Year 1 total units sold $ $ 3.00 100% (0.60) 2.40 80% 2.40 80% 8,407 Year one summary income statement: Sales: $ 41,000 100% COGS 9,000 22% Gross profit 32,000 78% Overhead 17,500 43% Pretax income 14,500 35% Tax expense 3,600 9% Owner withdrawals 7,000 17% Net income $ 3,800 9% Sherif O Alghali Best Ice Cream Drinks $ $ 2.00 100% (0.55) 1.45 73% 1.45 73% 6,556 Pickles $ $ 2.00 100% (0.30) 1.70 85% 1.70 85% 1,378 LEADERSHIP As the owner of Best Ice Cream, Sherif will be in charge of servicing customers, sales, lead generation and forging partnerships with event organizers and park managers. Sherif has over five years of customer service experience. He also spent four years running his own computer services business. In addition, Sherif has spent time working with Steve Akinbinu of Good Time Ice Cream, learning the business of selling ice cream. Sherif has also had extensive business training. He is a graduate of the PEP entrepreneurship program, which consisted of over five months of business training in which he developed and eventually pitched a business concept to over two hundred executives. This combined with his skills in public speaking, sales, and management make him imminently capable of making Best Ice Cream a successful venture. In addition, Sherif brings more than 12 years of experience in the information technology industry, with nearly four years supporting restaurant and retail point of sale systems. He worked for Luby’s Inc. at their corporate office as a help desk specialist, where he worked remotely and on-site supporting hardware, operating systems and networks. He currently works for Rogers-O’Brien Construction as a help desk specialist, supporting over 200 users in multiple sites throughout Texas. This background in IT will help him in executing Best Ice Cream’s technology and Social Media strategy Sherif is currently a student at Western Governor’s University working towards a Bachelor’s degree in Information Technology. Sherif also has earned several industry certifications from Microsoft, Cisco, and Comptia. Sherif is a member of the DFW World Affairs Council. PRODUCT OFFERING Best Ice Cream provides packaged ice cream, chips, sodas, bottled water, pickles, and candy at high traffic parks and special events in Dallas, Texas. Our main focus will be traditional ice cream treats like ice cream sandwiches, popsicles, fruit bars, and packaged cones. Our main products will be ice cream novelties, drinks and pickles. These three product groups will make up 61%, 32% and 7%, respectively of our annual revenues. Our first priority when we begin operations in July 2013 will be to build relationships with park managers and special event planners. MARKET The packaged ice cream market has been growing steadily year over year. This is an industry with a history of consistent growth that is projected to continue in the future. Best Ice Cream’s target markets are middle to upper-middle class families that attend fairs, special events and high-traffic parks in Dallas, Texas. We believe that these families are not properly served and present on opportunity for us. This will be a part-time venture. We will operate on Sherif O Alghali 2 Best Ice Cream weekends and holidays. This is a seasonal business. While there are some opportunities for us during the winter, late-fall and early-spring, sales during these time are limited. Our greatest opportunities will be in the late-spring, summer and early-fall. COMPETITION There is a great deal of competition in the packaged ice cream industry. There is a lot of indirect competition in the form of ice cream parlors and shops, convenience and drug stores, and traditional ice cream trucks. Nationally our largest competitors are ice cream parlors, Baskin-Robbins and Ben and Jerry’s; convenience and drug stores like, Walgreens, CVS, and 7 Eleven. Locally we will compete indirectly with Braum’s and Dairy Queen. The traditional ice cream trucks and carts are too numerous to count. We consider them indirect competitors because they mostly roam neighborhoods and are not found at the festivals and special events that we will target. Local direct competitors include Gypsy Scoops, Short-nSweet Ice Cream, and Coolhaus to name a few. These companies all have a social media presence and are found at the special events and festivals that we target. The barriers to entry are medium; to begin operations a modest capital outlay is required. To be successful, networking and social media skills are essential. DIFFERENTIATION At Best Ice Cream we differentiate ourselves from the competition through our use of technology, our simple approach to ice cream, and our service. Many in our industry accept only cash and do not track inventory in a meaningful way. We intend to use Square Register to handle credit card transactions and inventory, which will give us access to analytics. This will allow us to determine which products sell best at which locations, and what our turnover time is for our inventory. Thereby, we will be able to operate much more efficiently and profitably than the competition. We will also make use of Social Media to spread the word about our business and post a schedule for our loyal customers. We also differentiate ourselves by our simple approach to ice cream. Many of our direct competitors sell specialized products, like custom-built ice cream sandwiches. We offer traditional packaged ice cream at an affordable price for those who prefer something familiar. This is something that is not found at most events in Dallas. Finally, we differ from our competition in our commitment to service. We will offer friendly, hassle-free service. While this seems like a given in any business, it is not standard in our industry. We will commit to a set of best practices when serving customers. This will allow us to standout from our competitors. MARKETING STRATEGY Price Best Ice Cream offers its products at three different price points our ice cream novelties will be sold at an average price of $3. Our sodas will be sold at an average price of $2. Pickles will be sold at an average price of $1. Sherif O Alghali Best Ice Cream Place Best Ice Cream is located in North Dallas, but will serve all of Dallas. There are numerous high-traffic parks, festivals, and special events in Dallas that present a great opportunity for us. Promotion To reach our target market, we will heavily use Social Media and the web. We will develop pages on Twitter, LinkedIn, Facebook, Google+, and Yelp, as well as our own Webpage. The owner will also use his extensive personal network and web presence to get out the word about the business. Additionally, we will use Square Register to implement a rewards program to develop a loyal customer base. We will wear a uniform of Khaki pants or shorts with a polo shirt bearing our name and logo. Our truck will also have our name and logo as well as our Web address. The most important promotional work we will do will be to network and develop relationships with event organizers, planners and park managers. We will pass out business cards and fliers at small business events in Dallas, such as those sponsored by the Dallas Small Business Development Center, Minority Business Council and Dallas Chamber of Commerce. We will also join the previously mentioned organizations and others like the DFW World Affairs Council and Dallas Public Radio to increase our networking opportunities. VISION AND OBJECTIVES Two Months Before Starting Research/Advisory • Finalize business plan • Further research startup costs • Recruit advisory team including an accountant, bookkeeper and lawyer Marketing • Create marketing strategy • Develop plan to assess marketing effectiveness • Write 100 objectives and responses • Register with Chamber of Commerce and Minority Business Council Compliance • Get Texas Sales Tax ID • Organize business as RFL Investment Corporation • Obtain DBA for Best Ice Cream • Open a business checking account Other • Obtain a phone • Acquire appropriate insurance • Buy needed tools Sherif O Alghali Best Ice Cream • Secure legal counsel First Two Months After Starting • Assess marketing strategy effectiveness • Generate publicity by talking to civic groups about entrepreneurship • Participate in community events to increase networking opportunities First Year • Make a sales goal of $41,000 • Develop job description for the salesperson position • Create standard operating procedures for each position • Hire first employee • Work with a mentor from SCORE • Update my business skills through the Dallas Small Business Assistance Center • Expand marketing • Expand Equipment • Be profitable in the first year Second Year • Expand to cover events in Richardson • Update business plan • Update sales goal • Expand service offered Third Year • Further standardize practices • Expand geographic area • Research franchising • Update sales goal Fourth Year • Sell the business Philanthropy At Best Ice Cream we believe that making a positive impact on the world as a whole is a central part of our mission. As such we will focus our philanthropic efforts on donating 5% of profits to organizations that provide vocational training to young people. We believe this helps them to find better jobs, thereby empowering them to become productive citizens. Community Impact In the communities in which we operate we intend to pursue our philanthropic efforts as well as sponsoring events for community non-profits and organizations. Through these services we believe that we can assist these groups in better serving our community, which in turn will enable the community in which we serve to flourish. Sherif O Alghali Best Ice Cream FINANCIAL SUMMARY Best Ice Cream’s revenue model1 is based on selling the following three products: • Ice cream novelties at an average price of $3. This service has a material cost of $.60, producing a gross profit of $2.40 for each product sold. Materials include wholesale ice cream. We project selling 8,407 of these in the first year for revenues of $25,200. • Drinks at an average price of $2. This product has a material cost of $.55, producing a gross profit of $1.45 for each product sold. Materials include wholesale drinks. We project selling 6,556 of these in the first year for revenues of $13,100. • Pickles at an average price of $2. This product has a material cost of $.30, producing a gross profit of $1.70 for each service sold. Materials include wholesale pickles. We project selling 1,378 of these in the first year for revenues of $2,800. This will generate more than $41,100 in first-year revenues with a net profit of more than $3,900. This is a 9% net margin after deducting $10,600 in total owner compensation ($7,000 cash withdrawals and $3,600 income taxes). Best Ice Cream will have a positive cash flow in the second month of operations. FINANCING STRATEGY Best Ice Cream will start in July 2013. Total start-up funding is $8,000. This amount will cover all equipment, beginning cash balance and other start-up costs. Sherif will save $1,000. He also currently owns a truck valued at $2,000, which he will use to start the business. The combined $3,000 will be Sherif’s initial capital contribution. The company will have an additional $5,000 in debt financing that will be repaid in 24 months at 18% 1 The revenue model in the Executive Summary includes money paid for non-owner labor plus the economic value of the owner’s labor (not necessarily cash paid). Initially, the business will be unincorporated and, as such, receives no tax deduction for money paid to the owner. A deduction for owner’s labor is included in the Executive Summary so the reader can assess the pro forma gross profit of the products and/or services. Estimating this pro forma gross profit requires the PEP participant to value his time in calculating a realistic sales price for his company’s services. The attached financial projections differ in that non-owner labor is included in cost of goods sold, and money withdrawn by the owner is shown as owner withdrawals after calculating the business’s tax expense but before net income. Sherif O Alghali Best Ice Cream Sherif Alghali DBA Best Ice Cream Assumptions Used in Projected Income and Cash Flow Statements Year 1 Note 1 Business Organization and Taxation The business is a sole proprietorship and, accordingly, all taxes are the personal liability of the owner. The revenue model (note 4) includes a deduction for the owner's labor to mirror the cost structure of an incorporated business. This owner labor charge is deducted in calculating pro forma gross profit but is not included in the income statement presentation in arriving at taxable income. The income statement reports owner withdrawals after calculating tax expense and before net income. The income statement assumes a flat 25% federal tax rate (10% personal income tax and 15% self employment tax). Federal taxes are paid quarterly. Note 2 Accounting Method The financials assume that all revenues are collected in the month of sale and all expenses are paid in the month the obligation is incurred. The financial statements assume there will be no accounts receivable and no accounts payable. Note 3 Start-up costs The projected financials assume the business will secure initial financing and pay start-up expenses in month 1. Sales and normal operating activities will begin in month 2. marketing, business cards, fliers cell phone purchase car/truck lease down payment permits supplies, office & misc. Truck repairs and improvements S Corp Filing Register Equipment Cash needed for start-up expenses company car, truck or van company trailer computer, printer, fax Paid or contributed in Month 1 500 100 2,000 300 550 3,450 Paid or contributed in Month 1 2,000 building/office deposit beginning cash balance Cash needed for start-up assets 2,550 4,550 Total start up cost 8,000 Funding sources Cash owner will contribute 1,000 Value of assets owner currently owns and will contribute to the company Total owner contribution 2,000 3,000 Vehicle loan and other equipment debt (see note 5 for financing) Start-up financing owner needs (see note 5 for financing) Total start up cost 5,000 8,000 Equipment Financing N/A N/A - Depreciable Assets 2,000 N/A N/A 2,000 60 assumed life (months) 33 monthly depreciation Sherif Alghali DBA Best Ice Cream Assumptions Used in Projected Income and Cash Flow Statements Year 1 Note 4 Revenue Model Product name Product description Product 1 Ice Cream Novelties Any pre-packaged ice cream novelty Price per unit Cost of one unit Non-owner payroll exp. Non-owner payroll tax cost 1 description cost 2 description cost 3 description cost 4 description Total variable costs Income statement gross profit per unit hours Start-up Month 1 total revenue total cost of sales total income statement gross profit (excludes owner labor) Owner's labor hours (time spent directly related to sales) Note 5 Financing Start-up financing, see Note 3 Amount borrowed 5,000 principal, begin Interest rate 18% interest expense Payback period (months) 24 principal payment Grace period (months) principal, end Monthly payment 250 0.60 0.60 2.40 0% 0% 20% 0% 0% 0% 20% 80% 2.40 0% 80% Product 3 Drinks 16.9 ounce sodas, teas and water Pickles hours rate Owner's labor charge Pro forma gross profit Ice Cream Novelties sold Drinks sold Pickles sold 100% rate Wholesale ice cream hours 3.00 Product 2 100% 0.55 0.55 1.45 0% 0% 28% 0% 0% 0% 28% 73% 1.45 0% 73% hours rate Month 2 1,200 660 180 Month 3 1,300 820 215 Month 4 1,000 560 170 Month 5 500 1,171 59 Month 6 387 1,288 64 5,280 1,137 4,143 5,970 1,296 4,675 4,460 959 3,501 3,960 962 2,998 3,865 960 2,905 - - - - - 5,000 4,825 4,648 75 72.38069235 69.7221 -174.62051 -177.2398175 -179.898 4,825 4,648 4,468 2.00 rate Wholesale drinks hours Pickles Month 7 220 100 64 Month 8 210 95 61 Month 9 200 102 60 988 206 782 942 197 745 924 194 730 - - - 4,468 67.02362 -182.597 4,286 4,286 64.2846655 -185.3358443 4,100 4,100 3,912 61.50462784 58.68289 -188.115882 -190.938 3,912 3,721 3,721 55.81883 -193.8017 3,527 Month 5 Month 6 Month 7 Month 8 Month 9 - - - - - 100% 0.30 0.30 1.70 0% 0% 15% 0% 0% 0% 15% 85% 1.70 0% 85% rate Wholesale pickles hours 2.00 rate Month 10 830 465 120 Month 11 Month 12 Total Year 1,160 1,400 8,407 550 745 6,556 165 220 1,378 3,660 790 2,870 4,910 1,048 3,862 6,130 1,316 4,814 41,089 9,063 32,026 - - - - 3,527 3,527 3,331 52.91180004 52.91180004 49.96117 524.41741 -196.7087098 -196.7087098 -199.659 -1472.547 3,331 3,331 3,131 Note 6 Payroll - nondirect # of employees average hours each employee worked per month average per hour wage salary expense Month 2 1 60 10.00 600 Month 3 1 60 10.00 600 Month 4 1 60 10.00 600 Month 10 - Month 11 Month 12 Total Year 1 1 60 60 10.00 10.00 600 600 3,000 Sherif Alghali DBA Best Ice Cream Projected Income and Cash Flow Statements Year 1 Revenue Ice Cream Novelties Drinks Pickles Total revenue Assumptions 2 4 4 4 Cost of Goods Sold Ice Cream Novelties Drinks Pickles Total COGS Gross profit 2 4 4 4 Expenses Auto or truck lease Depreciation Gasoline & fuels Insurance - bonding Insurance - vehicle Interest - equip & start up Marketing Office - rent Office - insurance Office - telephone Office - utilities Payroll - not owner and not in COGS Payroll taxes (9%) Permits Supplies Tax service Telephone - cellular Start-up expenses Commissary Rent Event Costs 2 Total expenses Taxable profit (loss) Tax (expense) benefit Owner's withdrawals Net profit (loss) Depreciation Equipment purchases Principal, equipment loan Repay debt financing Owner contribution Net cash flow Cash, period start Cash, period end 3 5 6 6 1 1 1 3 3 5 5 3 % of Total Revenue Start-up Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 - 3,600 1,320 360 5,280 3,900 1,640 430 5,970 3,000 1,120 340 4,460 1,500 2,342 118 3,960 1,161 2,576 128 3,865 660 200 128 988 630 190 122 942 600 204 120 924 2,490 930 240 3,660 3,480 1,100 330 4,910 4,200 1,490 440 6,130 25,221 13,112 2,756 41,089 61% 32% 7% 100% - 720 363 54 1,137 4,143 780 451 65 1,296 4,675 600 308 51 959 3,501 300 644 18 962 2,998 232 708 19 960 2,905 132 55 19 206 782 126 52 18 197 745 120 56 18 194 730 498 256 36 790 2,870 696 303 50 1,048 3,862 840 410 66 1,316 4,814 5,044 3,606 413 9,063 32,026 12% 9% 1% 22% 78% 33 300 33 300 33 300 33 300 33 300 33 300 33 300 33 300 33 300 33 300 33 300 200 75 100 200 72 200 70 100 200 67 200 64 200 62 100 200 59 200 56 200 53 100 200 53 200 50 100 600 600 600 - - - - - - 600 600 367 3,300 2,200 680 1,000 3,000 0% 1% 8% 0% 5% 2% 2% 0% 0% 0% 0% 7% 54 54 54 - - - - - - 54 54 50 50 50 50 50 50 50 50 50 50 50 100 100 200 100 100 200 100 100 100 100 100 100 100 100 100 100 100 100 100 100 200 100 100 200 100 100 200 1,607 1,894 850 2,148 848 2,058 (1,525) 945 (163) 842 (97) 839 (109) 92 1,136 1,734 1,690 2,172 (1,000) 894 33 (180) 747 5,099 5,846 (1,000) 1,148 33 (183) 999 5,846 6,845 533 33 (185) 381 6,845 7,226 (163) 33 (188) (318) 7,226 6,908 (97) 33 (191) (254) 6,908 6,654 (17) 33 (194) (178) 6,654 6,476 (1,000) 734 33 (197) 571 6,476 7,047 (1,000) 1,172 33 (197) 1,008 7,047 8,055 500 100 2,850 3,450 (3,450) 1,812 2,331 (3,450) (2,000) 5,000 3,000 2,550 2,550 (1,000) 1,331 33 (175) 1,189 2,550 3,739 1,710 2,965 (461) (1,000) 1,503 33 (177) 1,360 3,739 5,099 Month 7 Month 8 The accompanying assumptions are an integral part of this financial statement. Month 9 Month 10 Month 11 Month 12 1,787 3,027 (1,733) (1,000) 294 33 (200) 127 8,055 8,183 Total Year 270 100 550 1,100 2,850 1,100 1,000 17,517 14,509 (3,627) (7,000) 3,882 367 (2,000) 2,934 3,000 8,183 8,183 1% 0% 1% 0% 3% 7% 3% 2% 0% 43% 35% -9% -17% 9%