1 Section 3 Team 4 Fall 2018 Business Plan Business Name: Classy Cocktails Business Idea: Do it yourself mixed drink packages Be your own Bartender Drew Basalyga _________________________________ [email protected]Gabriella Cano _________________________________ [email protected]Isaac Gamble __________________________________ [email protected]James Lewis ___________________________________ [email protected]Connor Tarrant __________________________________ [email protected]Brena Whitten __________________________________ [email protected]Zhang Xie _____________________________________ [email protected]
Transcript
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Section 3Team 4
Fall 2018
Business PlanBusiness Name: Classy Cocktails
Business Idea: Do it yourself mixed drink packagesBe your own Bartender
Executive SummaryClassy Cocktails101 West Ohio St., Indianapolis IN, 46204Phone: (800)-877-5309E-mail: [email protected]
Management:: Executive Director: Warren BuffettWarehouse Director: Eliyahu M. GoldrattMarketing Director: Jeff Bezos
Industry: Cocktail Mixers
Number of Employees: 14(15 beginning in year 3)
Amount of Financing Sought: $600,000 for initial start-up costs.
Investment Sources:$70,000 from seven creators……… 11.67%$300,000 Bank Loan……………… 50.00%$230,000 Angel Investors…………. 38.33%
Use of Funds: Marketing, Start-up costs, warehouse machinery, building leases, initial inventory and supplies.
Product/service selling price: $59.95
Business Description: Classy Cocktails packages and sells DIY cocktail kits to allow customers an easy way to create professional cocktails from home.Products/Services: Classy Cocktails has a variety of products that give consumers the ability to be their own bartenders. We offer numerous mixed drinks that allow customers to make the drinks they want from the comfort of their own home. The average cost for each of our products is $11.08, and our sales price is $59.95. Classy Cocktails is projected to sell 18,059 units in the first year.Competitive Advantage: Classy Cocktails is not protected by any form of patent or copyright law. We simply provide customers with the ingredients to create their own cocktails, which would not be under any intellectual property. Our advantage is our high quality ingredients and our focus on classic drinks.Markets: Our market is primarily individuals aged 25-34, as well as middle-aged women with a household income of $100k or more. Since cocktails are bought by a large and diverse population, we feel that we can gain a percentage of this market. Our revenue will come from entirely web-based sales in order to stay competitive within the market.
Distribution Channels: Classy Cocktails exclusively deals in online sales. After the customer decides on a purchase, Echo (A third party delivery company) will deliver our product to the appropriate destination.
Competition: Our direct competitors are Cocktail Courier and Saloon Box, both of which sell cocktail kits with a focus on more exotic drinks and subscription sales. Our indirect competitors include Bars, pre-mixed drinks and pre made mixers sold in stores.
Elevator Pitch: Classy Cocktails is a company that ships the ingredients to make high-quality
cocktails straight to your door. The do-it-yourself kits allow individuals of any skill to create
restaurant-quality cocktails from the comfort of their own home. Classy Cocktails uses top-shelf
liquor products, as well as the highest quality juices and mixers to create the best possible cocktails
that money can buy. With the kits, anyone will be able to mix drinks with the precision of a
professional bartender within minutes.
Product/Service Description: Upon order from our website, customers will receive a box filled
with all the ingredients needed to immediately begin mixing their beverage. Each box comes
complete with perfectly proportioned ingredients so our customers will mix the perfect beverage,
every time. Along with the ingredients, boxes also come with an easy to read instruction card that
explains the history of the drink and concise instructions on how it is made. Additional tutorials will
also be available on our website. Our drink selection includes a Cosmopolitan, a Mai-Tai, a Mojito, a
Long Island Iced Tea, and a Moscow Mule. More drink options will be added as our business
expands.
Competitive Advantage: Through the use of top-shelf ingredients, such as high quality alcohol and
mixers, we set ourselves apart from our competition. Our focus on a select few classic drinks allows
our customers to easily recognize our product, offering a sense of comfort through familiar drinks.
Classy Cocktails also values the education of our customers through the recipe cards included in
each box and instructional videos that will be available online through our website. Classy Cocktails
uses the Differentiation strategy of Porter’s model, as while our product is not inherently unique, we
provide different styles of drinks than our competitors.
Value Proposition: Classy Cocktails will prove to be a valuable investment as we are able to
provide our customers with our product at a much cheaper price than any of our competitors due to
our method of shipping. Classy Cocktails has a strong connection with Echo, a private shipping
company, to ensure that our customers will get their product quickly and safely, with relatively low
cost to the consumer. We have also invested heavily into our customer support network, to ensure
4that we have constant connection with our customers so we can better evaluate their needs. Our
company will also constantly be on the lookout for feedback from previous customers, so we can
better tell what we are doing right and what needs improvement.
Business Strategy: Classy Cocktails is able to cut costs by purchasing liquor products in bulk and
re-bottling them to suit our needs in-house. This allows us to sell our boxes at a lower price, while
also increasing our margins dramatically. Outside of initial equipment costs, our yearly operating
costs are not very high. Our partnership with an independent shipping company also allows us to
ship alcohol at a much lower rate than would otherwise be possible.
Business Location: Our headquarters and warehouse will both be located in Indianapolis, Indiana.
By locating both our headquarters and our warehouse in Indianapolis, we are able to maintain better
communication between the two processes. By giving our distributions manager the opportunity to
travel to and from the warehouse in less than an hour, we are eliminating potential
miscommunication issues before they occur. Indiana is a high-manufacturing state with a low cost of
real estate and licenses. Indiana is also located in close proximity to the states that drink the most
alcohol, (Illinois, Wisconsin, Ohio) allowing our business to be close to our key demographic. Our
third party distributor Echo also has locations in neighboring states close to the border of Indiana
(Michigan, Illinois, Kentucky).
Outsourced Functions: Distribution is outsourced to a retail distributor because of the legal issues
with shipping liquor over state lines. Other companies that are in similar businesses (Cocktail
Courier, Saloon Box) also use a third-party shipping company. In order to comply with both federal
and state laws, as well as stay competitive, we will be doing the same. All other operations, excluding
shipping, will be conducted in-house at our warehouse.
5Organizational Chart
In year 1 we are projected to sell 88 boxes per day. We estimate that each Warehouse Associate should easily be able to pack one box in 6 minutes. In a 8 hour workday, each employee will be able to package 80 boxes per day with our 6 minute estimate. Even with breaks, our associates should have no issue producing the 88 boxes we need between the three of them.
This market consists of American consumers across the country ranging from the ages of 25-34. The “Party at my house” market includes the consumer that would rather stay at home and host a few friends for drinks rather than go through the trouble of getting ready to go to bars and clubs.
1st Targeted
With the rapid growth of internet use millenials will be able to easily become aware of and purchase from our business through marketing and e-commerce. Younger consumers, who when first introduced to drinking alcohol lived the “party life”, are now settled down and enjoy the personalized, controlled experience of drinking at home (Bryant, 2018). In addition, when examining cocktail consumption by age group, those aged 25-34 have a higher consumption of cocktails than other age groups (Bloom, 2018)
Corporate lives and Housewives
Women, ages 35-64 with a HH income of $100k +
9,984,849*(Claritas, 2018)
0.56%increase(Claritas, 2018)
This market consists of married women with a higher household income who would purchase our product for themselves and their significant other or their friends. Women are more likely to purchase cocktails then men, so by focusing on the female side of the market, we hope to gain a larger consumer base.
2ndTargeted
Women with a higher socioeconomic status are among one of the top demographic groups to consume alcohol (Kiely, 2018). Therefore, this is a highly lucrative market segmentation to be targeting. There have been steep declines of on-premise alcohol consumption among women and older consumers in recent decades. 55% of cocktails are consumed by women, and 43% of cocktail drinkers come from households with an income of 100k or more (Bloom, 2018). By targeting all of these factors, we can narrow down our market and have a higher chance of influencing potential buyers.
Broke College Kids
Young adults, aged 21-24
17,863,297*(Claritas, 2018)
1.48% increase (Claritas, 2018)
This market contains young individuals who are either currently enrolled in college, have recently graduated, or are college-aged. They do not have sufficient disposable income do to being unemployed or just starting a job.
0Not
targeted
The median income of this age group is $580/ week which is around $30,000/ year (United States Department of Labor, 2018). Because this demographic does not have a large income, cocktails are not their preferred alcoholic beverage. Cocktails are one of the beverages that are least likely to be viewed as affordable, and individuals aged 22-24 are more likely to choose other drinks as their alcoholic beverage of choice (Bloom, 2018).
*Calculations on Page 18
8Market Quantification
YearTot Mkt
Potential (# Customers)
Mkt Growth
ProjectionMarket Share Product Annual
Unit Sales
Unit Price or
Weighted ASP
Annual $ Revenue
Year 1 55,327,521* .43% 0.04%Cocktail boxes 18,059 $59.95 $1,082,638
Year 2 55,565,430 .43% 0.05%Cocktail boxes 27,783 $59.95 $1,665,591
Year 3 55,804,362 .43% 0.06%Cocktail boxes 33,483 $59.95 $2,007,306
Year 4 56,044,521 .43% 0.07%Cocktail boxes 39,232 $59.95 $2,351,959
Year 5 56,285,312 .43% 0.09%Cocktail boxes 50,657 $59.95 $3,036,888
* How did you determine your market potential? Our market potential is the total US population within the ages of 25-34 (45,342,672) and women ages 40-64 with a household income of $100k or more (9,984,849). We believe we have the potential to reach this market of 55,327,521 people (Claritas).We used a US Census Bureau and Claritas report to determine our market and the growth projections for our target markets. According to Bizminer the average revenue for a cocktail mixer company is around $2,000,000 so we project we will start with a lower than average revenue but continue with a .43% market growth rate (Claritas).By using the projected annual revenue gotten from the Bizminer industry report on cocktail mixers, we were able to estimate our unit sales and from then estimate the market share we expect to receive. Since our company is entering a fairly new market filled with private companies it is hard to accurately predict the market share we will obtain. The unit sales for year one represent 82% of a regular years’ sales because of the April start date. (Beverage Information Group)We used the projected annual revenue from a Bizminer industry reports which gave us an idea of our unit sales based on our price per unit.
Our differentiating factors are our focus on classic style drinks that are well-known to our market and educating our customers to become more adept at creating their own drinks. Our “classic” drinks are traditional recipes that are found to be the most popular, which are not being offered by our competitors. Four out of our five offered drinks are on the list of the 30 best-selling cocktails in the world in 2018 by Business Insider (Millington, 2018). Our positioning strategy is to avoid competition by offering a different style of drink by sticking to the more conventional recipes while still maintaining a high quality. We did this because we noticed a lack of companies positioned in this area and saw the potential to gain a larger market share.
Our strengths include our use of high quality ingredients, and our focus on classic style drinks that appeal to a large percentage of the market. Our weakness is our small range of drinks offered, and we plan to combat this by offering drinks that there is a higher demand for, until we are able to expand our selection. An opportunity Classy Cocktails can take advantage of that is currently not being implemented by any of our competitors is to also expand our product selection into cocktail merchandise. This would be a set including a shaker, bar towels, measuring cups, and cocktail glasses. A threat is as our customer base grows, they may feel the need to no longer buy our products after they learn how to make the drinks and make drinks on their own. They may also want to branch out to try different drinks, which will lead them to drink outside of the home (Bryant, 2018). To further expand our knowledge on how our customers feel about our products we plan on having them fill out surveys, giving us the opportunity to learn and grow.
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Marketing MixProduct/Service BrandingClassy Cocktails promises to help our consumers efficiently transform into their very own personal bartenders, as our brand will provide them with all the ingredients and instructions to make a variety of high-quality and delicious cocktails right to their front doors. The slogan of Classy Cocktails is "Be your own bartender", as it emphasizes the product’s "do-it-yourself" and customization characteristics. The alliteration of our slogan will also help current and potential customers recognize our brand. The logo, a simple martini glass with the brand name, shows the focus on classic style drinks that our company maintains. It is also designed to be easily read, emphasizes the double "C" of our brand name, and keeps a boxy shape that aligns with the physical features of our product. The logo is designed to look slightly more feminine with a darker magenta color to attract one of our target markets, middle-aged women, while also using a more masculine, boxy font to attract some of our younger male customers.
Retail Price: $59.95 $59.95 $59.95 $59.95 $59.95Classy Cocktails implements two psychological pricing strategies. One pricing strategy used is odd/even pricing. The retail price is $59.95, only 5 cents away from $60.00, but causes the illusion that the price is lower to increase sales. Customary pricing is also a relevant pricing strategy because Classy Cocktails is within the normal range with direct competitors like Saloon Box and Cocktail Courier. The unit variable cost is made up of the costs of all inputs per drink (including the alcohol used and mixers) and then divided by the number of units. Finally, each drink’s unit variable costs were averaged to equal $11.08 with a range of $1.63.
Distribution/Location StrategyClassy Cocktails’ sales will solely be online in order to match competitors Saloon Box and Cocktail Courier. The units of products will be picked up twice a week from the manufacturing warehouse in Indianapolis by the third party distributor called Echo. Through an agreement with Echo, they will then bring the units back to their headquarters in Chicago, where they ship the packages to the consumers. Unlike major shipping companies like FedEx and UPS, who have strict rules and regulations that limits the shipment of alcohol, Echo does not.
Promotional Strategy (in thousands of $)2019 2020 2021 2022 2023
Other Promo Exp: - - - - -Leading up to our launch we will create videos showing what are in all of our boxes and tutorials on how to make our drinks. The expense from making these videos will come out of the production expenses, including the costs of our set, video equipment, lights, and microphones. We will also be using advertising expenses to produce photo content on instagram, facebook and magazine ads during this time showing sneak-peaks. To target our younger market we will reach out to social media influencers whose demographics align with our target market and offer a promotional code for their viewers which in turn we will offer the influencer a cut of the sales soon after the launch of our product to promote awareness of our brand. This will occur right before our first launch online and during the summer and holiday seasons when the demand will be higher. This money will come out of the sales promotion expenses. In addition we will be running facebook ads to target our older audience.
# of Salespeople: 0 0 0 0 0All of our sales will be done through our website, therefore, requiring no face-to-face contact.. We have our marketing team, who focuses on online advertising through social media and influencers, to target the largest feasible portion of the online market.
Exhibit 7: Process Map
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Quality Step
What is measured? How often? How will you ensure quality?
Q1 Aesthetics: The amount of ingredients we ordered are counted and the ingredients are inspected to see if they are damaged.
Every time that we receive shipments of our ingredients, which is twice a week.
Ensure that we receive every ingredient that we ordered by counting them by throwing away damaged ingredients that we find in our shipment. This is important for our operations because if ingredients were damaged during shipping they would not maintain a sufficient level of quality for our customers.
Q2 Aesthetics: After ingredients come out of the bottling machine we check to see that the right bottle sizes were used for the ingredients
Every time that the bottles are done being filled with ingredients and are taken out of the machine.
The warehouse worker must be able to tell if the correct size bottles are used . This is a huge part of our operation because in order to make quality drinks we need the exact ingredient sizes in order for them to put together the top quality cocktails we have provided them.
Q3 Durability: Once we are about to ship our finished product, we will measure the stability of the box to ensure that the bottles in the box won’t be damaged during transportation
Every finished product will be checked before shipment.
Have trained employees who know what our standard box needs to look like in order to maintain our top quality image. They will look for any defect in our packaging and ensure bottles are safely secured in box.
Failure Point
Brief description
How will you prevent this failure? How will you recover if this failure occurs?
F1 Delay in delivery by suppliers
Contact suppliers to make sure in advance that the products are arriving on schedule. This will either ensure that we are getting them in time or we will have to prepare for a delay.
If this occurs frequently, we will try to find alternative suppliers and negotiate and communicate with customers discounts or specials. We will be willing to negotiate terms where we can find a way to receive shipments on time because it is crucial to our operation.
F2 Machine malfunction
Check the machine’s operating status daily. Ensure an adequate inventory amount to prevent shortages caused by machine malfunction and train employees how to repair the machine. One of our warehouse workers will be trained to master the machine and be able to deal with any malfunctions.
If machines malfunction and break down, we will call a licensed technician to come to our warehouse and fix the machine. If the technician or the mechanic can’t actually fix the machine then we will have to invest in new machinery and make sure we run the machine correctly.
Operations Exhibit 8: Quality AssuranceIndicate the Why is this dimension important, given your industry & target Identify the Quality
12Dimensions of Quality on which you will focus.
market? Step(s) on the Process Flowchart / Service Blueprint to which this corresponds.
Reliable Delivery Our business is based around mailing our product to customers around the country, so getting our product to the customer reliably and consistently is extremely important. Customers like fast, reliable delivery and a key to keeping the customers happy is consistently getting the finished product to them so they want to order more and have another great experience.
Ship to customers
Aesthetics It is very important for our product to both look and taste good so customers will want to buy and later repurchase our product. Getting packages is always exciting especially with our product so making sure our product arrives looking good is crucial to the experience of buying our product.
Pack boxes and quality of ingredients
Perceived Quality We want to maintain a high quality product and a good reputation so we can increase our market share through word of mouth. We use top shelf ingredients and go through multiple quality checks to ensure that our consumers are getting exactly what they ordered and nothing less.
Qualified product
Use the space below to describe any additional Proactive Quality Assurance Plans that are not connected to a specific activity on your Process Flowchart / Service Blueprint.
Before our company chooses to purchase from a supplier, our warehouse director (who will be trained to know what quality we are looking for in our ingredients) will personally test all different ingredients from suppliers for both taste and quality purposes, ensuring that only quality products will be used in the boxes.We will set up a meeting where he will be able to test the suppliers products. We will only agree to contracts with suppliers once we know that we are receiving quality ingredients. Customer satisfaction surveys will also be sent out to ensure customers are enjoying the product. Upon completion of the survey, customers will be rewarded with a small discount on their next purchase.
Describe any reactive quality assurance plans. Include a recovery plan should a customer receive poor quality goods and/or services.
Our company has two customer service representatives on payroll to resolve any potential issues with our product. If a customer is dissatisfied, the company will resolve the problem to the best of our ability, compensating the customer based on the level of severity of the problem. The two customer service representatives will be familiar with all of our products and will be able to report any issues or findings to any of our management positions in the company in order to improve our operations.
If you will utilize a quality/process improvement methodology, indicate which:☐ TQM
Note: You will not use all of them; only those with highest relevance.Provide a specific explanation of how your chosen quality methodology relates to your business and how it will be applied:
The company embodies several different characteristics of TQM. First of all the company has a major focus on customer satisfaction. We are constantly trying to find what customers want using our surveys and customer service team. We strive to continuously improve ourselves and give customers not only satisfactory products but products that are above and beyond. As we learn about our customers we can continue to create new drinks and products that our customers are demanding. The company also has implemented fail-safing techniques that will ensure that our operations and production process are done right the first time. This includes the regular machine checks and the quality checks after each and every stage from bottling to packaging to delivery.
Operations Exhibit 9A: Inventory, Suppliers and DistributionRAW MATERIAL INVENTORY & SUPPLIER SELECTION
Item(s) Supplier Name & Location (City, State, Country)
Reason for selecting this supplier
Supplier lead time (in days)
Frequency of replenishment (in days)
System of Management
Mode(s) of Transportation
Bottles BottleStore.com, 3 Milltown Ct Union, NJ
Wholesaler who can provide our needs and keep up with demand.
7-14 days 30 days Fixed Order Interval
☐ Highway
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Boxes Paper MartOrange, CA USA
Paper Mart supplies customizable boxes at a reasonable price
14-21 days 30 days Fixed Order Interval
☐ Highway
Alcohol Alabama Select Spirit,PO Box 380832Birmingham, AL
This company has all of the ingredients we need and makes it much easier to have one central supplier at a good price.
14-21 days 30 days Fixed Order Interval
☐ Highway
Juices Alabama Select Spirit,PO Box 380832Birmingham, AL
It is easy for us as manufactures making our supplier consistent to solidify relationships.
14-21 days 30 days Fixed Order Interval
☐ Highway
Packing Paper
Paper MartOrange, CA USA
Cheap decorative stuffing, secures package and shows the product better.
7-9 days Semi annually Fixed Order Interval
☐ Highway
FINISHED GOODS INVENTORYFinished goods produced
Frequency of shipping finished goods
Average level of Finished goods inventory on site
Amount of safety stock on site
At the end of Year 1 11/ hour 213/2 times per week
132 2,556 boxes
At the end of Year 2 14/ hour 267/2 times per week
168 1,806 boxes
At the end of Year 3 17 / hour 322/2 times per week
204 9,806 boxes
At the end of Year 4 20 / hour 377/ 2 times per week
240 11,806 boxes
At the end of Year 5 25 / hour 487.08/2 times per week
300 3,806 boxes
What is the lifespan of your finished goods inventory? ☐NA 1 Year
How will you manage perishability of Finished Goods Inventory? ☐NA None of our products are perishable
DISTRIBUTION If your organization does not require distribution, please check this box: ☐NAName of transportation provider/carrier
Reason(s) for selecting this provider/carrier Frequency of Pick Up / Drop off
Echo Independent shipping companies are needed to ship liquor; Echo is based within an hour of our operation
Every other day (Mo/Wed/Fri)
Exhibit 10: CapacityDemand(per hour)
Capacity(per hour)
Utilization(%)
Hours of Operation
Bottleneck name and description
How will you manage the bottleneck to ensure you can appropriately serve or supply your customers?
At the end of Year 1 11 24 45.83% 8/day Packaging our product
At the end of Year 2 14 24 58.33% 8/day Packaging our product
14At the end of Year 3 17 32 53.13% 8/day Packaging our
productHire a new worker
At the end of Year 4 20 32 62.50% 8/day Packaging our product
At the end of Year 5 25 32 78.13% 8/day Packaging our product
Show your calculations for the following parameters at the end of Year 1. Hours of operation/month
Demand/month Demand/hour
Capacity/month Capacity/hour Utilization
~146hours/month
440/month 11/ hour 2,464 16 87.88%
Describe adjustments you will make as resource requirements vary with time. Be specific regarding which key resources (beyond your bottleneck) will be adjusted, when and how. If you will make multiple
adjustments, explain each.The resources used per box will not change over time. If orders begin outpacing our supply, we will order more from our suppliers to keep up with demand. Our bottling machine produces more than enough units/hour so our bottleneck will always remain the packaging stage. To deal with the bottleneck (the packaging stage) we are going to have to use management styles other than operational styles because this ties directly to our employees effort. If employees are not able to meet their daily quota, they will be given a warning or fired if the issue persists.
Additional resources (beyond your bottleneck) must be allocated appropriately to support operations. Identify which resources have a significant impact on capacity at start up and describe why these are
appropriate amounts of resources at startup.The amount of boxes and bottles we have at startup must be enough to handle initial demand. We also need to ensure all of our supplemental materials (bottles, packaging materials, alcohol) are stocked to the point where it will not be an issue upon startup. Packaging is our bottleneck but we also must always be sure that the bottling machine is functioning properly and is checked regularly so that our operation does not get delayed.
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How will you manage seasonality? If your organization does not have seasonal demand, please check this box: ☐NA
During high demand seasons (winter holiday season) we may need to hire additional warehouse employees for part time work as needed. However, the current amount of workers should be able to handle the higher demand periods with little issue.
16Income Statement Pro Forma***Classy Cocktails will start selling their product on April 1st, 2019. Employees will be present and working a month early to settle into roles and establish one months inventory supply.***
For calculating our sales we took marketing projections from our forecast and multiplied the number of units that can be justified by our (Bisminer) source we thought we could sell by our sale price $59.95. Our price holds true for all of our years in business. To calculate our COGS we took our average cost per unit which was $11.08 (Goel-lal, G., Spirits: Market) and multiplied it by our forecasted number of units sold. Then we took our direct labor workers (Warehouse Associates) and calculated their pay, taxes, benefits, and incorporated that into COGS as well. Being such an understanding company we gave all of our employees a 2% pay increase per year to adjust for inflation. We need to take into account the effect this had on taxes as well. In year 5 we added one more Warehouse Associate in order to keep up with demand.
The starting wages can be found on our benefits chart. Wages increased for these overhead employees by 2% due to inflation. In response to this we had to adjust our taxes accordingly because of this pay increase. In addition to this according to our (NYU) source we can expect the cost of our rent to increase by 1.25%. Another notable item was an increase in 2% each year for insurance and travel expenses.
Classy Cocktails has opted to outsource the making of our website and received a quote for $5,000, this is a one time fee. Our IT employee will do updates and keep it up to date. The liquor license we need is only a one time payment in Indiana for $1,000.
Advertising expense can be calculated by taking roughly 20% of our sales revenue in hopes to grow our market share. Classy Cocktails’ marketing team has do research and projected the costs of some advertising campaign and it can be reflected in the financial statements accordingly.
Classy Cocktails has taken out a loan of $300,000 and the interest expense can be backed by the (Wall Street Journal) we can receive a loan for Prime rate (5.25)+ 2.75= 8% for 10 years. This is cause we are a start up our interest is relatively high. Classy Cocktails has a Headquarters and a Warehouse Facility. We use straight line depreciation for all Equipment/Furniture.
Credit card expense account for 47% of sales and they charge 3% afterwards this can be backed by our (Statista) source. The shipping expense is calculated by doing $2 per box.
Lastly the source of our funding comes from three different places:● $70,000 from us the creators of the business● $300,000 from the bank that will have an interest rate of 8%● $230,000 from outside angel investors (friends, family, and fools)
Depreciation Table:
17
18Balance Sheet Notes
Accounts receivable was determined by taking 3 days worth of our yearly sales because credit card companies on average take 3 days to pay companies back on average (Statista). Prepaid Rent cost $10,000 at the end of year 1 adjusting to 2% increase each year. This is because we need to have the next month already paid for prior to the start of the start of business. Raw Materials is calculated by multiplying our unit cost by the expected units to be sold in the upcoming month. Without taking this into account we would not have the supplies we would need to produce our product(Alcoholic Beverages Industry Financial Strength Information.).
Inventory can be calculated by solving for the capacity of our operations and then subtract the amount demanded. We can calculate the amount of direct labor of inventory by multiplying utilization by the dollar amount of direct labor. Inventory is calculated using the FIFO method. Inventory can be calculated by doing 5% extra overall production per year. Less Accumulated Depreciation is depicted on the chart on page 17, the reasoning it increase is because we increase the amount of shelves we need. Year 1 (2), Year 2 (2), Year 2 (7), Year (8). Accrued salaries and wages increase 2 percent every year due to inflation. This can be seen adjusted in our accrued salaries and wages, this goes hand in hand with the accrued taxes and benefits. Current maturity of LT debt this is a representation of the principal amount paid out per year. Ultimately working toward paying of that $300,000 with $30,000 payments. Accounts payable can be calculated by adding next month’s raw materials and the rent expense. This is a representation of the temporary debt that we have as an LLC.
Lastly our retained earnings can be calculated by subtracting our sales from our expenses.
Market Segment Notes
Corporate Lives and HousewivesPeople aged 45-64 with a HH income of 100k + (Claritas, 2018) 19,490,237Percentage of population 45-64 that is female x 51.23%
Total: 9,948,849Broke College Students- Directly From Claritas PopFacts Demographics Report Party at my House - Directly from U.S. Census Bureau Market Quantification Notes
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Party at my house 45,342,672Corporate Lives and Housewives + 9,948,849
Total: 55,327,521
20
Cash flow notes
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Common Stock - $300,000 in common stock was issued in year 1 to fund initial inventory
Deprecation - Calculated through the straight-line method at 5% annually for chairs, desks, and tables. Monitors and computers were fully depreciated in the first year (Chart on page 17).
Distributions- A $150,000 distribution payment was issued to investors in year 5, returning the investment of the shareholders.
Long term debt payment - $300,000 goes towards our bottling machine and equipment.
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One element that we would like to address is our return on assets and how we are steadily increasing, showing signs of more efficiency and improvement and allocation of resources. Since we are a start up some of our numbers may not be that impressive but it is expected, and the net profit margin is also steadily increasing as well. This number is very low because many companies in this industry fail due to the fact that a lot of capital is needed to be invested. Another thing that Classy Cocktails brings to the table is our ability to collect our receivables at such a fast rate because all of our sales are online.
23Bibliography
Alcoholic Beverages Industry Financial Strength Information. (n.d.). Retrieved from https://csimarket.com/Industry/industry_Financial_Strength_Ratios.php?ind=501
Beverage Information Group. (2016). Prepared cocktails consumption in the United States in 2016, by month (in 1,000 9 liter cases). In Statista - The Statistics Portal. Retrieved October 11, 2018, from https://www.statista.com/statistics/462118/us-prepared-cocktails-consumption-by-month/
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