Cruffs Creampuffs
Business Plan 2012
Cruffs
The House of Cream Puffs
Prepared by: Kody Orr
Cruffs Creampuffs
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Table of Contents
Executive Summary....................................................................................................................................... 3
1.0
Introduction ...................................................................................................................................... 4
1.1
Mission Statement ........................................................................................................................ 4
1.2
Goals and Objectives..................................................................................................................... 4
1.3
Industry Overview ......................................................................................................................... 4
2.0
Operations Plan................................................................................................................................. 5
2.1
Organizational Structure ............................................................................................................... 5
2.2
Site and Floor Plan ........................................................................................................................ 6
2.2
Daily Operations............................................................................................................................ 9
Average Business Day ........................................................................................................................... 9
Average Business Week ...................................................................................................................... 10
Average Business Month .................................................................................................................... 10
Average Business Year ........................................................................................................................ 10
2.3
Supply Analysis ............................................................................................................................ 11
2.4
Capacity ....................................................................................................................................... 11
2.5
Cost of Sales ................................................................................................................................ 11
2.6
Capital Budget ............................................................................................................................. 12
2.7
Operational Budget ..................................................................................................................... 13
3.0
Human Resource Plan ..................................................................................................................... 14
3.1
Job Descriptions .......................................................................................................................... 14
Manager .............................................................................................................................................. 14
Full Time Employee ............................................................................................................................. 14
Part Time Employee ............................................................................................................................ 14
3.2
4.0
Training ....................................................................................................................................... 15
Marketing Plan ................................................................................................................................ 16
4.1
The Marketing Mix ...................................................................................................................... 16
Product ................................................................................................................................................ 16
Price .................................................................................................................................................... 17
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Promotion ........................................................................................................................................... 17
Place .................................................................................................................................................... 18
4.2
STP............................................................................................................................................... 19
Segmentation ...................................................................................................................................... 19
Target Market ..................................................................................................................................... 19
Positioning........................................................................................................................................... 19
4.3
Competition ................................................................................................................................ 20
4.4
Target Markets ............................................................................................................................ 21
5.0
Financial Plan .................................................................................................................................. 22
5.1
Financial Description ................................................................................................................... 22
5.2
Require Rate of Return ............................................................................................................... 22
5.3
Critical Success Variables ............................................................................................................ 22
5.4
Best and Worst Case Scenarios ................................................................................................... 23
Best ..................................................................................................................................................... 23
Worst................................................................................................................................................... 23
5.5
Sensitivity Analysis ...................................................................................................................... 24
5.6
Break Even Analysis..................................................................................................................... 24
5.7
NPV and IRR ................................................................................................................................ 25
5.8
Feasibility .................................................................................................................................... 25
5.9
Contingency Plan ........................................................................................................................ 25
6.0
Conclusion ....................................................................................................................................... 26
7.0
References ......................................................................................... Error! Bookmark not defined.
8.0
Appendices ...................................................................................................................................... 28
1.
Capital Budget ............................................................................................................................. 28
2.
Revenue Estimates ...................................................................................................................... 29
3.
Marketing Expenses .................................................................................................................... 30
4.
Retained Earnings and Dividend Schedule..................................... Error! Bookmark not defined.
5.
Break Even Analysis........................................................................ Error! Bookmark not defined.
6.
Cost of Goods Sold ...................................................................................................................... 31
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Executive Summary
Downtown business cores in cities throughout North America have become large hubs for retail
businesses as a whole but specifically small coffee shops and bakeries. Small geographic areas
polluted with working professionals and shoppers have made a recipe for success to businesses
offering food and drinks. Cruffs would like to try and take advantage of this by offering high
quality, freshly made coffee and pastries.
Currently Saskatoon does not house a specialty creampuff store. Creampuffs can be purchased
from small local bakeries as well as large grocery stores but only as a common product or
recipe. Cruffs plans to expose the market and achieve success by offering specialty individual
creampuffs as well as cakes for its customers in a friendly and efficient manner. Cruffs plans to
target local business professionals, events of all sizes, and common foot traffic in the downtown
core.
This business plan has been created to gather financing for the creation of a Cruffs store in
downtown Saskatoon. The financing will go towards capital costs, leasehold renovations, and
operating costs as well as designing and implementing a marketing campaign.
Critical success factors of Cruffs will include quantity of customers per day, growth of sales
immediately after startup, branding in the City of Saskatoon and competitive pricing.
Cruffs Creampuffs will be known as The House of Creampuffs and a local hub to purchase a high
quality, specialized product in a timely and cost effective manner.
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1.0 Introduction
1.1 Mission Statement
To offer fresh, specialty creampuffs at a competitive yet affordable price to satisfy the needs of
the greater Saskatoon area
1.2 Goals and Objectives





To gain a significant amount of awareness throughout Saskatoon of Cruffs brand and
product
To consistently offer customers a fresh and unique product
Generate a targeted (20%) return on investment
Stay environmentally friendly and offer “green” products to our customers
Continually grow our customer base until we hold a firm share of the market
1.3 Industry Overview
I have identified many opportunities within Saskatoon for a business such as Cruffs. In the most
recent census from Statistics Canada, Saskatoon’s population is estimated to be 220,035. This is
up 9.7% from the previous census. Also according to Statistics Canada, average household
income has been on the rise for many consecutive years and is currently pegged at $80,570 in
the most recent census. These positive statistics go to show that Saskatoon is growing in size as
well as income.
In recent years downtown Saskatoon has underwent many revitalization projects to attract
more people; however there is still no other business in the city that offers a product such as
specialty creampuffs. Cruffs will position itself not only in the right area of this but also in the
right market as factors such as population and income rise.
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2.0 Operations Plan
2.1 Organizational Structure
Cruffs will be solely owned by 1 person who will also manage the store. They will be in charge
of the inventory, basic accounting, and HR duties of the business. The manager will be heavily
involved with the daily operation of the store and although they are scheduled to certain
working hours they will more than likely be putting in many more unscheduled hours to ensure
a smoothly run operation. Assisting the manager will be 1 full time employee and 1 part time
employee. The full time employee will work Monday-Friday and will be in charge of all duties in
the store front and when working on duty with the manager will be given the task of cake
decorating in the kitchen. The part time employee will manage the duties involved in the store
front on an evenings and weekend basis.
Figure 1: Organizational Chart
Owner/Manager
Full Time
Employee (Cake
Decorator)
Part Time
Employee
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2.2 Site and Floor Plan
This plan ensures that an adequate space is available to rent which will be located in the heart
of downtown Saskatoon at 133 21st Street East. This location is surrounded by the downtown
business core which is home to thousands of business professionals as well as the heart of retail
shopping in Saskatoon. The store is also located half a block from Saskatoon’s largest shopping
center the Midtown Plaza. These factors will ensure that there is an adequate amount of foot
traffic travelling past our store every single day of the week. The store itself is quite small but
provides customers with a cozy environment and the open floor plan will ensure that
customers will have a fast and easy transaction which will provide minimal disturbance in their
day.
Cruffs board of directors will include 3 key components. First being an experienced accountant
to ensure that our business is efficient and on track to maximizing profits. Second being a local
food industry professional and local business owner to provide the manager with valuable
insight in managing and operating a small business. Third being a lawyer experienced in
business law who will be able to lend their services if any legal situations shall arise.
Figure 2: Site Plan
Cruffs Creampuffs
Figure 3: Building Specifications
Location:
133-21st Street East
Saskatoon, SK
Size: 548 SF
Surrounding Amenities:
Figure 4: Floor Plan
Store Front: Public Side
o
Downtown Business Core
o
Midtown Plaza
o
Heart of Retail District
o
Galaxy Movie Theaters
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Cruffs Creampuffs
Back of Store: Kitchen
8
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2.3 Daily Operations
Average Business Day
Every day, with the exception of Sunday, will begin with an employee (full time employee
during the week and manager on Saturday) arriving at the store at 7AM to begin baking and
preparing the creampuffs for the day. The baker will prepare an adequate amount of
creampuffs for the day based on common trends seen throughout each day. During the time
that the creampuffs are being baked the employee will prepare mix for the next batch of
creampuffs, prepare the freshly baked creampuffs in their proper coating and toppings, stock
the front display case with fresh creampuffs as well as prepare the filling for the creampuffs and
place it in the proper canister at the front of the store.
At 10AM the manager of the store will arrive to open up the store. This will include preparing
the till, brewing coffee, and opening the store to customers. Once the manager arrives the
baking should be done for the creampuffs which are being sold that day. At this time the full
time employee will perform cleaning duties in the kitchen from the baking activities in the
morning.
After cleanup is finished in the kitchen the full time employee will then work on any special
orders that are needed for the day. This includes Cruffs boxes and cakes. The manager will
continue to run the storefront as well as take business calls and continue to brew fresh coffee.
At 12PM the full time employee will receive an hour lunch break. During this time the manager
will continue to run the store front and take care of the lunch hour traffic.
At 1PM when the full time employee returns from lunch they will take over the operation of the
store front. At this time the manager will take care of other business duties such as stocking
inventory, taking care of HR and marketing duties, handle any problems that may have risen
throughout the business, and other miscellaneous duties that go along with the store.
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When the full time employee has put in their 8 hours for the day which should be at 4PM, they
will head home for the day and the manager will once again take over the store front duties.
After around 5PM when the foot traffic starts to slow down the Manager will begin to prepare
the store for the next day’s duties. This will include basic cleanup of the storefront and kitchen.
When the end of the day arrives at 6PM the manager will close the store to its customers and
finish off preparation for the next day’s duties. This will include cleaning out the display case,
cleaning the filling canisters and coffee machines, as well as balancing the cash in the till.
Average Business Week
Each week the manager will need to create a chart for special orders for the week. This will
mostly include of cakes for events as well as Cruffs boxes for corporate affairs. The manager will
also need to create an employee schedule 3 weeks in advance. This will give the employee and
employer a fair amount of time to account for situations which may arise that conflict the
working schedule. The manager should also view the inventory budget as well as the sales
budget each week to make sure that the business is running as efficient as possible.
Average Business Month
Each month the financial records will be sent to the accountant in order for the books to be
prepared. Monthly statements will be made in order to keep track of the company’s sales,
profits and expenses. It would be ideal to have a meeting each month as well between all
employees of the business just to discuss basic daily operations with the business and any
suggestions for improvements will be recorded and further investigated.
Average Business Year
Each year the manager will have to print the company’s fiscal year end reports. These will be
used for filing income tax. Goals and objectives will also be reviewed each year to assess the
progress as well as feasibility of each. Also it would be ideal to perform a store wide review of
any upgrades that are needed for all aspects of the business. Also a couple times a year the
manager will assess its inventory suppliers to make sure that they are receiving the most cost
efficient product available.
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2.4
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Supply Analysis
Cruffs will receive its product from local grocery stores in Saskatoon multiple times weekly.
They will not enter any binding agreements or contracts with stores due to the fact that prices
can fluctuate and they do not want to get stuck paying more with one provider when they
could go elsewhere to receive their product. The manager will perform quarterly competitor
checks with grocery stores around Saskatoon in order to maintain low costs of ingredients.
Cruffs will try to buy all their equipment locally however if the cost outweighs the benefit they
will then purchase their equipment from retailers outside of Saskatoon. Cruffs will buy
extended warranty on all of their equipment to ensure that if mishaps do occur they will not
have the burden of paying for repair fees.
2.5
Capacity
Cruffs owns 2 industrial sized ovens with 3 racks in each oven. Each rack will be able to cook 15
creampuffs which take half an hour to cook. With an employee in the store for 3 hours before
opening Cruffs would be able to produce 540 individual creampuffs for daily sales. Since this
would be much more than estimated sales, a better indicator of capacity would be how many
customers Cruffs could handle. Cruffs is open an average of 8 hours per day and an average
transaction is predicted to take 2 minutes. According to that the capacity would be 240
customers per day. If Cruffs was beginning to approach this capacity they would need to open a
second cash register to accommodate the higher customer inflow during certain times of the
day.
2.6
Cost of Sales
Creampuffs are relatively inexpensive to produce. The average creampuff sells for $1.75 but
only costs $.23 to produce. This gives us a profit margin of 87%. Wedding cakes vary in profit
margin depending on the specifics of the cake but they still stay between 80%-90%. Our coffee
we sell costs about $.033 per ounce to make but we sell it for an average of $.1065. This gives
us a profit margin of around 69% on coffee.
A detailed review of the Cost of goods sold as well as the Gross Profit Margin can be seen in
Appendix 4
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2.7
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Capital Budget
The capital budget consists of two major aspects which are equipment and leasehold
improvements.
The equipment budget includes all of the equipment which Cruffs needs to run their business.
This includes the baking equipment such as the ovens, refrigerators, dishwasher, cream
canisters, and display case. Cruffs will incur the initial cost of these in the first year and will also
purchase extended warranty on all possible equipment so that breakdown costs will not need
to be worried about.
The leasehold improvements will need to be done before the equipment is purchased and the
store is opened. These are vital costs that are needed as they provide the initial impression and
the environment that Cruffs offers to their customers. This will include the initial renovations to
the building such as plumbing, floors, paint and electrical. The leasehold improvements also
include furniture. The building will need to be supplied with a table and chairs for the few
customers who choose to sit in store as well as the counter which the orders will be placed at.
The IT systems and signs are another important improvement needed as a proper IT system will
ensure a smooth and efficient transaction for customers and the business. The new sign which
will be placed on the front of the store facing the street is essential for the success of the
business as it will create brand awareness to potential new customers.
On a side note we stated that working capital will be stated at $0. The reason for this is we will
not be accepting credit from our customers so we will have no accounts receivables. Also we
believe that since our inventory turnover will be so quick our accounts payables and inventory
will cancel each other out as we will be paying off our current debt at the same time that we
are accruing new debt. Cruffs plans to have very little cash on hand. Any cash that builds up we
plan to do 1 of 2 things with. First off if cash is building up we plan to reinvest it within the
business. Reinvesting is a great way to grow your business and provide the ultimate experience
for the customer. The second option we have is to pay out shareholders in dividends. This is
also a great option as the sole owner invests a lot of time and money into this business and
dividends is payoff when the business starts seeing success.
The total amount of the capital budget in year 1 is estimated to be $92,250
A detailed view of the capital costs can be seen in Appendix 1
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2.8
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Operational Budget
The operations budget accounts for all of the daily expenses the business should accrue. This
includes things such as accounting fees, rent, occupancy costs, inventory, insurance, utilities,
wages and benefits as well as phone and internet.
One of the expenses worth noting is the wages. The wages consists of a base $45,000 for the
manager. This is paid as a salary due to the inconsistent hours which the manager will work.
Following that is the wage paid to the full time employee which is $15/hour as well as the wage
paid to a single part time employee which is $10/hour.
Another expense is inventory. This may have to be adjusted up or down due to multiple revised
views of the budget and usage. If Cruffs is experiencing a lot of waste at the end of each day
then we will produce less and cut inventory costs however if it is noticed that we are selling out
of product before the end of the day consistently then we will have to produce more product
which will raise the inventory costs.
Maintenance costs may rise as years go by due to the fact that our extended warranty on our
equipment may be running out as different equipment will have different lengths of warranty.
The total amount for the operation budget in year 1 is estimated to be $131,66
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3.0 Human Resource Plan
3.1 Job Descriptions
Cruffs will have 3 employees hired at the store who consist of a manager, full time employee as
well as a part time employee. Their job duties will consist of the following:
Manager
 Oversee scheduling of employees
 Record daily financials, cash drops, and everyday accounting of the business
 Open and close store on a daily basis
 Bake and prepare creampuffs as well as fillings
 Stock display case with fresh stock
 Brew fresh coffee throughout the day
 Clean and maintain cleanliness through the store
 Operate front counter and take in store inquiries about cakes and Cruffs boxes
 Restock inventory
 Take care of all aspects of the marketing front for Cruffs
 Prepare product and store at the end of each day to be primed for following day
 Balance the cash till at the end of the day
Full Time Employee
 Bake and prepare creampuffs as well as fillings
 Stock the display case with fresh stock
 Brew fresh coffee throughout the day
 Clean and maintain cleanliness through the store
 Create cakes and Cruffs boxes specified as ordered
 Operate front counter and take in store inquiries about cakes and Cruffs boxes
Part Time Employee
 Ability to open and close store if needed
 Stock display case with fresh stock
 Brew fresh coffee throughout the day
 Clean and maintain cleanliness of the store
 Operate front counter and take in inquiries about cakes and Cruffs boxes
 Prepare product and store at the end of each day to be primed for following day
 Ability to balance the cash till at the end of the day if needed
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All Cruffs staff will need to hold valid food safety certification. If an employee does not hold this
certificate, Cruffs would pay for the course for the employee.
If over time the manager deems necessary, the part time employee will be trained on proper
preparation and baking of creampuffs.
3.2 Training
All training of new employees will be done during store hours during the employee’s first shifts.
The manager will train and supervise the employees during this time to ensure that proper
methods and visions are taught correctly. For full time employees they will need a minimum 24
hours of direct training. It will then be the manager’s discretion whether the employee shall
receive further training or not. For part time employees they will need a minimum 15 hours
training. Once again it will be the manager’s discretion whether the employee shall receive
further training.
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4.0 Marketing Plan
Cruffs is going to have to use their marketing resources extremely effective. As a small startup
business there is not a lot of capital to be used for marketing but at the same time marketing is
going to be the most important factor of success for our business. Cruffs need to find the
perfect mix of cost minimizing marketing that will maximize our exposure.
To review Cruffs 5 year estimates of revenue, Please view Appendix 2
4.1 The Marketing Mix
Product
Cruffs main product is creampuffs. All creampuffs will be made with the
same ingredients, fresh every morning however creampuffs will differ in
coatings as well as fillings. Cruffs will offer 2 different sizes of creampuffs
at mini and regular as well as 4 different coatings which consist of plain,
sugar coated, chocolate and white chocolate. After the coating is chosen
customers can choose their filling. Cruffs offers many different fillings
including Chantilly cream, hazelnut chocolate, strawberry, coconut,
banana, mocha, green tea, mango and lemon. Cruffs is also open to
any suggestions from customers on new coatings and fillings and will
update them as they see fit.
Aside from the individual pastries Cruffs also offers Cruffs boxes. These
consist of 12 specially prepared creampuffs made upon special order for
small gatherings. Cruffs boxes are perfect for small events and are cost
effective compared to small cakes and other similar treats.
Cakes are also a main product in which Cruffs offers. Cakes could potentially
make or break the business as they offer huge potential of profit if we can
gain a share of the market. Cruffs cakes are completely customizable as
they can be made in any different sizes, shapes, and flavors. All orders
must be placed one week in advance to ensure proper ingredients and
preparation time is aloud.
Coffee is going to be Cruffs hidden attraction. We will brew coffee fresh
throughout the day and offer this in a small and large size. Being that we
are located in the downtown business core of Saskatoon there are a lot
of business professionals who seek coffee throughout the day. By offering
this we will attract business professionals in with our coffee and turn them
into loyal customers with our creampuffs.
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Price
Cruffs will offer a mix between competitive and differentiated pricing. Since we are located
downtown where there are other bakeries Cruffs will have to stay competitive in order to gain
market share over other bakeries.
Cruffs creampuffs have 4 different scales on which they can be sold for. A mini regular
creampuff will cost $1.50, a mini coated creampuff will cost $1.75, a regular creampuff will cost
$2.00 and a regular coated creampuff will cost $2.25. With prices like these we feel that
customers will be attracted in to purchase a high quality product at a low price.
Cruffs boxes will be sold for a flat rate of $31.50. This is a specialized price as we feel that it is
such a different product than a cake and appeals to a different crowd.
Cruffs cakes are priced competitively at an average of $350 a cake. This is far less money than a
traditional custom cake. We feel that this low price will gain momentum and see increased
popularity as word gets out about not only the cost effective price but also the quality and
variety that is available. Each cake will vary in price as they will consist of different sizes,
coatings, and other customizable features as specified.
Promotion
Cruffs is looking to reach out in as many ways as possible to maximize awareness about the
business. The promotional plan consists of 3 aspects which are creating brand awareness, trade
shows, and building the image of Cruffs
To create brand awareness Cruffs plans to create a modern, and easy to view website. This will
appeal to not only customers inquiring about our Cruffs boxes and cakes but will also create
awareness to prospective customers who have never heard about the business before. Cruffs
also plans on purchasing a modern sign for the front of the building. This could be the single
most important aspect of this phase as a properly designed and placed sign could spark the
interest of many prospective customers who pass by on the street. Due to the high traffic that
the store front receives it is vital to portray the proper image to each person passing by and this
all starts with a well designed sign. Cruffs will also offer a grand opening promotion one month
after the store opens. This will consists of one free regular mini creampuff to everyone who
walks in the store. This should draw a large crowd into the store with the goal of winning them
over with our supreme product. To advertise this Cruffs will also place a newspaper ad in the
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star phoenix for 2 weeks prior to the grand opening. We feel this will reach our target audience
for this being business professionals.
We plan to also take part in many tradeshows throughout each year promoting our cakes to
customers of all kinds. 3 main tradeshows which we plan to attend are bridal spectacular,
women’s world, and the Saskatoon exhibition. Attending these trade shows will maximize our
exposure to customers seeking our services as well as create awareness to others who may not
have heard about or business yet.
Building the image of Cruffs is something that will keep us successful in the long run. This will
harness and keep our loyal customers to returning to our store on a regular basis. We plan to
do this by offering 3 promotions. First off is a stamp card. Customers may take a stamp card
and will get it stamped every time they purchase a creampuff. If a customer purchases 20
creampuffs they will be eligible for 1 free one where they can then begin a new stamp card
again. Second is a business card draw. Since we are located in the downtown business core we
plan to have a draw box where customers can insert their business card every time they visit. At
the end of each month one card will be drawn and the winner will receive one complementary
Cruffs box. Finally Cruffs hopes to build partnerships with downtown businesses. We
understand that many businesses hold meetings and conferences on a daily basis and we hope
that Cruffs can offer our services to them and provide them with coffee and pastries. This will
not only become a solid stream of income to the business but will also create even more
awareness of our services.
To view estimates of the marketing expenses, please view Appendix 3
Place
Cruffs will be located at 133 21st street east, Saskatoon SK. As discussed earlier in the
operations plan this is located in the downtown business core of Saskatoon.
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4.2 STP
Segmentation
The market will be segmented into three segments that include:

Business Professionals

Events of all styles and sizes

Foot traffic of the downtown core
These segments are based on the Saskatoon market.
Target Market
The market Cruffs will target will consist of business professionals, events in and around
Saskatoon, as well as everyday foot traffic in the downtown core. The business professionals
will be middle to high income males and females who are looking to grab a coffee for work or
to satisfy their sweet tooth on their break. Cruffs will also try to attract the hosts of events in
and around Saskatoon. This market will be crucial to the success of the business in that their
purchases usually consist of high volumes and large profit. Lastly, Cruffs will hope to attract a
large volume of foot traffic in the downtown core of Saskatoon. This will be a market that may
start of slow but as awareness builds of the business, more and more people will be stopping in
to try our products and become regular customers in the store.
Positioning
Cruffs will be positioned as an affordable, medium to high end luxury product. Cruffs will offer
specialty creampuffs and cakes at a fair price to their loyal customers. Cruffs will rely on their
variety of products as well, as they understand that every consumer has different preferences
and Cruffs would like to offer them choice when they enter our store.
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4.3 Competition
Cruffs has many indirect competitors throughout the city of Saskatoon however there are not
many direct competitors in the sense that nobody else makes specialty creampuffs in the city or
surrounding area. Cruffs closest competitor is cupcake conspiracy as they are located just a few
blocks from the planned location of Cruffs and they also offer specialty products available
directly to the consumer in the store front.
The following is a chart designed to display and compare Cruffs competitors in and around
Saskatoon:
Competitor
Image
Almost Heaven
Specializes in wedding
cakes but also prepare
cupcakes upon request.
Only available for events
Bridge City
Specializes in cakes.
Available upon order only.
Cupcakes only available in
bulk
Our closest competitor.
Wide variety of cupcakes
and cakes all of which are
specialized. Available
anytime and upon request
Similar in business model
to Cruffs. Offer a wide
variety of high quality
products in store. Also do
special events. Also offer
cookies
Offers high quality
cupcakes only. Not
available to for individual
sales but can only be
ordered upon request.
Offers basic plain
creampuffs sold for retail
Cupcake Conspiracy
Crave Cupcakes
Mini-Bites
Safeway
Location
Home based,
Saskatoon
Unavailable
Price
Cakes are very
expensive however
cupcakes are
reasonably priced.
Overall Competitive
pricing
Competitively priced
Cakes followed by
expensive cupcakes
#4-157 2nd Ave N
Just a few blocks
from Cruffs
Competitive Pricing
on all products
802 Broadway Ave
Expensive prices
however quality is
very high
Unavailable
Expensive cupcakes
however they do
reduce rates on large
orders.
Multiple locations
in Saskatoon
Cheap prices
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4.4 Target Markets
Cruffs plans to target 3 different markets to achieve maximum exposure.
The first market consists of business professionals. Downtown Saskatoon is the heart of the
business core and employs thousands of workers a day. These potential customers are on
periodic breaks throughout the day and are looking for somewhere close where they can go to
get their fix of coffee and satisfy their sweet tooth. This market is receives above average
income and also has above average disposable income making them a prime target for Cruffs
The second market Cruffs plans to exploit consists of events of all sizes and nature. During all
times of the year there are events happening such as weddings, anniversaries, birthdays,
corporate meetings, or even just friends gathering. During these events people are looking for
cost effective ways to impress their guests with food. Cruffs can satisfy their needs by offering
Cruffs boxes and cakes of all sizes and forms. This is one market in which success will depend
completely on brand image and exposure.
The third target market for Cruffs is general foot traffic in front of the store. Being located on
21st street Cruffs is in the heart of the retail district downtown as well as only a block away from
Saskatoon’s largest mall the Midtown Plaza. This combined with the employees in the business
district will ensure that there will be a large amount of traffic passing by our store each day. If
Cruffs can attract even a small fraction of that traffic into the store we are confident that a
large percentage of them will be sold on our product and become repeat customers.
Cruffs Creampuffs
22
5.0 Financial Plan
5.1 Financial Description
Cruffs will finance its capital assets with 100% equity through the owner. The capital budget
requires funds equal to $92,250 however Cruffs plans to raise slightly more than that to cover
any unforeseen needs within the first couple years. Overall Cruffs plans to raise $125,000 for
startup. This will be contributed by the owner as well as some outside investors. Since the
company is small and will not raise a lot of capital in its beginning it is preferred that the
investors stay within the owner’s family and friends as too much equity cannot be given out.
Dividends will not be paid out initially as the company will not be able to afford it. Once Cruffs
achieves retained earnings over $15,000 dividends will then begin to be paid out.
The following is a detailed chart of the retained earnings account:
Retained Earnings Account
Beg RE
Net Income
-
(26,696)
(44,481)
(33,397)
(17,932)
(26,696)
(17,785)
11,083
29,848
36,556
-
-
-
14,383
37,923
(26,696)
(44,481)
(33,397)
(17,932)
(19,299)
6,601
Dividends
15,000
End RE
5.2 Require Rate of Return
The owners of Cruffs require a 20% return on the business. Since the business is small with
medium to high risk due to the competition, it is essential that Cruffs returns 20%. In saying
this, their location brings down their risk as there is a high volume of consumers who surround
the business.
5.3 Critical Success Variables
Identified below are 2 critical success variables which could define the success or failure of the
company. These consist of customers and price of product.
Cruffs Creampuffs
23
The first variable is customers. This consists of a few different scenarios in being a) the number
of customers and b) the type of customers. The number of customers is the single most
important variable for Cruffs. If Cruffs can receive continuous customer growth upon opening
they will undoubtedly become successful and turn a profit. However if Cruffs cannot grow in
popularity and continually sees no growth in customers, than it is inevitable that they will fail.
There is one exception to this however and that lies in the type of customers which Cruffs sees
growth in. If they can become successful in their cake sales then individual creampuffs sales can
stay constant and the business will still turn a profit. This is due to the fact that Cakes offer
much more return then individual creampuffs do.
The second critical variable is the price of their products. Since Cruffs will experience fierce
competition in their early years it is important that they price their products appropriately. Too
high of a price will drive customers away without them ever knowing what the product is even
like. On the other end too low of a price will make it hard for the company to turn a profit. In
small startup businesses price is often overlooked and turns into a large factor of the success or
failure of the company.
5.4 Best and Worst Case Scenarios
Best
The best case scenario for Cruffs would be to reach their projected base case of 60 customers
per day and experience the projected growth. If this were too happen Cruffs would see a profit
after year 3 and then experience continual growth beyond that. By year 5, Cruffs would be up
to 104 customers and would bring in a net income of $36,556. At this point in time Cruffs would
not yet have enough profit to pay dividends.
Worst
The worst case scenario for Cruffs would be that they get 0 customers per day in their base
year. If this happened Cruffs would bring in no revenue and accrue losses of $129,131 in net
income for year 1. This would be due to the fixed costs accrued throughout the year. If this
happened it would undoubtedly force the business to close and lose everything that was put
into it. The only salvage available at this time would be 60% of the equipment invested in which
would amount to roughly $34,500
Cruffs Creampuffs
24
5.5 Sensitivity Analysis
The average 5 year owner’s compensation is extremely sensitive to number of customers per
day. When we deviate by 5 customers from our base case of 60 customers per day, we see our
average net income fluctuate from -5,296 to -18,180 in year one when customers per day drop
to 55. In the other direction we see our average net income fluctuate up to 6,601 if we raise the
customers per day to 65. In seeing this it is extremely important that we maintain our
projections as any loses larger than what we projected in the first 2 years would be too much
for the company to handle.
5.6 Break Even Analysis
The break even analysis looks at our net income and compares it to the amount of purchasing
customers that we have in the store each day. It is assumed that each customer will spend an
average of $5.87 per visit. This is a combination of customers making purchases of cakes as well
as individual creampuffs and coffee. In order to break even, Cruffs has to meet the following
number of customers in the 5 years:
Customers/day 76
85
84
83
82
The chart below is Cruffs base case estimate for customers per day:
Customers/day 60
75
90
99
104
3 rd
As shown above we can see that Cruffs does not break even until the
year due to the initial
business startup costs combined with the low customers per day. After this point, Cruffs
exceeds the break even each year and achieves a profit.
The following is a flow chart to show how many customers Cruffs will need to breakeven
120
100
80
# of
60
Customers
40
20
0
1
2
3
Years
4
5
Cruffs Creampuffs
25
5.7 NPV and IRR
When looking at the NPV and IRR for Cruffs it is important to note that these particular
attributes are not accurate measures of the business due to the nature of the business activities
and the low amount of capital required for startup. The NPV after year 5 for Cruffs in the base
projection is stated at $39. The IRR in the same case after year 5 is projected at 20%. These are
positive numbers as the NPV is above 0 and the IRR is what was required. After saying that
these numbers are not large by any means and other aspects such as average owner
compensation are a better measure to go by.
5.8 Feasibility
When deciding whether the business is feasible or not we need to take a look at many of the
numbers in the financial model and combine them with the risk taken to pursue this. Overall I
believe that the business is feasible however there is a large amount of risk taken if this was
pursued. There is not a lot of breathing room for the business and everything would have to run
as outlined in order for it to eventually turn a profit.
5.9 Contingency Plan
If the owners of Cruffs decide at the end of year one that Cruffs is not where they want it to be,
they may then ramp up their advertising budget. Gaining awareness is going to be the key
critical factor as to whether the business succeeds or fails. Cruffs will consider seeking a
guerrilla marketing campaign as well as a radio ad.
If at the end of year two the owners decide Cruffs is still not where they believe it should be,
they may then close the business and take their losses. The only salvage value will be the
equipment. They should be able to sell the equipment for about 50% of what it was worth new.
Other than this everything else will be considered a loss. The business itself may also owe
remaining payables to their suppliers. These will be paid before the business is shut down.
Cruffs Creampuffs
26
6.0 Conclusion
In the end I believe that Cruffs has a strong business model in place. The operations provides a
lot of potential as it is a small business with little capital needed. It does not require highly
skilled workers or a lot of training. The site plan which is established provides unlimited
opportunity for the business to grow.
The marketing plan is the single most important factor for the business. Cruffs needs to utilize
the perfect marketing model which will allow them to achieve maximum exposure at a
minimum cost. As far as the competition goes there is little to no direct competition however
there is a large amount of indirect competition within the city of Saskatoon. The market itself
provides a huge opportunity for the business to succeed as Saskatoon in particular the
downtown business core is growing rapidly and is full of opportunity.
The financials for Cruffs are going to be key as they need to find a way to keep costs to a
minimum in order to turn a profit in the first few years. If Cruffs can financially survive the first
2 years than it shows that the business will achieve success and profit.
Overall the business model does have potential to turn a profit however a lot of factors must go
the right way in order for that to happen. After reviewing the financials and discussing the
capital needed and risk involved, I believe that Cruffs business plan should be further reviewed
and not moved forward with at this time. The potential returned is too low for the risk involved
however if redone and costs can be cut it would be worth reviewing again for potential of
success.
Cruffs Creampuffs
27
7.0 Works Cited
(2011). Retrieved from Statistics Canada: http://www12.statcan.gc.ca/census-recensement/2011/dppd/prof/details/page.cfm?Lang=E&Geo1=POPC&Code1=0738&Geo2=PR&Code2=47&Data=Cou
nt&SearchText=Saskatoon&SearchType=Begins&SearchPR=01&B1=All&Custom=&TABID=1
Government Services for Entrepreneurs. (2012, 11 14). Retrieved from Canada Business Network:
http://canadabusiness.ca/eng/page/2749
Saskatoon, C. o. (2012). Obtaining a Business License. Retrieved from
http://www.saskatoon.ca/DEPARTMENTS/COMMUNITY%20SERVICES/PLANNINGDEVELOPMENT
/BUSINESSLICENSEMAPPINGANDRESEARCH/BUSINESSLICENSE/Pages/default.aspx
Cruffs Creampuffs
8.0
Appendices
1. Capital Budget
Cost
Source
Equipment
Industrial Ovens
Commercial Fridge
Refrigerator (x3)
Dishwasher
Cream Servers (x15)
Furniture
Sign
$ 14,000.00
$ 5,000.00
$ 5,000.00
$ 3,000.00
$ 3,750.00
$ 7,000.00
$ 5,000.00
IT Systems
Bakery Display Case
Total
$ 9,500.00
$ 5,000.00
$ 57,250.00
Russell Food
Russell Food
Sears
Sears
Server International
Pavar
Saskatoon Awning and
Canvas
Jay Technologies
Food Service Warehouse
Leasehold
Improvements
Renovations
$ 35,000.00
Total
$ 35,000.00
Operations Budget
Accounting and Legal
Rent/Lease
Occupancy Costs
Inventory
Insurance
License and Fees
Utilities
Repair and Maintenance
Telephone and Internet
Uniforms
Wages
Benefits
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
6,000.00
16,440.00
6,100.00
28,288.00
800.00
350.00
7,200.00
2,000.00
1,200.00
300.00
84,200.00
12,866.00
165,744.00
Multiple Saskatoon
Companies
Norris Accounting Services
Remax
Remax
Business Plan
Butler Buyers
City of Saskatoon
Sask Power, Sask Energy
Sasktel
Retail, Stitched Locally
Business Plan
Business Plan
28
Cruffs Creampuffs
29
2. Revenue Estimates
Income Statement
For the year ended
2013
2014
2015
2016
2017
126,792
162,452
199,816
225,293
242,471
21,821
27,958
34,388
38,773
41,729
Sales
COGS
Gross Profit
104,971
Profit Margin
Operating Expenses
Lease Expense
134,494
165,428
186,520
200,742
83%
83%
83%
83%
83%
16,440
16,851
17,272
17,704
18,147
7,200
7,380
7,565
7,754
7,947
84,200
96,350
98,759
101,228
103,758
12,866
14,722
15,090
15,468
15,854
2,000
2,050
2,101
2,154
2,208
2,536
3,249
3,996
4,506
4,849
6,425
11,677
9,561
7,860
6,490
-
-
-
-
-
131,667
152,279
154,345
156,672
159,254
(26,696)
(17,785)
11,083
29,848
41,488
-
-
-
-
4,932
(26,696)
(17,785)
11,083
29,848
36,556
Utilities
Wages
Employee Benefits
Repair and Maintenance
Other Variable Costs % Sales
Capital Cost Allowance
Debt Interest
Total operating Expenses
Taxable Income
7,588
Income Taxes
Net Income
6,601
Cruffs Creampuffs
30
3. Marketing Expenses
Grand Opening
Newspaper Ad
Sign
Website
Stamp Card
Business Draw
Partnerships
Bridal Spectacular
Women’s World
Saskatoon Ex
Total
Year 1
$648
$4,000
$5,000
$3,000
$2,534
$380
$0
$750
$1,250
$675
$18,237
Year 2
$0
$0
$0
$0
$3,142
$386
$0
$750
$1,280
$675
$6,233
Year 3
$0
$0
$0
$1,000
$3,750
$392
$0
$750
$1,311
$0
$7,203
Year 4
$0
$0
$0
$0
$4,562
$399
$0
$750
$1,343
$0
$7,054
Year 5
$0
$0
$0
$0
$4,684
$406
$0
$750
$1,378
$0
$7,118
Cruffs Creampuffs
31
4. Cost of Goods Sold
Gross Profit Margin
Confectionary
Groceries
Tobacco
Cost of goods Sold
Year 1
Year 2
Year 3
Year 4
Year 5
87%
86%
69%
87%
86%
69%
87%
86%
69%
87%
86%
69%
87%
86%
69%
Year 1
Year 2
Year 3
Year 4
Year 5
8,736
11,193
13,767
15,523
16,706
4,438
5,686
6,994
7,885
8,486
8,647
11,079
13,627
15,365
16,537
21,821
27,958
34,388
38,773
41,729
Confectionary
Groceries
Tobacco
Total Cost of Goods Sold
Total Cost of Goods Sold
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
Total Cost of Goods
Sold
1
2
3
Year
4
5
Cruffs Creampuffs
5. Financial Budget
Financial Projections
See Excel Spreadsheet
32