Finance
How did you project your costs and profits?
What is the break-even point, and when is profitability expected?
Our costs were predicted by adding together all of our fixed costs which included our rent for our factory, our forklift, our saws, as well other pieces of equipment with our variable costs which included the wood used, UVC light, as well as nails, screws, etc.
Profits were predicted by taking average price minus variable costs multiplied by the expected annual unit sales. The expected annual unit sales were calculated by total market potential multiplied by market share multiplied by annual purchase frequency
Breakeven point for year 1 is 8,905
Profitibility is expected year 1
What are the key market trends, and how does the business plan to adapt to them?
Post-Covid, emphasis on cleanliness
Trend in technology/modern furniture
How do you use UPS to ship? How many days of shipping will the consumer receive the product?
Come once per day, priority shipping $60 (included in price) varies per location
Depends on their location
How you will create a motivating environment and reward your people?
We have a budget for generous bonuses, due to our small work force we are going to place an importance on work culture
Why did you pick Maine to produce in?
Our headquarters will be located in Winterport, Maine, USA, primarily due to its proximity to our main wood source, Hammond Lumber Company. This strategic location enhances our supply chain efficiency by reducing transportation distances. We obtained a quote for veneered birch plywood from Hammond during a phone call (M. Ducharme, September 18, 2023), making this location key for obtaining the most affordable costs.
Winterport’s location within 25 miles of the University of Maine offers opportunities for development, partnerships, and support from local economic activity
Pine Tree Development Zone program, which provides significant state tax incentives for up to ten years (Maine.gov, 2023).
How did you decide to price your product? Why does it fluctuate?
The price increases and fluctuates due to inflation of the market as well as our variable costs
Our price was made as all variable costs and a 30% profit margin
You say customers will get a clear sense of reliability and accountability with your product, how? What guarantees / warranties are you offering your customers?
No warranties, but our customer service representatives are understanding and more than willing to help customers. As a small business we prioritize customer loyalty so we have stellar customer service as well as 11 quality checks to ensure our product is fit to send out upon production.
UPS and Amazon have shipping insurance and will accept the liability if the package is damaged enroute.
Will your facility be able to handle the growing capacity you have?
Yes, our factory has a proper layout and an adequate amount of size to maintain the growing capacity
If growing capacity gets out of hand, we can use the retained earnings we have been saving to rent a new factory
Why did you decide to outsource your IT department? Aren’t most of your sales through your own website?
We project most of our sales to go through amazon, so most cost efficient to have an outsourced IT guy
What are the benefits of the Pine Tree Development Zone program?
It offers the chance to greatly reduce state taxes for up to ten years when they create new, quality jobs in certain business sectors, or move existing jobs in those sectors to Maine.
PTDZ companies can receive corporate tax credits, sales and use tax exemptions for both personal and real property, employee income reimbursements of 3.6%, and reduced electricity rates.
Why don’t you pay dividends?
Because we reinvest the money into our company (a.k.a money is in our retained earnings)
We let our investors know beforehand that they will not be receiving dividends, but the benefits to them as shareholders of our company are greater than dividends they could receive.
How did you determine what advertisements to use?
We used statistica to determine the most used social media websites by our target markets (Google Ads, Instagram, Facebook)
Why did you choose Hammond to be your lumber supplier?
They had a great price on the wood we needed
Outsourcing…
Know why we outsourced each product
Based on our research, it was cheaper to buy then produce
Why we got it from where
Wood: Offered veneered birch plywood, it was previously a bottleneck but since it's already veneered it saves us having to sand, paint and wait for the drying time of the wood
How it was cheaper/more efficient/ more sustainable/ faster shipping
What employees did you hire and why?
General manager to oversees hiring
Accountant to oversee our financials
Marketing managers to oversee customer service
Year 1 → 2 projections and why
We expect with our marketing campaigns that demand might increase, we plan to evaluate our hiring strategy at the end of year 1 if demand does not increase
Why do you hire a Human Resource Advisor in year 3?
To mitigate risk of employee turnover and to promote and continue a progressive and comfortable work environment
Why do you hire a Customer Service Advisor in year 4?
We want to be known for our stellar customer service as a new business in order to gain customer loyalty
Why is your technology hard to imitate?
Our product has market differentiation with the capacity of shoe storage and aestethics being our unique advantage. We are establishing ourselves as market leaders, setting new standards and gaining brand recognition. This "first-mover advantage" allows the product to capture an initial customer base and loyalty, while competitors playing catch-up may struggle to replicate its success.Our pricing is much lower compared to our competitors, and our UV-C light technology needs to ensure it is used safely.
How did you determine profit margin?
We based it off of comparable industry profit margins for furniture, which is 3-6%, so we selected 1.5 [50%].
We can also justify this based on our price point, predicted high competitive advantage due to the uniqueness of our product, our efficient management of cost and expenses.
What are your three promotional campaigns and when are you doing each of them?
Our first campaign will be a Google advertisement, which we concluded using Statistica, that this was the way we would reach the most consumers in our target market, which is people 18-34 years of age. Google advertisements cost $3.12 per 1,000 people reached. Therefore, we allocated 60% of our budget to Google ads in order to reach roughly 6,502 consumers in our market. We allocated 20% of our budget toward Instagram advertisements, because this was another form of media in which our target market largely and regularly consumes. This costs $8.96 per 1,000 people reached, allowing us to reach roughly 755 consumers through instagram. Lastly, the remaining 20% of our budget will go towards general public relations. As our company grows, we plan on adjusting our budgets to best fit our promotional needs.
Why did you choose to have 8 hour shifts and stay open 24 hours? Do you have the resources for that? Do you have the capacity/demand for that?
8 hours shifts create 40 hour weeks among employees, which mitigates the need for overtime among employees.
We decided to stay open 24 hours because it reduces our need for security around our warehouse, and also creates the greatest productivity among the factory
How did you determine how frequently you will be replenishing the supplies?
Our system of management was fixed order interval, we replenished based on when we run out of resources
We produce based on capacity not by customer orders, therefore we replenish based on when resources will run out
What have you done to mitigate safety risks?
The UV-C light will be on a timer with an automatic turn off switch for 15 minutes
We have a switch much like a fridge light that will turn off the moment the hinge opens, ensuring no UV light exposure to the outside of the home
We added a anti-tip hook
What loan are you taking out? Why did you select this one?
We are taking out a SBA loan. We selected this loan for various reasons. SBA loans offer favorable terms, such as lower interest rates and longer repayment periods, making them an attractive funding option for us due to our limited operating history. It will cover our essential expenses, purchase equipment, and help fund our initial working capital.
How will you recruit or train employees with the needed knowledge, skills, and abilities?
Computer or video based training, standardized training to a large number of people at a low cost/ orientation
How are you using Six Sigma?
Our products use the same amount of resources each product, there is no variation in the process for each product.
1. How do you increase capacity when needed?
2. While your demand is decreasing, why is your production increasing?
We have a plan to decrease the bottleneck if demand end up superseding our projections due to marketing endeavors
We will add a fan and capacity will go from 9 → 12 per hour
While we implement marketing strategies, demand is predicted to increase and we will have inventory already produced to fill the predicted demand. We have the production capacity to produce more than our demand in year 2 and 3 and will not lose money as our product is non-perishable and will be sold as demand increases
How much more useful life does this give the shoes? How much microbial growth does it prevent?
The increased useful life of shoes due to the use of UVC light primarily depends on the specific conditions and reasons for shoe disinfection. The degree of extension in useful life may vary depending on factors such as the shoe material, usage patterns, and environmental conditions. For some, the impact may be minimal, while for others, regular UVC disinfection could significantly prolong the life of their shoes by keeping them fresher, more hygienic, and in better condition. UVC (Ultraviolet-C) light is a form of ultraviolet light with a wavelength of around 200 to 280 nanometers.
It works to disinfect microbial growth in shoes by damaging the DNA and RNA of microorganisms, including bacteria, viruses, and fungi.