Business Plan - Example

Business Plan
Example: Online furniture business
Tools & Frameworks - v 1.0

3
With an investment of EUR 100 k, Company X will launch an online home
decoration brand targeting EUR 12.5 m revenues in year 5
• As an online brand with operation in Poland, Company X is able to offer high quality home
decoration items at attractive prices
• By adding one country per year, we can target a market of 10 m women with an interest in classical
design that amounts to EUR 900 m
• First projections show revenues around EUR 12.5 m in year 5, with net profits of EUR 2.6 m
• We are on schedule to launch in September 2010 – next steps are to contract suppliers, develop a
full webshop & webmagazine and secure funding
• We are looking for a private investor with experience in online retail that invests EUR 100 k for 40%
of equity to finance inventory, working capital and investments in the website
EXECUTIVE SUMMARY
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5
Our target customer is a 40+ year old woman with a passion for classical
interior design
Customer segmentation based on interior design magazine styles1)
“I am a 40-60 year old woman, with a higher income
and higher education”
“I love classic interiors, tasteful antiques, and
selected shopping addresses”
“I´m constantly looking for a source of inspiration for
my house and I love to read my home-deco magazine”
“I can decorate my house as I wish (my husband
doesn’t care). I buy whatever I like for our home”
1) See backup for full segmentation
Modern &
Metropolitan
Do-It-Yourself decoration
Classic &
Country-side
Luxurious living
CUSTOMER

7
She loves to shop at small boutiques, but these are quite expensive, too far
away and in the end the quality is not what she hoped for
NEED
“I like the style, I know I can
always find products I like”
Pros and cons of a typical real-life shopping experience at boutique1)
“I love shopping here, but the
boutiques are quite expensive”
PROs CONs
“The personal touch is great –
as a regular customer I get
special treatment“
“In the end the quality was not
what I hoped for”
“I love to exchange addresses
of new boutiques with friends”
“Somebody with ‘”the eye” showed
me new trends and inspired me”
“Boutiques I like are too far away
and have limited opening hours”
“When I see a nice chair they
only have 1 …”
1) Based on interviews with focus group of target customers
TYPICAL BOUTIQUE

9
Typical
boutique
Company
X
Business model
As an online brand, operating from Poland, Company X is able to offer high
quality home decoration items at attractive prices
- 20%
Product
Personnel
& housing
Margin
Discounts
Sales &
delivery
30%
30%
10%
10%
10%
40%
10%
25%
25%
Wholesaler 10%
100
80
Own brand
and design
Manufacturing
and operation
in Poland
Sell via online
shopping
experience
At home delivery
and local service
>Differentiate with
own brand
>Freedom in pricing
strategy
>Exploit any trend
that brings back a
scent of the past
>All items packaged
as gifts
>Small items can
be shipped at
relatively low cost
>Service through
local agents
>No wholesale
margins
>Wide reach to get
economy of scale
>Cut out high fixed
cost of housing
and personnel
>Suppliers with
craftsmanship
>Relatively low
wages
>Short lead time
reduces need for
large inventory
Source: CBS
BUSINESS MODEL

11
All operations will be organized in Poland – the combination of high skills,
low wages and short lead times ensures quality at low cost
SHORT LEAD TIMES
Manufacturing and operations strategy
Lublin
(warehouse)
Warsaw3 days
2 days
5 days
5 days
2 days
> Poland has a long tradition of manufacturing items made of
porcelain, glass , lace and wood
> Poland is one of the most competitive furniture exporters in
the world
– # 3 in terms of growth
– # 4 in terms of size
HIGH SKILLS AT RELATIVELY LOW WAGES
> Short lead times compared to
production in Asia
> Significantly limits inventory
needs
> Local suppliers still employ highly
skilled workers
> Relatively low wages (60-70%
lower than in the Netherlands)
> Highly subsidized by the
European Union
Source: UN Comtrade database, Polish Bureau of Statistics, Ecoparcel
MANUFACTURING & OPERATION

13
We will ship our products, packaged as gifts, from our warehouse in Poland
directly to our customers in Western Europe
Door-to-door delivery from Poland to Western-Europe
• Outsourced to logistics provider
• Consumers pay EUR 4.95 delivery
costs on orders < EUR 100
• If parcel cannot be delivered, we try 2x
more after which it is stored for pickup
• Track & trace of packages on website
• Proactive after sales service call when
package is delivered
• Returns can be send to the address of
a local agent, but at own expense
• Damaged or broken goods will be
replaced by local agent
PACKAGE AS GIFTS
• All items packaged as gifts to
emphasize luxury feeling
• Handwritten “with compliments”
note for personal touch
• Ship ready made product
• Package contains flyers to hand-
out to friends
SHIP DIRECTLY FROM POLAND PROVIDE LOCAL SERVICE
Source: Ecoparcel
DELIVERY

15
By adding one country per year, we can target a market of 10 m women with
an interest in classical design that amounts to EUR 900 m
2011 20122010 2013 2014 2015
Market potential of (online) classical interior design
60 m
365 m
700 m
840 m
915 m
45 m
Market size 2 )
(# target customers)
Market size 1)
(online spend of
target customers)
1 m 3.5 m 6.8 m 9.3 m 9.7 m0.6 m
Local agents - 1 2 3 4-
Polish employees 1 2 3 11 270.5
1) 20% of 2009 market size for each country; 2) Number of 40-60 year old women with an interest in classical interior design
GROWTH STRATEGY

17
First projections show revenues around EUR 12.5 m in year 5, with net
profits of EUR 2.6 m
10 100 400
1,350
4,100
12,500
2010 2011 2012 2013 2014 2015
NET REVENUES (EUR k)
-10
5 65
240
800
2,600
2010 2011 2012 2013 2014 2015
NET PROFITS (EUR k)
Forecasted net revenues and net profits
REVENUES & PROFITS
Source: Monte Carlo analysis with Crystall Ball, 10.000 trials
> In 2015 we expect gross margins of 30% and net margins
of 20% (after tax)
> In 2015 we expect to sell 160.000 products at an average
price of EUR 100 (incl. VAT)

19
Through our blog and marketing campaign we have already established
contact with >500 potential customers and learned what their needs are
ANALYSIS OF WEBLOGANALYSIS OF ONLINE MARKETING CAMPAIGN
Key questions answered:
> What are people looking for? -> most used keywords are
“vintage furniture”, “living trends” and “nostalgic living” 1)
> What is the Cost per Click? -> around EUR 0.20
> What is the Click Through Rate? -> around 2%
Current customer contact
Key questions answered:
> How many visitors? -> Over 500 unique visitors in 2 months
> Is the content what people look for? -> 3.3 page views / visit
> Where does our traffic come from? -> 65% search engines
> What is the repeat visitor rate? -> around 23%
Source: Google AdWords, Google Analytics
1) Out of over 80 keywords that show our online advertisement
RISK ASSESSMENT

21
We are looking for a private investor that invests EUR 100 k for 40% of
equity to finance inventory, working capital and investments in the website
Offer to investors
FUNDING
FUNDING (EUR k) USE OF FUNDS EXIT STRATEGIES
> We look for a private investor with
experience in online retail
> If growth is higher than projected, max
EUR 125 k of extra funding is needed1)
> Finance inventory and working capital
> Invest in website
> Cover initial losses
-€100
€0
€100
€200
€300
€400
€500
• Sell to offline home-deco firm
• Sell to e-commerce firm
• Sell to private equity firm
• Management buy-out
Personal
loan
Investor
funding
1) Based on 95% certainty interval -> revenues of EUR 35 m with profits of EUR 7.5 m; 2) Personal loan already taken into account
Source: Monte Carlo analysis with Crystal Ball, 10.000 trials
2010 2011 2012 2013 2014 2015
Cumulative
Cash flow 2)
100
(80%)
25
(20%) EXIT
2015
> At projected revenues and profits
the company could be valued at
EUR 5-10 m in 2015

23
Our customer is a 40-60 year old woman that loves classic design – she can
decorate her house as she wishes and is constantly looking for inspiration
Target
customer
> 40-60 year old woman, higher
income, higher education
> Can decorate her house as she
wishes. If she sees something
she likes, she buys it.
> She loves classic interiors,
tasteful antiques, and selected
shopping addresses
> Her home is not static; she
wants to make it ever more
attractive and comfortable
> She is constantly looking for a
source of inspiration
> She enjoys going to auctions,
concerts, museums, eating out
Customer segmentation of Dutch home decoration magazines (# of readers)
100.000 readers
Country-side
& classic
design
Metropolitan
& modern
design
Luxurious
DIY
VT wonen
Eigen huis
& interieur
Seasons
Buitenleven101 Woonideeen
Ariadne
at Home
Home and
garden
More than classic
Landleven
Residence
Elle wonen
Source: NOM PRINT MONITOR 2008-II/2009, company websites
445k
296k
1) Lower than the sum, as some people read more than one magazine
+/- 750 k
readers1)
114k
20% of total
CUSTOMER

25
Online retail is evolving from transactional buying to emotional shopping
MARKET
6.0 years
5.4 years
5.4 years
5.1 years
5.0 years
4.8 years
4.6 years
3.1 years
2.6 years
2.3 years
1.8 years
1.5 years
1.0 years
Books
Software
Music, video
Airline tickets
Apparel, shoes
Computers
Electronics
Toys
Jewelry
Sporting goods
Appliances
Automobiles
Online sales by product group
Source: North American Technographics® Retail Online Survey, Q1 2008
1) Base: US online shoppers who have seven or more years of online purchasing experience, Q1 2008
Transactional
Emotional
How long have you been purchasing each
of the following types of products online? 1)
18%
28%
55%
15%
9%
20%
35%
44%
30%
43%
0%
10%
20%
30%
40%
50%
60%
2004 2006 2008 2010 2012
Computers, software
Appliances
Furniture
Tickets
Travel
Apparel, shoes
Jewelry
Books
Baby products
Music , video
Share of sales through online channels 1)
Furniture
Transactional
Emotional

27
The ‘average’ emotional online shopper is a 44 year old educated woman
with a high household income
Profile of the US online fashion buyer, November 2007
Online statistics
Broadband at home: 75%
Technology optimist: 70%
Online spend (3 months): USD 720
Demographics
Female : 60%
Age: 44 years
Household income: USD 84 k
College degree: 58%
54%37%
9%Early adopter
Mainstream
Sideline
I often tell my friends about products that interest me 52%
48%
45%
44%
39%
Attitudes and behaviors
I would pay more for products that save me time/hassles
I’m always willing to try or do new things
Price is more important to me than brand names
If I really want something, I will buy it on credit
Segmentation
77%
36%
35%
18%
16%
11%
Online activities (monthly)
Research products for purchase
Read customer ratings/reviews
Track shipped packages
Use social networking sites
Use comparison-shopping sites
Post ratings / reviews
Source: Forrester, 2008
CUSTOMER

29
Women shop online for ‘emotional’ products – clothing tops the list
Internet shopping habits of Dutch women 1), 2002–2008
53%
49%
44%
42%
25%
25%
20%
11%
6%
2%
Clothing & apparel
Travel & accomodation
Tickets
Books & magazines
Software/hardware, electronics
Films, music
Furniture & home applicances
Groceries & cosmetics
Financial services
Other
Source: CBS
1) Base: all women 12-74 year old
CUSTOMER

31
As the online sales channel has a much wider reach than physical stores, it
offers economies of scale for niche products
Home decoration retail segmentation
Volume
Price / Margin
Discounters,
DIY stores
Life-style
brands
Specialty storesBrand dealerships
& franchisers
(Inter)national
chains
Boutiques
Key selling
point
Price Brand Quality
COMPANY X
> Online channel offers economies of
scale and reduces costs of
personnel and housing
> Cut out wholesaler/brand by selling
own brand
Competition
COMPETITION

33
Company X is able to offer high quality home decoration items at 20% lower
cost and double the margins compared to a boutique
30%40%
100%
15%
10%
3%2%3%5%2%
17%
13%
10%
10%
10%
Raw
material
LabourSalesMarginFactory
price
LabourSalesMarginWhole-
sale
price
LabourHousingSalesMarginDiscountRetail
price
Cost structure of home decoration value chain (% of boutique net sales price)
RETAIL WHOLESALE PRODUCTION
* * * *
Source: CBS, CBW Kerngegevens woonzaken 2008 * Estimates
2)
32%32%
80%
16%
11%
3%2%6%2%
19%
20%
1%
Company
X
Offline
boutique
COMPETITION

35
All products will be sourced from Poland, one of the most competitive
furniture exporters in the world
0%
10%
20%
30%
40%
0 5 10 15 20
World furniture exports – top 25 countries
Growth (CAGR ‘03–’07)
Export 2007 (USD Bn)
30
Italy
UPCOMING
PLAYERS
LOSERS OLD PLAYERS
Vietnam
United States
Canada
Mexico
Romania
Czech Republic
Average
Poland
China
Average
Germany
WINNERS
Source: UN Comtrade database
FINANCE

37
We expect to be cash flow positive in 2012 – EUR 100 k of external funding is
needed to finance inventory and other working capital
-€50
€0
€50
€100
€150
€200
€250
€300
€350
Forecasted cash flows and external funding needed
CASH FLOW DEVELOPMENT (EUR k) EXTERNAL FUNDING NEEDED
2010 2011 2012 2013 2014 2015
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
300 k0 100 k 400 k 600 k
Mean: EUR 95 k
200 k 500 k
> We need EUR 100k of funding for inventory and working capital 1)
> If growth is higher than expected, max EUR 125 k of extra funding
is needed2)
> We expect to be cash-flow positive in Q2 2012
> Includes personal loan (EUR 25 k)
Source: Monte Carlo analysis with Crystal Ball, 10.000 trials
1) Excluding EUR 25 k personal loan; 2) Based on 95% certainty interval
CASH FLOWS AND FUNDING
Out of 95% confidence interval
Within 95% confidence interval

39
Company X’s business model changes the rules of the game
VALUE PROPOSITION
High-quality authentic
home decoration items
sold through a unique
online shopping
experience to older
women
CORE CAPABILITIES
• Market and customer
know-how
• Purchase/ design products
• Marketing
• Operations management
and quality control
• Communication: speak
local languages !
PARTNER NETWORK
• Extensive personal social
network in Poland
• Polish suppliers
• Indian IT developers
• Website designers
• Magazines/bloggers/etc.
CUSTOMER
RELATIONSHIP
• (Online) community, blog
• Newsletter
• Personalized login,
brochure, etc
• Contact center
• Indirect: word of mouth,
magazines, blogs
TARGET CUSTOMER
• 40-60 year old women
• Interest in life-style and
interior design
• Determine 90% of home
decoration purchases
• Initial market: the
Netherlands (#1 internet
access) – expand to
Western-Europe
VALUE
CONFIGURATION
• Purchasing, design
• Storage, packaging
• Sales & marketing
• Service & customer mgmt
• Website design & content
• Outsourced: production
DISTRIBUTION
CHANNEL
• Online sales
• Door-to-door delivery
• Service through local
contact center
COST STRUCTURE
• Purchasing
• Operations
• Logistics
• Marketing & sales
• IT
• Customer service
REVENUE STREAMS
• Direct product sales
• Later stage: personalized
advertising
• Potentially: 3th party sales
INFRASTRUCTURE CUSTOMEROFFER
FINANCE
BUSINESS MODEL

41
Seasonality is limited besides a little peak before Christmas
113
50
60
70
80
90
100
110
120
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Seasonal development volumes of home decoration shops, Netherlands (2000 - 2008)
Volume
(& revenue)
Source: CBS
MARKT

43
Labor costs are rising slightly
zł2,000
zł2,200
zł2,400
zł2,600
zł2,800
zł3,000
zł3,200
zł3,400
2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1
CAGR 3.1%
per annum
Average monthly gross wages (adjusted for inflation), 2001-2009
Source: Polish Bureau of Statistics
FINANCE

1
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