crafting cultures final business plan

OFC VENTURE CHALLENGE

2014 BUSINESS PLAN COMPETITION

Tennessee State University

Members

Xinyi Yan

Mercy Sawe

Adrian Smith

Gbemileke Ogunranti

Olukayode Oke

ADVISORS

Anis Mnif, Kenneth Kungu

ii | P a g e Crafting Cultures Inc. Confidential- March, 2014

EXECUTIVE SUMMARY

Crafting Cultures Inc. is a company that deals with the collection, global transportation and

distribution of the handicrafts from around the world with initial focus on products from Tunisia.

This includes products such as hand woven purses, textiles, olive woods, ceramic ornaments, pottery

and carpets, among others.

Our main objective is to create value-maximizing distribution channels which will provide artisans

sustainable avenues to sell their products in the global market place while providing them with

sustainable streams of income. We seek to create returns for our investors while seeking to eradicate

poverty in other parts of the world through market-based solutions.

There is a growing market for home accessory products, particularly in the high-end segment. The

global market for home accessories was estimated to be at least $100 billion in 2006. The home

accessory market is often used to estimate the demand for handcrafted goods. The American craft

market is one of the largest and most important markets for craft in the world, it imports home

accessories valued at $67 billion. Crafting Cultures Inc. will concentrate on premium handicraft

goods at the high-end segment which is a growing market in the United States. This market is

increasingly seeking a different look and labels reflecting diverse countries of origin. This market

seeks genuine and authentic handicraft products which many low-cost, large-scale mass-producers

and distributors cannot offer. Tunisian handicrafts are known to have a high demand in the USA due

to their unique look, a demand that has not yet been met. Crafting Cultures Inc. intends to provide the

market with unique and distinctive goods that have a story behind them and a distinct cultural

identity.

In doing this, we have identified our target markets as specialty shops/museum stores, discount

specialty stores, retailers, department stores, and mass merchants. Crafting Cultures Inc. will promote

its handicraft products channels including participation in international trade and gift fairs, electronic

media (a website linked with advanced search engine queries) and social media (Facebook, Twitter,

and YouTube).

In our initial operations, we will work with 20 Tunisian artisans who will be trained and contracted to

produce selected handicraft products for us. In addition, we will conduct frequent research and

development to keep us abreast of trends and constantly develop new designs and products in

collaboration with Tunisian artisans. Our Tunisia partner company will manage collection, labelling,

iii | P a g e Crafting Cultures Inc. Confidential- March, 2014

and shipping of those products to the U.S. Once in the US, clearing, warehousing, distribution and

fulfillment of products will be contracted to OHL a 3rd

party Logistics Company who have

tremendous experience handling fulfillments for major corporations.

Based on our own projections, the estimated percentage mark up for our selected products ranges

from 35% to over 100% depending on the product. We believe that we can significantly improve on

our mark ups for several reasons. Our management team is composed of dedicated and

knowledgeable professionals, several of whom have a background in Supply Chain Management, a

core component of our business. They all are dedicated to work on improving the operational

efficiency to improve bottom lines for the company and artisans. Our collaboration with contracted

artisans and our strategy to engage in market-driven product design will help ensure sustainability of

our business. Lastly, there is tremendous government regulatory support for our business, both on

the US and Tunisian grounds based on the socio-economic potential the business portends for both

regions.

Given the above, Crafting Cultures Inc. is seeking a one-time seed investment of $1.5 million in

capital investment. This investment will ensure smooth flow of operation in the first year. After the

first year of operations, Crafting Cultures Inc. will be able to expand its business, improve on sales

and distribution channels and generate more revenue. By year 2, we project that the company will

generate enough funds be able to start paying back on capital investments.

iv | P a g e Crafting Cultures Inc. Confidential- March, 2014

Table of Contents

EXECUTIVE SUMMARY .......................................................................................................................... ii

1.0 COMPANY BACKGROUND ......................................................................................................... 1

1.1 Our History ................................................................................................................................... 1

1.2 Vision Statement ........................................................................................................................... 1

1.3 Mission Statement ......................................................................................................................... 2

1.4 Our Values .................................................................................................................................... 2

1.5 Goals and Strategy ........................................................................................................................ 2

1.6 Unique Success Factor .................................................................................................................. 3

2.0 PRODUCT ........................................................................................................................................ 3

2.1 Product Categories ........................................................................................................................ 3

2.1.1 Ceramics ............................................................................................................................... 3

2.1.2 Carpets .................................................................................................................................. 3

2.1.3 Woodwork............................................................................................................................. 3

2.1.4 Mosaic ................................................................................................................................... 4

2.2 Product Design .............................................................................................................................. 4

3.0 MARKET ANALYSIS AND MARKET STRATEGY .................................................................... 4

3.1 Market Overview .......................................................................................................................... 4

3.2 Market Segment ............................................................................................................................ 5

3.3 Needs and Identification ............................................................................................................... 5

3.4 Pricing ........................................................................................................................................... 5

3.5 Market Acceptance ....................................................................................................................... 6

3.6 SWOT Analysis (see appendix II) ................................................................................................ 6

3.7 Marketing/Promotion strategy ...................................................................................................... 6

4.0 PLANNED OPERATIONS .............................................................................................................. 6

4.1 Pre-Shipping ................................................................................................................................. 6

4.1.1 Collection .............................................................................................................................. 6

4.1.2 Packaging .............................................................................................................................. 6

4.2 Shipping ........................................................................................................................................ 7

4.3 Distribution ................................................................................................................................... 7

4.4 Distribution Channels and Targeted Buyers ................................................................................. 7

4.4.1 Retail stores ........................................................................................................................... 7

4.4.2 E-commerce retailers (Internet) ............................................................................................ 7

4.4.3 Trade and Gift Fairs .............................................................................................................. 7

4.4.4 Fair Trade Buyers ................................................................................................................. 8

5.0 MANAGEMENT AND OWNERSHIP ............................................................................................ 8 5.1 Structure and Common Stock ...................................................................................................................... 8

5.2 Key Individuals ........................................................................................................................................... 8

5.3 Personnel Needs .......................................................................................................................................... 9

5.4 Board of Directors ....................................................................................................................................... 9

6.0 FINANCIAL PLAN.......................................................................................................................... 9

6.1 Start-up Cost ................................................................................................................................. 9

6.2 Adjustments in the Operating Budget ........................................................................................... 9

7.0 OFFERING ..................................................................................................................................... 10

7.1 Proposal ...................................................................................................................................... 10

7.2 Exit Strategy ............................................................................................................................... 10 APPENDIX I: Product Samples ................................................................................................................................. 11

APPENDIX II: SWOT Analysis and Organization Chart........................................................................................... 12

APPENDIX III: Operating Expenses .......................................................................................................................... 13

APPENDIX IV: Income Statement and Table 1 ......................................................................................................... 14

APPENDIX V: Cash Flow Statement ......................................................................................................................... 15

APPENDIX VI: Operations Schematic ...................................................................................................................... 16

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1.0 COMPANY BACKGROUND

1.1 Our History

Crafting Cultures Inc. is a company that deals with the collection, global transportation and

distribution of the handicrafts and allied products. Our company originated in the halls of Tennessee

State University out of conversations between five dedicated students focused on creating a successful

entrepreneurial venture while addressing social issues such as poverty alleviation and income

inequality. As social entrepreneurs, we were looking for wealth generation opportunities that also

contribute to social good. Crafting Cultures was created to exploit a tremendous revenue-generating

potential that exists in the handicraft business afforded to those who could create market solutions to

connect handicraft artisans and their products around the world with unmet demand for those products

in resource-rich global markets.

Products in the crafts sector represent over $10 billion in retail sales in the US. African goods

make up a tiny fraction of this market, even though they produce some of the most unique products

which have great demand. Most of the gift or decorative items with African motifs are actually mass-

produced in Asia. The number of direct importers of African goods is very limited. The small market

share of African goods in the crafts market is attributed generally to the logistical difficulty experienced

by artisans in meeting the demands of markets such as America.

We see tremendous opportunities for generating sustainable revenues for our company, while

promoting the dignity of artisans through fair prices and sustainable income which lift their quality of

life, while affording consumers access to tasteful handicraft gifts, accessories and home decor from

around the world. This will create value for us, customers and artisans.

Our main objective is to create value-maximizing distribution channels which will provide

artisans sustainable avenues to sell their products in the global market place while providing them with

sustainable streams of income. We seek to create returns for our investors while seeking to eradicate

poverty in other parts of the world through market-based solutions.

Crafting Cultures Inc. is seeking seed investment of 1.5 million dollars in capital investment. This

investment will ensure smooth flow of operation in year one. We project increased revenue based on

expanded and improved sales channels. By year 2, the company will generate enough funds be able to

start to payback the capital investment.

1.2 Vision Statement

Creating bridges to worlds cultures through the imagination of artisans while enhancing

livelihoods.


1.3 Mission Statement

To be an innovative leader in the distribution of craft products and improving means of livelihood

for talented low income artisans around the world by providing new market opportunity for their

products.

1.4 Our Values

Crafting Cultures Inc. is guided by several Core Organizational Values in all of our decisions.

Fair Prices, Sustainable Income and Improved Quality of Life for Artisans

Partnership and Collaboration: Our relationships with artisans, employees, customers and

shareholders are based on mutuality, respect, and compassion

Communication, Transparency and Trust: We strive for honesty and integrity in all our

interactions, and work to create and maintain trust with our stakeholders

Sustainable Development: We believe in long-term environmental, economic, and social

sustainability, and strive to practice responsible stewardship in all of our operations

Culture, Craft and Tradition: We believe that cultural continuity and pride in heritage sustains

the spirit of individuals

Quality: We strive for the highest quality possible in all of our products and services

1.5 Goals and Strategy

Crafting Cultures will be selling handicrafts products within six months of investments. Within

the first year we plan to:

Negotiate, develop and facilitate the signing of handicraft production contracts with identified

artisans in Tunisia within 2 months of funding

Negotiate, develop and facilitate the signing of contracts with an identified handicrafts logistics

company in Tunisia to collect and ship products within 2 months of funding

Negotiate, develop and facilitate the signing of contracts with a logistics company in USA for

receiving, storage and distributions in the USA within 2 months of funding

Negotiate and sign a contract for a part-time consultant to advise the company on handicraft

trends, and participate in research and development of future products

Develop, test and launch an online selling platform for retail and wholesale handicraft selling of

handicraft within six months of funding

Import one container featuring a variety of selected handicrafts every quarter, with first container

landing in the USA within six months

Participate in two Handicraft fairs in the USA within the first year


In year 2 we plan to:

Import two containers featuring a variety of selected handicrafts every quarter

Participate in three Handicraft fairs in the USA

By Year 3, Crafting Cultures Inc. expects to have created a considerable amount of market

presence and be well positioned to target multiple countries simultaneously. Our initial plans is to work

with 20 Tunisian artisans for our products supply. Our partner company will manage collection and

shipping of products to the U.S. In addition, we will conduct regular research and development to keep

abreast with trends and constantly develop new designs and products.

1.6 Unique Success Factor

A McKinsey study in 2010 showed the following unique value for Tunisian made art works:

Tunisia as a producer and exporter country promises 20-30% lower operating costs than competing

countries such as Morocco or Turkey. There is zero percent corporate tax for totally exporting

companies; 15-25% investment subsidy for projects designated as regional development areas; and

training grants of up to 50% of the training costs for artisan re-training. These are all factors in favor

of our business in Tunisia.

In the United States, the government has committed millions of dollars to support trade in Tunisia

indicating a favorable regulatory environment for companies trading with Tunisia. USAID has

undertaken several studies on the Handicraft market in Tunisia

2.0 PRODUCT

Crafting Cultures Inc. products would be collection of handicrafts from around the world with

initial focus on products from Tunisia which include hand woven purses, textiles, olive woods, Ceramic

ornaments, pottery and carpets.

2.1 Product Categories

Crafting Cultures Inc. will be focusing on the following product categories (See Appendix I):

2.1.1 Ceramics

The two main centers of ceramic in Tunisia are Nabeul on the Cap Bon peninsula and Guellala on

the islands of Jebra. Nabuel is known for its brightly colored, glazed pottery. Much of this is produced

solely for visitors and is of very good quality.

2.1.2 Carpets

Tunisian handmade carpets are highly sought-after and consist of two types: knotted and woven

varieties. The knotted variety cost more and has up to 160,000 knots per square meter.

2.1.3 Woodwork

The popular wooden items on sale in Tunisia include salad bowls and containers for salad


dressing, and wooden dolls dressed in colorful clothes. The material used in making this woodworks is

mainly olive-tree wood suitable for making bowls and oil containers.

2.1.4 Mosaic

Mosaic work in Tunisia dates back to Punic times but flourished with the Roman occupation.

This art work produced with intricate patterns using finely polished pieces of brick, glass and marble.

Mosaics arts are used in tilings for house or as walls of buildings.

2.2 Product Design

In developing designs, trend information is very important. Marketing experts advise that 10 to 20% of a

product line should be based on trends. Our consultant will advise the company on design trends which will form

the basis for training the artisans on subsequent product designs.

3.0 MARKET ANALYSIS AND MARKET STRATEGY

The Tunisian handicraft business is promising due to high demand of its products in US and globally.

3.1 Market Overview

There is a growing market for home accessory products, particularly in the high-end segment.

The global market for home accessories was estimated to be at least $100 billion in 2006 according to

the study done by US AID in 2006 titled Global Market Assessment for Handicrafts. The home

accessory market is often used to estimate the demand for handcrafted goods. The report identifies

major markets for home accessory markets including United States, Germany, France, United

Kingdom, Spain, the Netherlands, Japan, Hong Kong, among other Western European nations. The

American craft market is one of the largest and most important markets for craft in the world, it imports

home accessories valued at $67 billion. More than 127000 people are currently employed in the American art

and craft sector. Growth is expected for Western markets for these products, and demand for these

products is also expected to grow in other regions such as China and India where middle-class

populations are also expanding. This trend suggests that there are numerous and expanding

opportunities for artisans in developing countries to create products for these markets.

China and India, Vietnam along with several other Asian countries, currently dominate handicraft

production worldwide. However, Chinas dominance has been pegged on mass-produced low-cost, high

volume, Western-designed goods. According to the USAID report (2006) a China backlash trend

from both from buyers and consumers may be developing in the marketplace, as they increasingly look

for a different look and labels reflecting diverse countries of origin. Countries such as Indonesia,

Thailand, Cambodia, and Philippines offer compelling products but face challenges. Some problems

are: a limited understanding of foreign markets, changes in customer trends and styles resulting from an

insufficient capacity to conduct market research. This trend where consumers are increasingly looking


for unique products with unique designs displaying distinct identity differentiated from traditional

producer and supplier countries of craft good can be met by handcrafts from Tunisia.

Tunisian handcrafts are known to have a high demand in the USA but that demand is rarely met

due to logistical challenges and lack of a proper knowledge of the US market and its buyers,

appropriate product designs, and marketing. The value of Tunisian handicrafts exports reached 385

million dinars ($244 million) from January to June 2012, according to figures provided by the National

Crafts Board (Office National de l'Artisanat ONA). In two recent trade fairs in the US market, Tunisian

handicraft products enjoyed unprecedented sales figures indicating a great demand for the Tunisian

handicraft products. It was tremendous vote of confidence from trained shoppers of the quality and

value of those products in meeting US market demand and trends.

3.2 Market Segment

Crafting Cultures Inc. will concentrate on premium good at the high-end segment. There is a

growing market for handicraft products, particularly in the high-end segment especially in the United

States. Crafting Cultures Inc. has established supplies of products that met the international standard in

terms of the quality and the quantity of the production. The unique nature of the goods is that they are

of good quality and are originally made in Tunisia. According to USAID report in 2006, many buyers

and consumers seek unique products made in countries other than China. Our consultant will help in

market research and product development to ensure our products address the high-end segment

changing tastes and desires.

3.3 Needs and Identification

There is a market for genuine and authentic handicraft products targeted to the needs and tastes of high-

end market segment niche consumers who are not adequately served by low-cost, large-scale mass-

producers and distributors. Tunisian handcrafts are known to have a high demand in the USA due to

their unique look, but that demand is rarely met. Crafting Cultures Inc. intends to provide the market

with unique and distinctive goods that have a story behind them and a distinct cultural identity from

Tunisian Handicraft producers. This will provide access to the US market for Tunisian artisans, creating

employment in that region and thereby addressing one of our primary missions. It will also provide

customers with access to unique handicraft products.

3.4 Pricing

Crafting Cultures Inc. purchases and sells a variety of handicraft products. Each product will be

separately priced based on its cost. Our price is set based on two major factors: US handicraft market price

research and our total product cost (see table 1 in appendix IV). The percentage mark up for products ranges

from 35% to over 100% depending on the product.


3.5 Market Acceptance

The marketing efforts will mainly target the high end consumers of the products and early buyers

will include the home and interior decor, Museums hotels and restaurants the recreational centers,

libraries and the high end offices. Those who purchase the crafts could use it for personal fulfillment

gifts and souvenirs for loved ones.

3.6 SWOT Analysis (see appendix II)

3.7 Marketing/Promotion strategy

Crafting Cultures Inc. will promote its handicraft products using various methods. For instance,

participation in international trade and gift fairs such as the NY Now which is held in February and

August of every year. Also, electronic media (a website linked with advanced search engine queries)

and social media (Facebook, Twitter, and YouTube) will be utilized since, targeted direct end users are

home decor and interior design professionals that rely on constant and reliable decorations that go

according to the existing trend in the season.

4.0 PLANNED OPERATIONS

Our Operations is divided into three parts namely:

1) Pre-shipping

2) Shipping

3) Distribution

4.1 Pre-Shipping

This stage of the operation involves two major activities: crafts collection and packaging

4.1.1 Collection

We create a collection center in Tunisia which will be managed by our agent who is licensed by

the World Fair Trade Organization. This agent will be our business partner in Tunisia who liaises with

the selected artisans about necessary details (contract agreement, processing fees, delivery, returns, etc.)

and collect all merchandises for preparation for shipment. Initially 20 artisans will be contracted to

supply selected products to our collection center in Tunisia.

4.1.2 Packaging

Once all the items are delivered to the collection unit in Tunisia, the person in charge will oversee

the process of individually packing items, using standardized size boxes, and labeling boxes and case

packaging with specific labels for easy re-shipping. If the order is delivered directly to large retailers,

most of these buyers will require very specific packaging requirements which will be executed in

Tunisia. The warehouse manager in Tunisia will be in charge of providing all the shipping forms and

services. These will include custom box availability, labeling, as well as specific packaging (by sets,

individually, etc.). The labels are bar coded so as to conform to world labeling standards.


4.2 Shipping

Our operation will start by shipping of one container per quarter to designated port at the east

coast US. Our orders will be consolidated from several producers into a 20ft container. The first order

will consist of a minimum order of 2,500 hand woven purses, 1,000 units of Mosaic art, 3, 400 units of

Olive- wood products comprising of 400 large salad bowls and 3,000 kitchen utensils, 1,500 bales of

textile and 100 rugs (50 knotted rugs and 50 woven rugs).

Shipping by ocean will be our main mode of transportation. However, air freight will be used for

very limited orders and based on customers request only, when dealing with small orders of different

products/artisans and limited delivery time.

4.3 Distribution

In the United States, the clearing, warehousing, distribution and fulfillment of products will be

contracted to OHL a 3rd

party Logistics Company. We choose OHL because they have distribution

centers within the Nashville area which has 7 major highways running through it. They also have years

of experience handling importations of goods to the US and handling fulfillments for major

corporations (operations schematic See appendix VI).

4.4 Distribution Channels and Targeted Buyers

Crafting Cultures Inc. will focus on the following 4 different categories:

4.4.1 Retail stores

Retailers sell goods directly to individual end users and are subdivided into large retailers,

specialty shops/museum stores, discount specialty stores, department stores, mass merchants and chain

stores. Our initial target will be specialty shops and museum stores including museum stores, gift shops,

coffee companies, garden shops, zoos, small boutiques, home designers, home dcor stores among

others. Specialty shops in particular are interested in unique, handmade crafts and normally sell higher

priced products. We will also target department stores which carry specialty products. Once a brand

name has been established, we will target the large retailers, department stores and discount specialty

stores such as TJ Maxx, Marshalls, Home Goods among others.

4.4.2 E-commerce retailers (Internet)

Another major channel of emphasis to promote our products is on the internet through a well-

designed e-commerce website for crafting cultures Inc. Also, catalogs will be utilized together with the

online retail channel. However, product lines will change frequently on the website as buyers search the

internet for novelty gifts.

4.4.3 Trade and Gift Fairs

Participation in international trade and gift fairs is a primary sales outlet for handicraft products


for small retailers as they attract tens of thousands of prospective buyers. They allow suppliers like us

to interact with potential U.S. buyers, allow them to see and touch our products, and create new supplier

relationships especially with small buyers who may lack the resources to travel overseas to find

products. Previous participation by Tunisian handicraft producers in trade fairs resulted in return of

150% or more on total costs of participation.

4.4.4 Fair Trade Buyers

These buyers are from both larger and smaller companies and are interested in working with

artisans who respect fair trade practices. We are currently in the process of joining the World Fair Trade

Organization, as a member we will have access to the fair trade distribution network.

5.0 MANAGEMENT AND OWNERSHIP

Crafting Cultures Inc. has a passionate and dedicated management team with experience and

education in various disciplines. Until a formal Board of Directors is appointed, Crafting Cultures will

consult the TSU Director of the Small Business Development Center (SBDC).

5.1 Structure and Common Stock

Crafting Cultures Inc. will be a C Corporation with 100,000 authorized common stock shares.

Three seats out of nine in the Board of Directors will be reserved for the investors.

5.2 Key Individuals

The management team of Crafting Cultures, Inc is a major competitive advantage for the

company. Majority of our team have educational backgrounds in Supply Chain Management, a core

component of our business. Each individual has settled in a position that compliments his/ her

knowledge base, background, and personal interests. (See appendix II for organization chart).

Mr. Olukayode Oke (Chief Executive Officer) has the responsibility to facilitate the strategic

planning and goal setting for the company, and also fidelity to our core values in our operations. Mr.

Oke holds a Bachelors degree in Systems Engineering. He is currently an MBA student concentrating

in Supply Chain Management and MIS.

Mr. Adrian Smith (Chief Financial Officer) is responsible for maintaining and safeguarding the

financial health of the company including such duties as Strategic financial planning, cost management,

budgeting and forecasts, and financial reporting. He holds a Bachelors degree in Business

Administration, Accounting option. He currently is pursuing an MBA, Finance option.

Mr. Gbemileke Ogunranti (Chief Operations Officer) will be responsible for the daily operations of

the company ensuring operational efficiency in the whole value chain. Mr. Ogunranti holds and

Bachelors degree in Mechanical Engineering, Masters of Science in Industrial and Production

Engineering. He is currently an MBA student in Supply Chain Management and MIS.


Ms. Mercy Sawe (Vice President of Research and Development) is responsible for coordinating

Research & Development efforts and the development of new products to meet customer tastes and

trends in the US market. She will liaise with the Vice President for Sales and Marketing in executing

her roles. Mercy, a CPA, holds a Bachelors degree in Business Administration. She is currently

pursuing an MBA degree with a concentration in Supply Chain Management.

Ms. Xinyi Yan (Vice President of Sales and Marketing) will be responsible for developing and

sustaining our strategic marketing and sales efforts. She will be responsible for development of our

marketing strategy, our internal and external marketing initiative and materials, and market research.

She will liaise with our Vice President of Research and Development in development of new products

and new markets. Ms. Yin holds a Bachelors degree in Economics. She is currently an MBA student,

Supply Chain Management concentration.

Mr. Anis Mnif, a Tunisian national and current MBA program director at Tennessee State University,

will serve as a consultant in our initial start-up efforts. Mr. Anis is a subject matter expert in Handicraft

products from Tunisia and has participated in past efforts for creating exposure of Tunisian artisans to

the US market. He holds an MBA from Tennessee State University, and a Masters in Economic

Development from Vanderbilt University.

5.3 Personnel Needs

Crafting Cultures Inc. founding members will initially fulfil essential roles within the company.

However, as the company evolves the roles may be re-evaluated. Part-time consultants will be

contracted to offer specialty services such as legal advice and contract administration, and product

research and development. As the company evolves, full-time employees may be considered for these

roles.

5.4 Board of Directors

After receiving the initial investment funding, Crafting Cultures will form a nine member Board

of Directors. Three seats will be reserved for the investors, while others are open for management,

elected officials, and professionals with extensive business and marketing experiences.

6.0 FINANCIAL PLAN

6.1 Start-up Cost

In reference to the income statement we will need investment financing of 1.5 million to buy materials

for the second quarter of the first year (see appendix III & IV). During this second quarter of the first year

we have projected our first inflows of revenue from customer receipts (see appendix V)

6.2 Adjustments in the Operating Budget

Furniture- This item features only in year one as initial start-up cost.


Office Supplies- In 2nd

year, we propose less paper transactions resulting in 34% cost cuts.

Bank Fees- Bank Fees fluctuate throughout each year. We have a free small business account, but we

are being charged currency exchange fees. The breakdown of this fee is: 0.3% of COGS (Goods

bought from artisans in Tunisia) + 0.3% of Warehouse expense in Tunisia.

Shipping and custom clearance- Shipping and related expenses are estimated at $20,000 for the first

year, with an increase of $20,000 every year for next two years (see appendix III).

Warehouse (Tunisia and US) - Warehouse expense increase by 20% each year to account for an

increasing amount of warehouse space needed.

Products Delivery- Product delivery expense is expected by 50% for each additional container.

Booth Rental and Design (Trade Show) On average it cost about $20,000 for booth/selling space in

a trade show. It is projected to have a return of 150% or more of its cost.

7.0 OFFERING

7.1 Proposal

Crafting Culture Inc. is projecting and seeking a onetime capital investment of $1.5 million. The

venture capitalist will be given 40 percent ownership in the company as well as three of the nine

member seats on the Board of Directors. At the conclusion of 3 years, Crafting Cultures Inc. founding

members will purchase the investors shares in the company.

7.2 Exit Strategy

By the end of year three, Crafting Cultures, Inc. will have demonstrated its service capabilities as well

as the financial success of the company. It is then that the firm in collaboration with stakeholders will

discuss possible exit strategies.

1. An option would involve the acquisition and merger of Crafting Cultures by a leading or equally

successful company. The selling price will be negotiated with the stakeholders based on the following

criteria:

- Market share size and penetration

-Milestones achieved,

- Patent portfolio

2. Crafting Cultures Inc. will go public by the end of year three, through an initial public offering (IPO).

Investors would retain 40% of the firm in preferred stock. This will provide the investor with the

leverage to negotiate a stock selling price and a generous return on investment.

11 | P a g e

Crafting Cultures Inc. Confidential- March, 2014

APPENDIX I: Product Samples

WOODWORKS

CERAMICS

MOSAIC

TEXTILES

Scarves

Fouta

Bed Spreads

Curtain Throw

CARPETS

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APPENDIX II: SWOT Analysis and Organization Chart

Organizational Chart

Strengths Weaknesses

Lower price for products compared to current

or existing product prices in market

Strong relationship with private and partner

companies in Tunisia.

Product quality and its Uniqueness

Company foundation is based on tested two

years market research.

U.S. government support (Duty free)

Consumers have limited knowledge of

Tunisian handicraft products, as well as their

background stories

Limited production capacity and slow

production process

Opportunities Threats

Growing demand in US market for distinct and

unique products from different cultures

Growing demand for handmade global and

cultural goods in the US driven by growing

interest in interior decoration and greater

spending on home furnishings

Emerging markets with a growing middle-class

Trade agreements between US and Tunisia

with tax incentives (Duty Free)

Frequently changing market trends

Increased competition from producers all

over the world, particularly in China and

other emerging Asian county producers

Frequently changing market trends

Government Regulations & trade policies

Production capacity (skill and time lag) for

particular hand-made products

Board of Directors

Adrain Smith

Chief Financial Officer

Oke Olukayode

Chief Executive Officer

Leke Ogunranti

Chief Operations Officer

Xinyi Yan

VP Sales & Marketing

Mercy Sawe

VP Research & Development

Consultant

13 | P a g e


APPENDIX III: Operating Expenses

No. Budget Item Per Quarter Total cost

1

1.1 5 employees @22,000 110,000 27500 110,000

1.2

Subtotal 27500 110,000

2

2.1 Furniture 15,000 3750 15,000

Subtotal 3750 15,000

3

3.1 Local and international calls 480 120 480

3.2 Office supplies & Equipment 2,900 725 2,900

3.3 Internet fees 240 60 240

3.4 Bank fees 652.8 163.2 652.8

3.5 Office space 8820 2205 8820

Subtotal 3273.2 13092.8

4 Contractual

4.1 Consultants 20,000 5000 20,000

4.2 Shipping and custom clearance 20,000 5000 20,000

4.4 Online store platform maintenance 1,500 375 1,500

4.5 Warehouse fee (In Tunisia) 20,000 5000 20,000

4.6 Warehouse in the US 22,000 5500 22,000

4.7 Products delivery (in the US) 8,000 2000 8,000

4.8 Marketing Material Design and Printing 20,000 5000 20,000

4.9 Research & Development 20,000 5000 20,000

4.10 Booth rental and design(Trade show) 20,000 5000 20,000

Subtotal 37875 151500

5

5.1 2,500 purses $22.00 per unit 55000 220000

5.2 1,000 Mosaic boxes $20.00 per unit 20000 80000

5.3 3,400 Olive wood products

3000 utensils $9.50 per unit 28500 114000

400 large bowls $50.00 per unit 20000 80000

5.4 1,500 Textile

250 Fouta "Patridge Eye" 100x200cm $20.00 per unit 4100 16400


250 Fouta "Chaine Beige" 100x200cm $20.00 per unit 5000 20000


400 Scarfs "Zine" 70x200cm $20.00 per unit 8000 32000

100 Scarfs "Noor" 70x200cm $20.00 per unit 2000 8000

6 100 Rugs

6.1 50 Knotted rugs $40.00 per unit 2000 8000

6.2 50 Woven rugs $50.00 per unit 2500 10000

Subtotal 151600 606400

7

7.1 Travel(Local and International) 15,000 3750 15,000

Subtotal 3750 15000

Grand Total 227,748.20 910,993

Travel expenses

Year one Crafting Cultures Inc. Operating Expenses budget

Salaries (+ tax)

Equipment

Administrative costs

Cost of Goods Sold (1 Container per Quarter)


1

1.1 5 employees @22,000 110,000 27500 110,000

1.2

Subtotal 27500 110,000

2

2.1 Furniture 0 0

Subtotal

3




3.4 Bank fees 1450.8 362.7 1450.8

3.5 Office space 8820 2205 8820

3.7 Copying and postage 0 0 0

Subtotal 2997.7 11990.8

4 Contractual

4.1 Consultants 20,000 5000 20,000









Subtotal 64995 259980

5

5.1 2,500 purses $22.00 per unit 165000 660000





5.4 1,500 Textile







6 100 Rugs



Subtotal 454800 1819200

7


Subtotal 3750 15000

Grand Total 554,042.70 2,216,170.80

Travel expenses

Year two Crafting Cultures Inc. Operating Expenses budget

Salaries (+ tax)

Equipment


Cost of Goods Sold


1

1.1 5 employees @22,000 110,000 27500 110,000

1.2

Subtotal 27500 110,000

2

2.1 Furniture 0 0

Subtotal 0 0

3




3.4 Bank fees 981.6 245.4 981.6

3.5 Office space 8820 2205 8820

3.7 Copying and postage 0 0 0

Subtotal 2880.4 11521.6

4 Contractual

4.1 Consultants 20,000 5000 20,000









Subtotal 50975 203900

5

5.1 2,500 purses $22.00 per unit 110000 440000





5.4 1,500 Textile







6 100 Rugs



Subtotal 303200 1212800

7


Subtotal 3750 15000

Grand Total 388,305.40 1,553,221.60

Travel expenses

Year two Crafting Cultures Inc. Operating Expenses budget

Salaries (+ tax)

Equipment


Cost of Goods Sold

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APPENDIX IV: Income Statement and Table 1

Table 1: Sales Revenue Breakdown per Container

2,500 purses @ $50.00 per unit 1,500 Textile

1,000 Mosaic boxes @ $40.00 per unit 250 Fouta "Patridge Eye" 100x200cm @$50.00 per unit

3,400 Olive wood products 250 Fouta "Patridge Eye" 50x80cm @$22.50 per unit

3000 utensils @$20.00 per unit 250 Fouta "Chaine Beige" 100x200cm @$50.00 per unit

400 large bowls @ $85.00 per unit 250 Fouta "Chaine Beige" 50x80cm @ $22.50 per unit

100 Rugs 400 Scarfs "Zine" 70x200cm @$50.00 per unit

50 Knotted rugs @ $200 per unit 100 Scarfs "Noor" 70x200cm @ $50.00 per unit

50 Woven rugs @$500 per unit

Year 3 Total Quarter 4 Quarter 3 Quarter 2 Quarter 1 Year 2 total Quarter 4 Quarter 3 Quarter 2 Quarter 1 Year 1 Quarter 4 Quarter 3 Quarter 2 Quarter 1

Sales & Investment

(first Quarter) 4,263,000.00$ 1,065,750 1,065,750 1,065,750 1,065,750 2,842,000.00$ 710,500 710,500 710,500 710,500 2,065,750.00$ 355,250.00$ 355,250.00$ 355,250.00$ 1000000

Trade Show Revenue 150,000.00$ 50,000 50,000 50,000 100,000.00$ 50,000 50,000 50,000.00$ 50,000.00$

Total Revenue 4,413,000.00$ 1,065,750.00$ 1,115,750.00$ 1,115,750.00$ 1,115,750.00$ 2,942,000.00$ 710,500.00$ 760,500.00$ 710,500.00$ 760,500.00$ 2,115,750.00$ 355,250.00$ 355,250.00$ 405,250.00$ 1000000

Cost of Goods Sold 1,819,200.00$ 454,800 454,800 454,800 454,800 1,212,800.00$ 303,200 303,200 303,200 303,200 606,400.00$ 151,600.00 151,600.00 151,600.00 151,600.00

Gross Profit 2,593,800.00$ 610,950.00$ 660,950.00$ 660,950.00$ 660,950.00$ 1,729,200.00$ 407,300.00$ 457,300.00$ 407,300.00$ 457,300.00$ 1,509,350.00$ 203,650.00$ 203,650.00$ 253,650.00$ 848,400

Selling / Contractual /

Administrative

Expense 396,970.80$ 99,242.70 99,242.70 99,242.70 99,242.70 340,421.60$ 85,105.40 85,105.40 85,105.40 85,105.40 304,592.80$ 76148.2 76148.2 76148.2 76148.2

Net Operating Income 2,196,829.20$ 511,707 561,707 561,707 561,707 1,388,778.40$ 322,195 372,195 322,195 372,195 1,204,757.20$ 127,502 127,502 177,502 772,252

Other Non-Operating

Expense (Income) -$

Earnings Before Taxes 2,196,829.20$ 511,707 561,707 561,707 561,707 1,388,778.40$ 322,195 372,195 322,195 372,195 1,204,757.20$ 127,502 127,502 177,502 772,252

Income Taxes 439,365.84$ 102,341 112,341 112,341 112,341 277,755.68$ 64,439 74,439 64,439 74,439 240,951.44$ 25,500 25,500 35,500 154,450

Income Before

Extraordinary Items 1,757,463.36$

409,366 449,366 449,366 449,366

1,111,022.72$

257,756 297,756 257,756 297,756

963,805.76$

102,001 102,001 142,001 617,801

Total Extraordinary

Items -$

Net Income 1,757,463.36$ 409,366 449,366 449,366 449,366 1,111,022.72$ 257,756 297,756 257,756 297,756 963,805.76$ 102,001 102,001 142,001 617,801

Crafting Cultures Inc. Pro Forma Income Statement

15 | P a g e


APPENDIX V: Cash Flow Statement

-20,000

-266,970.80-110,000

-439,365.843,576,663

0

00

4,332,291.48

4,332,291.48

Cash receipts from

Year 3

Crafting Cultures Inc.

Cash Flow Statement

Cash at beginning of Year $ 2,574,828.48

OperationsCash receipt from customers 4,413,000Cash paid for

Research and DevelopmentGeneral operating and

administrative expensesWage expenses

Net cash Flow from Investing -1,819,200

Income TaxesNet Cash Flow from Operations

Investing ActivitiesCash paid for

Purchase of materials and

equipment -1,819,200

Net increase in Cash

Cash at End of year

Financing Activities

Net Cash Flow from Financing Activities

-20,000

-159,592.80-110,000

-240,951.44585,205.76

0

Cash receipts from1,500,000

1,463,805.761,463,805.76

General operating and administrative

expenses

Year1

Crafting Cultures Inc.Cash Flow Statement

Cash at beginning of Year


Research and Development

Wage expensesInterestIncome Taxes

Net Cash Flow from Operations


Purchase of materials and equipment -621,400

1,500,000

Net cash Flow from Investing Activities -621,400


Net increase in CashCash at End of year

Venture Funding


-20,000

-210,421.60-110,000

-277,755.682,323,822.72

00

0

2,574,828.48

2,574,828.48

Year 2

Crafting Cultures Inc.

Cash Flow Statement

Cash at beginning of Year $ 1,463,805.76


Research and DevelopmentGeneral operating and administrative

expensesWage expenses

Net cash Flow from Investing -1,212,800

Income TaxesNet Cash Flow from Operations


Purchase of materials and equipment -1,212,800

Net increase in Cash

Cash at End of year



16 | P a g e


APPENDIX VI: Operations Schematic

Product and Information Flow