atraction - edwards school of business painter... · web viewtwo highly qualified individuals who...

aTraction

Our Business Plan

Delia Edwards & Jennifer Egroff

BE BOLD!

aTractionDelia Edwards & Jenn Egroff

Executive Summary

“To the individualist who loves to be bold and stand out from the crowd, aTraction turns unfortunate injuries into a personalized statement.”

Every year, approximately 250,000 Canadians fracture their bones, which is a key component to our business’s success. Excluding fractures, there are also many more opportunities for cast coverings for medical as well as personal reasons. No one enjoys wearing unsightly casts or splints for prolonged periods of time; Injuries are bad enough without have the added unwanted attention to the medical apparatus on your arm or leg. Our cast covers seek to address this unfortunate timing, and make it a positive experience for everyone.

aTraction’s customized and handmade cast covers for arms and legs will offer a variety of options for all of those who are injured. The most profitable segment of our target market will be children. Our kids’ covers will be bright, fun and full of life. Another segment our cast covers will cater to is young females, who always want to be on the cutting edge of fashion. Trendy patterns and changeable fabrics will allow every young adult to stand out. Injuries are a significant component of upper level athletes, who will make up our third targeted line. These covers will largely be customized for those players wanting to cheer on the team and proudly display their team spirit on their covered arm or leg while recovering from an injury.

Currently, the only cast cover companies are located in the United States. aTraction will be the first Canadian cast covering company, strategically offering customers the lowest prices for high quality, handmade products. It will use an interactive website for customers to place orders, submit measurements and request customized embroidered designs.

Two highly qualified individuals who will have Bachelor of Commerce degrees in April and have sewing experience will manage aTraction. Jenn Egroff will be the Marketing Manager as she is a marketing major and Delia Edwards will be the Sales Manager as she is a management major. They will both use their previous sewing experience and practical business knowledge to run this operation out of their own homes while managing their full-time positions throughout the week.

With an initial investment of $5,250 each (for $10,500 total), as well as 4 hours for production and administration duties each week, aTraction will be a flexible part-time business with lots of financial potential. With low initial capital costs of approximately $6,000 and little risk, it will earn an internal rate of return of 23% and will achieve annual profit margins between 58% and 67% over the next five years. In order to expand operations and achieve significant returns on our investment, aTraction hopes to establish a partnership with a retail department store or pharmacy.

aTraction’s business plan follows, detailing the operations, human resources, marketing and financial components of the business.


Table of Contents:1.0 Introduction 1

1.1. Industry Overview 11.2. Mission Statement 11.3. Goals and Objectives 1

2.0 Operations Plan 12.1 Building and Floor Plan 1

a. Current Site Plan 1b. Future Site Plan 2

2.2 Flow of Organization 2a. Work Plan and Flow of Work

2.3 Quality Control Programs 32.4 Organizational Tasks 3

a. Daily 4b. Weekly 4c. Quarterly 5d. Annually 5

2.5 Supply Analysis 52.6 Service Providers 52.7 Capital Budget 52.8 Cost of Sales 62.9 Operating Expenses 72.10 Working Capital 8

a. Cash 8b. Inventories 8c. Accounts Receivable 8d. Accounts Payable 8

3.0 Human Resources Plan 83.1 Organizational Structure 8

a. Advisory Board 93.2 Job Descriptions/Qualifications 9

a. Marketing Manager 9b. Sales Manager 10c. Additional Seamstress 10d. Training Programs 10

3.3 Human Resources Strategy 104.0 Marketing Strategy 11

4.1 Target Market 114.2 Positioning Statement 114.3 Marketing Mix 11

a. Products 11i. Product Design 12

b. Price 14


c. Promotions & Advertising 15d. Place 16

4.4 Competitive Analysis 164.5 Marketing Expenses 17

5.0 Financial Plan 185.1 Capital Requirements 185.2 Summary of Projected Income Statement 185.3 Summary of Projected Balance Sheet 195.4 Risk Analysis 19

a. Critical Variables 19b. Contingency Plan 19

5.5 Dividends Policy 195.6 Economic Forecasts 205.7 Ratio Analysis 215.8 Break-Even Analysis 22

6.0 Summary 22

Figures1 Site Location2 Floor Plan3 Work Flow Chart4 Organizational Chart5 Arm Product6 Break-Even Graph

Tables1 Fixtures and Equipment2 COGS3 Margin Comparisons4 Operating Expenses5 Arm Measurements6 Leg Measurements7 Pricing8 Competition9 Marketing Expenses10 Capital Requirements11 Income Statement Summary12 Balance Sheet Summary13 Best Case Scenario14 Worst Case Scenario15 Ratios

Appendices:1 Future Expansion Site Plan


2 Income Statement3 Ratios4 Break-Even5 Investment Analysis6 Base Case Financial Statement7 Best Case Financial Statement8 Worst Case Financial Statement

Works Cited


1.0 Introduction1.1. Industry Overview

According to the Canadian Institute for Health Information, in 2008-09 there were approximately 60,000 hospitalizations in Canada (excluding Quebec) for lower limb fractures, and 30,000 for upper limb fractures (Health Zone). Within four months, 60,000 fractures were treated in emergency rooms in Ontario alone. These numbers do not include sprains, burns, or those people who were treated in clinics. Looking at the country as a whole there are approximately 250,000 fractures in Canada each year. For each of these injuries, a cast or other medical apparatus may need to be worn for up to 6-8 weeks, and many injuries will require an additional 3-4 months of physiotherapy before the injured limb becomes fully functional again (ABC News).

It is important that medical apparatus’s are kept clean, dry, and protected. This will not only reduce patient’s discomfort, but it is also easier for the medical practitioner to examine a clean, well kept cast. For many people there is an unpleasant association with their medical apparatus, since it can draw unwanted attention to a painful or embarrassing memory. It also requires a shift or change in regular activities and tends to make simple tasks much more difficult.

1.2. Mission StatementAt aTraction, our mission is as follows:

“Covering medical apparatuses with a bold Canadian-made accessory in order to have fun with an injury and stand out from the crowd.”

1.3. Goals and ObjectivesThere are several goals and objectives that aTraction would like to accomplish within the next five years. Our operational and profitability goals include:

To become an operationally profitable part-time business by the third year To establish a market presence for Canadian products To become the main provider of cast covers for children and athletes in Canada To break-even sales by the second year of operations To achieve sales of $50,000 by the fifth year To sign a distribution agreement with a large retailer

2.0 Operations PlanaTraction is a co-owned Canadian-controlled private corporation. This will give the company limited liability and will defer taxes so that we can reinvest in the business.

2.1 Building and Floor Plana. Current Site Plan

The current site plan is in Jenn’s spacious basement of approximately 15’ by 35’. This space will give us a maximum capacity of producing 80 arm covers and 64 leg covers for one work

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weekend (16 hours). This means that the full capacity of the current site will be 4,160 arm covers and 3,328 leg covers in the first year, with this number increasing during the next five years as our sewing efficiency increases.

Figure 1.

b. Future Expansion Site PlanIf we manage to obtain a retail contract and orders exceed our present capacity, we might need to expand. We would need a larger space with more storage room, as well as space for more machines and additional seamstresses. If we were planning on taking on employees, we would also want to include separate working spaces for Jenn and Delia to perform their management and marketing tasks. This space could be anywhere in the city and we could aim for the cheapest location as we would not need to be downtown properties. Ideally, we would look for a building to lease in a residential area. A larger space could increase production up to a level that could meet the sales targets for year five in the best case scenario (if 40 hours were put into production each week). Best case scenario shown in Economic Forecasts 5.6. See possible layout in Appendix 1.

2.2 Flow of Organization a. Work Plan and Flow of Work

We will focus on producing one design at a time, which includes using the same fabric and thread and varying pattern sizes after every ten covers are created. This will save time and be much more efficient. In this way we will produce the covers in batches organized by fabric so we can also ensure that there are a range of sizes available in every fabric type. In the best case scenario, this will be an assembly line process, and will be laid out according to the Future Floor Plan above.

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Figure 3

2.3 Quality Control ProgramsWhile operations are small, we will perform quality control programs ourselves. We will inspect each other’s work for straight seams, uniformity of sizing, loose threads, and check that the elastic is completely covered. A Stretch Test will be performed after every ten covers, which involves testing it on a mannequin with a mock cast. We will also perform Batch Tests on new fabric to ensure that the fabric stands up well to washing without losing shape, stretch, or color. A sample will be created for every design, and one sample will be washed and stretched to see if it stretches properly or contorts after washing.

2.4 Organizational TasksAs it is currently a very small business, we will co-manage the company. Delia will be the Sales Director, handling tasks such as calling retailers, distributing products and taking orders. Jenn will be the Marketing Director, and will handle all of the promotional strategies, product packaging and manage the brand. Since it is just the two of us, we will both be seamstresses, producing our own designs and products to meet demand. See Job Descriptions in 3.2.

Once the company expands and orders reach approximately 8,000 per year, we will hire additional seamstresses. In the Human Resources section of this plan we have a projected future organizational chart should the company need to expand past just Jenn and Delia.

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1. Choose Fabric & Design

2. Pin Pattern on

Fabric

3. Cut Fabric

4. Sew Elastic

5. Sew Seams

6. Embroider

Logo

7. Package

8. Box For Delivery


Average Business DayManagers will work part-time on the weekends depending on sales demands. In one weekend we can make 5 arm and 4 leg covers per hour each. At this rate we will only need to work 163 hours in the first year to finish the planned production. The low time commitment will allow us to work on the business from 9 am to 5 pm Saturday and Sunday for 20 weekends out of the first year, which would include both production and management hours. This means that the hours will be extremely flexible and production can be done whenever it is convenient for us. If the demand exceeded what is anticipated there will be plenty of time available to fit in more production hours.

a. Daily or One ShiftProduction Shift:

According to order, set out pattern Find or buy fabric to meet order Begin production

o Depending on availability one of us might cut while the other sews, or some other mixing of the tasks required might be done

Administration Shift:4 hours of administrative tasks such as financials, sales calls and marketing strategies.

The first fifteen minutes will be spent checking emails and attending to the very important or urgent matters.

Later in the day, there is time set aside for administrative duties such as pursuing sales calls or purchasing more supplies

Update Facebook page and website, respond to orders made online Verify custom orders with customers

Production:For current operations, the first hour will be spent pinning patterns onto fabric and cutting out designs. During this time, the co-managers would be able to cut out approximately 20 patterns. The second hour will be spent sewing elastics into seams and serging together. The third hour will be spent embroidering the logo and packaging the covers onto the sock hangar, attaching the price tags, or customizing the order as requested.

After production duties, the managers will sweep up the floors and put all of the leftover materials away for the following day, as well as send off any outgoing orders.

b. Weekly Inventory will be taken every second Wednesday and purchasing and orders will be

made every other Thursday or once a month as required Ensuring posters and brochures are fully stocked at various locations Website maintenance Fabric research

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c. Quarterly Budget checks Balance sheet and income statement Develop promotions (based on seasons, around holidays)

o update posterso promotional contests

Routine maintenance on sewing machines, laundry machines, etc.

d. Annually Feasibility analysis to conclude whether business is still profitable Plan tradeshows and conferences for following year Pay and organize taxes Evaluate the success of different designs, fabrics and promotions

2.5 Supply AnalysisOur main supplier of fabric will be Fabricland in Saskatoon, but as the business grows we will travel to places such as the Garment District in New York City for some more unique fabrics. We will also browse online for bulk sewing supplies of needles and thread.

Sewing items such as scissors and fabric cutting mats, as well as office supplies will be bought at Wal-Mart when available. However:

We will be making routine purchases and will continue to comparison shop for the best supplies to meet our needs

We will always be looking for the trendiest fabrics

2.6 Service ProvidersThe Royal Bank of Canada will provide all financial services. We will open a line of credit with a joint credit card and chequeing account. Using this account, we will try to earn reward points, which could be used for travel or additional supplies.

Since we will be operating out of Jenn’s basement, one third of the household utilities, such as natural gas, electricity, and water will be allocated to the business and will be provided by SaskEnergy, SaskPower and the City of Saskatoon. Sasktel will provide all telecommunications such as the landline phone, wireless Internet and cell phones.

The Sewing Machine Store will provide sewing machine and serger repair.

We will also be looking for an individual to help us set up our website and help us maintain and update it. A possible suggestion at this time is Stealth Web Designs, based out of Saskatoon.

2.7 Capital BudgetListed below are the few capital costs that will be initially required. The largest investments lie in the sewing machines, which include the one embroidery machine and two sergers. These

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machines will not need to be updated over the first five years of operations, as they tend to be high quality machines that require little technological updates. These machines will be able to handle up to approximately 8,000 covers per year. Office equipment will be required to fulfill all of our marketing and administration duties. This includes a computer, telephone, desk and chairs. The creation of the tradeshow booth is another large capital cost. It will be updated every other year in order to create interest and showcase our latest designs and products. Sewing tools such as scissors, needles, pins, rulers and cutting boards will need to be purchased as well. Some minimal costs have been allocated every year to account for over-use and worn tools.

Table 1

$ Each $ Year 1

Fixtures and Equipment

1 Embroidery Sewing Machine 549

2 Sergers 499 998

3 Sewing Machine Tables 100 300

3 Cutting Tables 50 150

2 Work Tables 50 100

Additional Lighting 200

Trade Show Booth 700

Sewing Tools 500

Office Equipment 2,200

Total Fixtures and Equipment $5,697

2.8 Cost of SalesWithin the first year, we hope to achieve revenues of $17,000. The expected cost of sales for the first year of operations is included in the chart below:

Table 2Cost of Sales $ Year 1

Beg Inventory 0Cost of Goods Manufactured 7,534

End Inventory 1,858

COGS $ 5,677

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Table 3Year 1:

Item Cost ($) Selling Price ($)

Margin

Arms 4.47 10.00 44.70%

Legs 5.47 14.00 39.07%

Year 5:

Item Cost ($) Selling Price ($)

Margin

Arms 3.86 10.00 38.60%Legs 4.81 14.00 34.36%

For a details regarding Cost of Goods Manufactured, see Appendix 6.

2.9 Operating ExpensesThe following table outlines the operating expenses for aTraction. Since the largest expense for our business will be related to marketing, those expenses are separated and shown in more detail below.

Table 4.

More details can be viewed in Appendix 2.

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Operating Expenses 2011 2012 2013 2014 2015

Legal and Accounting $500 $510 $520 $531 $541

Repairs and Maintenance 250 255 260 265 271

Incorporation Fee 300 75 77 78 80

Manager Salary 0 0 0 0 0

Employee Training Costs 1,000 500 500 500 500

Marketing Expenses

Business Cards 300 306 312 318 325

Pamphlets and Posters 1,000 1,020 1,040 1,061 1,082

Website 5,000 1,000 1,020 1,040 1,061

Travel 6,150 6,273 6,398 6,526 6,657

TOTAL: $14,500 $9,939 $10,128 $10,320 $10,517


2.10 Working Capitala. Cash

We want to leave cash in the business for as long as possible so that we will be able to pay for supplies and bills right away. This will result in a zero accounts payable.

b. Inventories

Ideally, we want to purchase all of our supplies on a monthly time frame. We will aim for 90 days inventory, with a turnover 4 times per year. We would keep all fabric and materials in stock and would buy smaller amounts of requested materials for custom orders.

c. Accounts ReceivableWe will not have any accounts receivable because we will require payment to go through online before we begin work on an order. However, customers can place orders online using PayPal or major credit cards such as Visa and Mastercard.

d. Accounts PayableWe will not have any accounts payable because we will pay for our purchases in cash, which will be paid in advance on our line of credit. The credit line will be used to purchase supplies and pay for bills online.

3.0 Human Resources Plan3.1 Organizational Structure

Figure 4

a. Advisory Board

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Advisory Board

DeliaSales Manager

Seamstress

JennMarketing Manager


As a privately-held corporation, aTraction will have an advisory board. The advisory board will be professionals that will be able to answer questions and provide guidance for the business, without the authority to make decisions. There are four members on the advisory board. Dr. Caroline Duval, a local plastic surgeon is part of the Board as she repairs and constructs casts for patients on a daily basis and understands the importance of keeping casts clean. Sanjeev Singh, a local entrepreneur and professor at the University of Saskatchewan has lots of practical knowledge of the healthcare industry and will be able to offer recommendations from experience. There will be a pediatrician who works with children on a regular basis and would give us insight as to designing children’s casts. The fourth member will be a representative from the Royal Bank of Canada who has experience in commercial banking and will be able to advise us in regards to financing.

3.2 Job Descriptions/QualificationsSince this is a small organization, the partners will share many of the duties and responsibilities. Delia will be the Sales Manager and Jenn will be the Marketing Manager, based on our respective backgrounds. As partners, we will both sew covers and handle all production activities together. More specifically, our production responsibilities will include cutting fabric, sewing, embroidery and packaging. We both have excellent people skills and are both great communicators, which will help increase sales and manage the brands integrity while interacting with customers, suppliers, and business professionals.

a. Marketing ManagerJenn will be the Marketing Manager. Her duties include creating promotional strategies, designing the logo and embroidery, and creating new cover designs. She will also be in charge of purchasing new fabrics and keeping track of inventory.

Jenn will be completing her Bachelor of Commerce degree in April 2011. She is currently a Marketing major, having contributed to an integrated marketing campaign, conducted marketing service audits, and created a promotional video for the U of S. Her past marketing experience involves working for Student Recruitment at the U of S, helping in the planning, coordination, and promotion of various recruitment initiatives including U-Start, Experience US!, Greystone Scholars Spend-a-Day and largely focusing on New Student Orientation. Her larger projects were organizing and managing the LIVE Expo Information Fair at Orientation. Other experience includes s working for Mosaic Sales and Solutions, selling and sampling beverage products for Diageo.

b. Sales ManagerDelia will be the Sales Manager. Her duties involve developing working relationships with potential customers. She is also in charge of the website, updating product content, and retrieving purchase orders for production. More specifically, she will be responsible for all planning and procedures to improve the operating quality and efficiency of the company.

Delia will be completing her Bachelor of Commerce degree in December 2010, and is a Management major. She has experience with sales and various management projects including

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retail work and event planning. She also has experience in volunteer work and work with non profits. She is currently coordinating Lemonade Day Saskatchewan alongside the Wilson Centre for Entrepreneurial Excellence. Her retail experience involves cash management, stock organization and management, customer service, and the care and storage of clothing.

c. Additional SeamstressShould demand exceed our capabilities, such as bulk orders, we may need to contract a seamstress. It would be short-term and this person would be paid hourly with the same wage. The additional seamstress would need to have some previous sewing experience and be able to work evenings and weekends.

d. Training ProgramsIn order to improve quality, both Delia and Jenn will receive seamstress training once a month for the first year. There are excellent workshops at the Sewing Machine Store offered every month. For example, the “Serger Make It and Take It” class would be extremely beneficial. These classes cost about $40 for a 3.5 hour session. The following years, both managers will take classes every other month or during the slow demand times. Continuous learning will improve our efficiency with time and inspire us to create new designs.

Should we expand, future employees will receive extensive training when they first start and continually once operations increase.

3.3 Human Resources StrategyOur human resources strategy thrives on being extremely flexible. Due to the lower amount of hours required, this business is able to accommodate a full-time job, as well as other personal responsibilities. A couple hours of production and administration activities will be required each week. Since production time is also very minimal, it will be easy to fulfill customized orders as soon as they are received online.

A partnership will also allow us to showcase our passion for creating fun cast covers. We will not be preoccupied with managing employees or dealing with external disputes. We will both strive to have a constant, open line of communication. The nature of our work will allow us to do so and we will encourage social conversation while we sew. This will be the best environment to keep this small business in operation, especially since there is a lot of potential to make money.

4.0 Marketing Strategy4.1 Target Market

We will be focusing on three main target markets for our product: Kids between the ages of 4 and 12 – We will have fabrics with bright colors, fun themes,

and popular characters to appeal to young children. This market will be useful because children grow quickly and the opportunity for repeat sales is largest in this market. We will also highlight the benefit to children of turning a painful accident into an experience that a child can remember positively.

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Young Females between the ages of 12 and 22 – For this market we will focus on the design of the product, highlighting the customization and choosing only fabric that is on trend. We will also emphasize the benefit of having multiple cast covers to complement different outfits and occasions.

Athletes between the ages of 15 and 30 and fans of any age– The products for this market will be available in basic colors to compliment a number of sports teams. These will also be promoted as package deals with possible sales in bulk to large teams. This market will also be very important for promotion possibilities and word of mouth advertising. Because injuries are common in many sports we see this becoming a large market in the future, and want to be the first to offer designs specifically created for teams, with their logo, colors, and player names.

4.2 Positioning StatementTo the individualist who loves to be bold and stand out from the crowd, aTraction turns unfortunate injuries into personalized statements.

4.3 Marketing Mixe. Products

aTraction will offer a trendy product that makes people feel better about their injuries. It is a fun way to dress up a boring medical apparatus. We will use the trendiest fabrics, with different patterns, bright colours, and even popular cartoon characters for the children’s line.

All of our products are local and handmade in Saskatoon. They are machine-washable and dryer safe, making them extremely user friendly, which is especially important for the children’s line.

Covers are available in standardized small, medium and large for arms and legs. However, custom orders are also available and can be individually placed online. A measuring chart is provided and it is extremely easy to submit custom measurements. Our covers also have the option of adding custom embroidery. Kids can get their names embroidered, or a team player can get their number. Lots of options so that everyone can have a personalized cover!

Our products offer many benefits. They keep medical apparatus’s clean and free of everyday dirt and dust. Covers can be switched everyday and washed so that there is always a

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clean exterior. They help prevent the injury from smelling, since the apparatus would be kept much cleaner.

Our cast covers will also boost a person’s confidence, especially after having to deal with an injury. Medical apparatus’s often take a while to get used to and can be difficult. Covering an injury with a fun colour or favourite pattern allows the person to be bold and stand out from the crowd. They can accessorize it with their favourite outfits or disguise it during a formal occasion.

i. Product DesignThere will be two different styles each of both arm and leg covers in order to accommodate multiple medical apparatus and customer sizes. All arm covers will reach to the wrist like a sleeve and leg covers will reach halfway down the foot past the heel. Customized orders may add additional thumb or hand coverings for arm covers, as well as full boot covers for legs.

There will be half arms, measured from the hand to the elbow, as well as full arm, which will reach to the mid-bicep. Multiple sizes will be offered; extra small full arms to large full arms. See the measurement chart below for the complete list. See Figure 3. This sizing also applies to leg covers. Half leg covers will measure from the knee to cover the entire heel of the foot, whereas full leg covers will start at the upper thigh.

We will also accommodate specialty sizes. Customers can measure themselves using our chart and submit their sizes online. Once the order has been processed, there will be an additional charge for customization.

The following sizing chart will be used so that customers ordering online can find the right product:

*Measure the circumference of your skin on your Arm or Leg right above the cast. (If the end of the cast is close to the elbow, measure mid-bicep or measure upper-thigh). DO NOT MEASURE AROUND THE CAST

Table 5 Arm Measurements:

Cast Cover Size Arm Circumference Length

XS Full Arm 6-6.75 inches or 15.2-17.1 cm 16 inches or 40.6 cm

Small Half Arm 6.75-8.75 inches or 17.1-22.2 cm 17.5 inches or 44.5 cm

Small Full Arm 6.75-8.75 inches or 17.1-22.2 cm 23 inches or 58.4 cm

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Figure 5


Medium Half Arm 8.75- 10 inches or 22.2- 25.4 cm 25 inches or 63.5 cm

Medium Full Arm 8.75-10 inches or 22.2- 25.4 cm 28 inches or 71.1 cm

Large Half Arm 10 inches or 25.4 cm & up 20 inches or 50.8 cm

Large Full Arm 10 inches or 25.4 cm & up 31.5 inches or 80 cm

Table 6 Leg Measurements:Cast Cover Size Leg Circumference Length

XS Full Leg 7.5 - 10 inches or 19.1- 25.4 cm 19 inches or 48.3 cm

Small Half Leg 10 - 13 inches or 25.4- 33 cm 21 inches or 53.3 cm

Small Full Leg 10 - 13 inches or 25.4- 33 cm 29 inches or 73.7 cm

Medium Half Leg 13 - 16 inches or 33- 40.6 cm 31 inches or 78.7 cm

Medium Full Leg 13 – 16 inches or 33- 40.6 cm 33 inches or 83.8 cm

Large Half Leg 16 inches or 40.6 cm & up 23.5 inches or 59.7 cm

Large Full Leg 16 inches or 40.6 cm & up 37 inches or 94 cm

f. PriceOne of aTraction’s biggest competitive advantages is its pricing strategy. Our products are priced well below our American competitors so that we can compete within the Canadian market as well. Since this product is generally consumed within a short period of time, we wanted the price to be low enough that the customer would still perceive value.

Our direct online prices are included in the chart below. Once we establish retail partnerships, these will also be the profits we receive. We will recommend that retailers markup prices by 100%, for example sell a medium full arm for $22.00 plus tax. We want to encourage customers to go online and order, which is the only option to customize. Customization will increase prices and since this is a trend within the marketplace, will lead to more profits.

Table 7

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Item Size

Arm Covers XS Full Arm- $8.00Small Half Arm- $8.00Small Full Arm- $10.00Medium Half Arm- $10.00Medium Full Arm- $12.00Large Half Arm- $12.00Large Full Arm- $14.00

Leg Covers XS Full Leg- $12.00Small Half Leg- $12.00Small Full Leg- $14.00Medium Half Leg- $14.00Medium Full Leg- $16.00Large Half Leg- $16.00Large Full Leg- $18.00

Customized Items Additional $1.00 for every added inch or 2.5 cm of fabric

Embroidery ranges between an additional $1.00 to $5.00, depending on the design and amount of thread.

For all online orders, there will be a shipping calculator available. We will charge standard shipping, but priority shipping will also be available upon request.

g. Promotions & Advertising aTraction will spend a large portion of its budget on marketing expenses since sales will be one of its critical variables to success.

The largest source of promotion will be from our website. It will be crucial to direct web traffic to our site, so we will invest in online marketing tools such as Google AdWords, so that when people type in ‘cast covers’ or other suggested keywords, our website will show up within the sponsored ads toolbar at the top of the search.

We will also invest in social media tools, opening up a Facebook fan page and a YouTube account that will be linked to our website. Initially we will invite all of our friends and relatives to like the page, and offer a contest every month. The first contests will be posting wall comments on the “oddest injury” or the “funniest injury.” Another contest will be photo contests, where customers can submit their favourite photos of them with their cast and their cover, showing off their “bold” accessories.

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Our website will promote the aTraction incentive program. When customers purchase cast covers from our website, they will be given an online discount code as well. This code will get them a 15% discount on their next purchase. That way, customers can make several purchases during the duration of their injury, or can share with friends and family when they are injured and are looking for ways to cover up their cast. We conservatively estimated sales and didn’t include the additional revenue from customization, which will be a large enough portion to cover the discount from our incentive program.

aTraction will also make several strategic partnerships. It will partner with medical professionals such as plastic surgeons and occupational therapists to promote the importance of keeping casts clean. From there, we will have pamphlets of information available in the office, next to the other upcoming events and brochures and customers will be directed to our websites. Surgeons and doctors dealing with bone breaks will be given approximately 20 samples to hand out at their initial meeting with clients. These samples will be an excellent way to increase sales. It just takes a few influential people to start decorating their injuries before it becomes a trend and people will think to personalize their own injuries, should they occur.

Partnering with athletic teams, such as some of the University of Saskatchewan’s Huskies is another promotions strategy. We would receive access to their logo and get customized fabric printed for all of their orders. These covers would also be available online for all Huskie fans to purchase. By tapping into this market, Huskies would be quite influential within the city of Saskatoon. Even injured players would still feel they are supporting their team and would be sporting our cast covers. For these large teams, we would offer customization for large orders, bought in bulk. For example, if the Huskie football team required 20 large arm covers and 20 large leg covers, we would offer to embroider the names and numbers on the injured player’s cover as they would like.

aTraction will also visit medical conventions and conferences in order to promote its cast covers. We would invest in a tradeshow booth and would heavily invest in Canadian conferences. For example, we would attend the Calgary Health, Fitness & Sport Expo, which usually takes place around the second week of January. This tradeshow offers a variety of health, fitness & sport related businesses and is one of the biggest exhibitions in the region for fitness and sport industry (Biz Tradeshows). Other possible tradeshows include the Edmonton or Red Deer Health & Wellness Shows. The Wellness shows attract more than 12,000 visitors every year (Biz Tradeshows).

h. PlaceFor placement we will be selling many of our products online, but it will be important for us to advertise our company in a few key areas:

Medical Clinics Pharmacies Medical supply stores Tradeshows

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Schools and Universities Sporting complexes

When looking to sell the product in a retail environment we are hopeful that we would be able to find partnerships with:

Pharma-save, Rexall Shoppers Drug Mart Wal Mart Local drug stores Medical supply stores Pharmacy locations in grocery chains ( Co-op, Safeway)

4.4 Competitive AnalysisThere are four major competitors that we have identified for aTraction. All of them are located throughout the United States, and so all of the prices that we have listed below are in U.S. dollars. Fashion for casts has the benefit of free shipping and handling, and they charge the same price for all of their sizes and styles. Cast Coverz is the most well developed competitor, with the largest product range by far. The Cast Coverz website is also very well made, and their prices are dependent on sizing and the product type. Sling Couture sells at a premium and has their items available in some retail locations, but do not offer much in the way of style options. Finally Broken Beauties offers cast covers in adult sizes as well as other accessories such as slings and crutch covers.

Though each of these competitors has a different advantage, none are currently marketing towards Canadians, and none can match the low prices that we have set, especially when you take shipping costs and the exchange rate into consideration.

Table 8

Company Reason to Shop Price Range

CastCoverz

United States

Various products to choose from, user- friendly website

Arms:$16.99 - $19.99Legs:$21.99- $29.99

16


Fashion for Casts

New Jersey

Free shipping and handling, all sizes same price

Arms:$12.95Legs:$17.95

Sling Couture

Florida

Sold at medical supply stores and pharmacies, more premium products

Arms:$19.95- $29.95

Broken Beauties

New Mexico

Only adult cast covers, more slings and crutches accessories

Arms & Legs:$26.95Slings:$24.95-26.95

4.5 Marketing Expenses

Table 9

Marketing Expenses 2011 2012 2013 2014 2015

Business Cards $300 $306 $312 $318 $325


Website 5,000 1,000 1,020 1,040 1,061

Travel 6,150 6,273 6,398 6,526 6,657

Total Operating & Marketing Costs

$14,500 $9,939 $10,128 $10,320 $10,517

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5.0 Financial Plan5.1 Capital Requirements

In order to start this venture, aTraction will require $10,500. Since we each have $5,250 to contribute to the business, we chose equity financing. Bank debt was not considered, as it would be an additional expense that we do not want to have to worry about.

Table 10

Year 2011 2012 2013 2014 2015Bank Debt 0 0 0 0 0Common Shares

$10,500 0 0 0 0

Total$10,500 0 0 0 0

5.2 Summary of Projected Income Statement For our first year of operations the net income is negative. This is due to the conservative estimates that we have made on sales both in volume and price. The net income in our financial statements is set to low prices, and does not include the income from customization.

Table 11

Year 2011 2012 2013 2014 2015

Revenues $17,000 $21,318 $24,516 $29,419 $36,774

Net Income (3,177) 2,328 3,605 6,302 10,625

End Retained Earnings $(3,177) $(849) $2,756 $9,058 $19,682

5.3 Summary of Projected Balance Sheet

Table 12

Year 2011 2012 2013 2014 2015

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Total Assets $7,323 $9,651 $13,256 $19,558 $30,182

Total Liabilities 0 0 0 0 0

Total Equity $7,323 $9,651 $13,256 $19,558 $30,182

5.4 Risk Analysisa. Critical Variables

The critical variables for aTraction are sales and selling price. If we cannot meet our sales targets then we will not be able to remain profitable. Likewise, if we cannot sell at our projected price, we would need a much greater volume of sales to reach profitability.

b. Contingency PlanIf by the end of the second year of operations we are not making a profit, the contingency plan will be to sell off any remaining stock, and then to liquidate the assets of the company. By selling the machinery, tables, computers and other equipment, along with the leftover stock, we anticipate that we would be able to recoup approximately $3,000 each of our initial investment.

5.5 Dividends PolicyAs a small home operated business with limited returns it is more feasible to pay wages to ourselves rather than paying out dividends. We also find that it is more important to keep money in the business than to pay it out to ourselves as dividends.

5.6 Economic Forecastsa. Best and worst case scenarios

Our Best Case Scenario is based on the potential for a retail partnership. If a partnership could be found we could expect to see sales and revenues increase dramatically in the first five years. We projected that the sales per year would increase up to over 50,000 total sales and $586,960 in the fifth year. This scenario shows that if a retail partnership could be made, the potential returns are much greater than with only the online sales. If this scenario were to happen it is also likely that we would be able to continue operations further into the future and that we could support ourselves solely on the income from aTraction.

Table 13 Best Case:

Year 2011 2012 2013 2014 2015

Customers per year (Arms) 1,000 2,200 5,060 12,144 30,360

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Customers per year (Legs) 500 1,467 3,373 8,096 20,240

For the Year Ended 2011 2012 2013 2014 2015

Revenues $17,000 $42,533 97,827 234,784 586,960

Cost of Goods Sold 5,677 14,425 30,540 69,005 165,758

Gross Profit $11,323 $28,109 $67,287 $165,779 $421,202

Net Income $(3,177) $15,846 $48,299 $131,363 $347,029

Present Value of the Cash Flows $186,155

Net Present Value $175,655

Internal Rate of Return 157.2%

In our worst case scenario we set our sales low enough that the net income does not become positive until the fifth year. This makes our cash flows negative as well, and the business would not be able to continue operations in this scenario without an increase in equity or debt financing. This scenario also brings our IRR down to -10.1%, and would not be feasible at all.

Table 14 Worst Case:

Year 2011 2012 2013 2014 2015

Customers per year (Arms) 500 550 633 759 1,898

Customers per year (Legs) 200 367 422 506 1,265

For the Year Ended 2011 2012 2013 2014 2015

Revenues $7,800 $10,633 $12,228 $14,674 $36,685


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Gross Profit 4,440 5,048 5,940 7,733 24,230

Net Income $(10,060) $(4,891) $(4,188) $(2,588) $13,714

Present Value of the Cash Flows $(6,415)

Net Present Value $(16,915)

Internal Rate of Return -10.1%

5.7 Ratio Analysis Table 15

Year 2011 2012 2013 2014 2015

Gross Profit Margin 67% 58% 58% 60% 63%

Net Profit Margin -19% 11% 15% 21% 29%

Return on Assets -43% 24% 27% 32% 35%

5.8 Break-Even Analysis Our break-even analysis showed that we were missing our break even sales point by 20% in the first year, which attributes to our negative net income, but that this changes by the end of the second year. Our projected sales are 14% over break-even by year two, and increase to nearly 100% above break-even by year five.

Figure 6

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1 2 3 4 5 (2,000) -

2,000 4,000 6,000 8,000

10,000 12,000 14,000

Break-Even Analysis

Break Even Base Case

Year

Net

In

com

e

6.0 SummaryaTraction is a local cast covering company that seeks to enhance its customers’ experiences as they recover from an injury. With bright colours, trendy patterns, customized embroidery and low prices, aTraction has the opportunity to capitalize on its Canadian market. A minimal initial investment and low capital costs lower the risk to start up this part-time business on the side.

Even though it requires a minimal time investment in order to achieve sales, we feel that it does not produce the significant returns on investment we had hoped for. Without a retail partnership or expansion within the third year, we would not continue. We find that our time is much more valuable than the returns we would achieve while managing full-time responsibilities throughout the week. This would be an excellent opportunity for a stay-at-home mother or daycare operator who would be searching for a supplemental income on the side.

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Appendices:Appendix 1: Future Expansion Site Plan

23


Appendix 2: Income Statement

Income StatementFor the Year Ended 2011 2012 2013 2014 2015

Revenues $17,000 $21,318 $24,516 $29,419 $36,774


Gross Profit 11,323 12,267 14,239 17,778 23,090

Gross Profit Margin 67% 58% 58% 60% 63%

Operating ExpensesLegal and Accounting 500 510 520 531 541

Repairs and Maintenance 250 255 260 265 271

Incorporation Fee 300 75 77 78 80

Manager Salary 0 0 0 0 0

Employee Training Costs 1,000 500 500 500 500

Marketing ExpensesBusiness Cards 300 306 312 318 325


Website 5,000 1,000 1,020 1,040 1,061

Travel 6,150 6,273 6,398 6,526 6,657

Total Operating & Marketing Costs

14,500 9,939 10,128 10,320 10,517

Net Income B4 Taxes (3,177) 2,328 4,111 7,457 12,573

Income Taxes 0 0 506 1,156 1,949

Net Income $(3,177) $2,328 $3,605 $6,302 $10,625

Beg RE 0 (3,177) (849) 2,756 9,058

Net Income (3,177) 2,328 3,605 6,302 10,625

Dividends 0 0 0 0 0

End RE $(3,177) $(849) $2,756 $9,058 $19,682

24


Appendix 3: Ratios

Schedule 11: Ratios 2011 2012 2013 2014 2015Gross Profit Margin 67% 58% 58% 60% 63%Net Profit Margin -19% 11% 15% 21% 29%Return on Assets -43% 24% 27% 32% 35%

25


Appendix 4: Break-Even

Break Even AnalysisYear 2011 2012 2013 2014 2015Base Case Arms

1,000 1,100

1,265

1,518

1,898

Legs 500

737

848

1,017

1,271

Net Income BE Sales Arms

$1,249 $963

$966

$972

$978

Legs 625

645

647

651

655

% Difference -20% 14% 31% 56% 94%

Total: $1,874 $1,608 $1,613 $1,623 $1,633

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Appendix 5: Investment Analysis

Schedule 12: Investment AnalysisYear 2011 2012 2013 2014 2015

Required ROE 25%

Net Cash Flows to Equity InvestmentNet Cash Flow 338 2,610 3,764 6,476 10,286Dividends 0 0 0 0 0Terminal Value 0Total Cash Flow to Equity Investors

(10,500) 338 2,610 3,764 6,476 10,286

Payback Gross 23,474 First 5 YearsNet 12,974

Present Value of the Cash Flows

9,891

Net Present Value (609)Internal Rate of Return 23.0%

Appendix 6: Base Case Financials

See Excel Spreadsheet

Appendix 7: Best Case Financials


Appendix 8: Worst Case Financials


Works Cited

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Biz Tradeshows. Medical and Pharmaceutical Tradeshows in Canada. 2010. 1 December 2010 <www.biztradeshows.com/canada/canada-tradeshows.mp>.

Health Zone. A Bad Break. 2010. 3 October 2010 <www.healthzone.ca/health/newsfeatures/article/755643--58-000-ontarians-fractured-a-limb-last-winter>.

ABC News. Rise in Broken Bones in Children. 2010. 3 October 2010 <http://abcnews.go.com/WNT/story?id=129387&page=1> - McKenzie

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