A Business Proposal by: Alina Ding Joanna Gou Annabella Seto Gwen Yip Presented on: July 3, 2009 1.0 Executive Summary Wishing Stone Photography is a new business, with its own photography studios and photography staff. With studios located in Richmond, BC, and photographers available on location, Wishing Stone offers high quality photography services for children, families, engaged couples, and anyone else celebrating special occasions. Our mission is to capture the details for clients while they enjoy those special moments in their lives. Wishing Stone separates itself from competitors by offering themed pictures which cater to Chinese and South Asian weddings. This is a unique service, which allows for couples of different nationalities to experience weddings of different cultural backgrounds without having to leave the country. The company offers its services mainly to the middle class families with income in the range of $100,000 to $150,000. Wishing Stone will be managed by an experienced operations manager who has a background in photography. This individual is essential to the success of the business and a rigorous search will be conducted to find the right fit for our company. A receptionist will be the first point of contact for clients. The receptionist must be well-organized, friendly and have some photography background. The projections in this business plan indicate that with an initial equity investment of $200,000, investors will earn a return of approximately 33%. Dividends will be paid beginning in the fifth year of operation. The critical variable in this business is sales and our focus will be to increase sales through our marketing strategies and client retention. The initial outlay for marketing is significantly higher in the first year of operations due to the need for increased exposure and the development of a website. However, in later years, the marketing expense is expected to drop drastically and then stabilize. Furthermore, revenue is expected to grow at 15% per year, while capital expenditures increase by 5% per year. ii Table of Contents 1.0 Executive Summary.......................................................................................................................... ii 2.0 Introduction ..................................................................................................................................... 1 2.1 Our Vision .................................................................................................................................... 1 2.2 Our Mission ................................................................................................................................. 1 2.3 Goals and Objectives ................................................................................................................... 1 3.0 Industry Overview ............................................................................................................................ 2 3.1 Key Success Factors ..................................................................................................................... 2 3.2 Future Challenges and Opportunities ......................................................................................... 2 3.3 Business Model ............................................................................................................................ 3 3.4 Target Market .............................................................................................................................. 3 4.0 The Marketing Plan ....................................................................... 4 4.1 Business Analysis ......................................................................................................................... 4 4.2 Pricing .......................................................................................................................................... 5 4.3 Promotion .................................................................................................................................... 5 4.4 Place ............................................................................................................................................ 5 4.5 Strengths and Weaknesses.......................................................................................................... 5 4.6 Projection of Revenue and Marketing Expenses ......................................................................... 6 5.0 The Operations Plan ...................................................................... 7 5.1 Company Ownership ................................................................................................................... 7 5.2 Location ....................................................................................................................................... 7 5.3 Operations ................................................................................................................................... 7 5.4 Supply/Cost of sales Analysis....................................................................................................... 9 5.5 Cost of Sales and Operating Expenses......................................................................................... 9 5.6 Working Capital Plan ................................................................................................................... 9 5.7 Capital Budget ............................................................................................................................. 9 5.8 Cash Conversion Cycle ............................................................................................................... 10 6.0 Human Resources Plan ...................................................................................... 11 6.1 The Business .............................................................................................................................. 11 6.2 Operations Manager.................................................................................................................. 11 6.3 Receptionist ............................................................................................................................... 13 iii 6.4 Photographers ........................................................................................................................... 13 6.5 Set Designer ............................................................................................................................... 14 6.6 Make-up Artist ........................................................................................................................... 14 6.7 Projected Human Resource Costs ............................................................................................. 15 7.0 7.1 8.0 The Financial Plan ......................................................................................... 16 Risk Analysis............................................................................................................................... 16 Conclusion ...................................................................................................................................... 17 Appendix I – Wishing Stone Photography Floor Plan ................................................................................. 19 Appendix II - Statistics Canada Demographic Information ......................................................................... 21 iv 2.0 Introduction Photographs play an important role in our lives as they capture significant events. Moreover, they allow us to share our experiences with others and to treasure those feelings that the photographs evoke. This has inspired the idea for Wishing Stone Photography, a photography studio located in Richmond, BC, that provides photography services for people in all of the special moments in their lives. This is a comprehensive business plan that outlines the vision, mission, and goals of the company, as well as the marking, operating, human resources, and financial plans. We have secured debt financing, and have received $100,000 of equity financing from investors Alina Ding, Joanna Gou, Annabella Seto, and Gwen Yip. We require an additional $100,000 of equity financing to start the business. 2.1 Our Vision At Wishing Stone Photography, we want to take a part of our clients’ lives, and allow them to capture the important moments for all time, through high quality, and creative photographs and portraits. 2.2 Our Mission Let us focus on the details, while you enjoy the moment. 2.3 Goals and Objectives Our short-term goal (1-2 years) is to break-even on a cash flow basis and to make profits thereafter. Over the long-term, we expect to: Provide quality pictures for our clients while they enjoy their special moments. Establish relationships with our clients and retain those relationships throughout their lives by offering photography services for children and families. Be well-known throughout the Lower Mainland of British Columbia for our specially-designed outdoor studio. To pay cash dividends within the first five years of operation. 1 3.0 Industry Overview The industry has undergone significant changes over time, from using negative plates for developing pictures to digital pictures, and the simplicity in developing and taking pictures has allowed many to enter the photography industry. Today, people can get their pictures taken at places such as Walmart, Zellers, or other photo studios, where the quality and price of the pictures can differ significantly. Walmart and Zellers are considered to be at the lower end of the spectrum with limited design options and normally cost about $100 for 20 portraits, whereas high end photo studios can cost up to thousands of dollars per package. There are very few photo studios that provide a middle ground that focuses on providing quality at an affordable price. 3.1 Key Success Factors Photography is considered as a service business and there are two important key success factors for this industry: 1. Quality of Service – Photography is about providing the image/picture by communicating with the clients. It is important to be able to build relationships and understand customer needs while building a professional and creative atmosphere. 2. Quality of Pictures – Clients rely on photographers to provide them with creative suggestions and ideas. Therefore, in order to produce the “end product” that meets clients’ needs, communication is crucial. 3.2 Future Challenges and Opportunities Photography is considered as a luxury item and therefore, economic conditions will have a great impact on its performance. Substitutes for studio quality pictures are to take pictures personally or visit a photo studio at a department store. With an increase in the immigrant population, there is a market to tailor the photo design to the specific ethnic groups. In 2006 Statistics Canada Census, within the minority groups in BC, the Chinese population earns the highest income followed by South Asians. Therefore, there is an opportunity to tailor the studio design to these populations. 2 3.3 Business Model With our indoor and outdoor studios, we can provide options and quality that clients demand while maintaining reasonable pricing. Our business provides both an end product to the clients in the form of pictures and a service component by creating ideas and experience for our clients. Wishing Stone specializes in providing services in the following areas: 3.4 Babies and children Graduations Weddings Families Chinese and South Asian events Target Market Our strategy is to attract clients early on by focusing our services on children and family portraits. By bringing them in early, we intend to build brand loyalty and customer relationships. Our mission statement is “Let us focus on the details while you enjoy the moment” and our tag line is “There for each moment of your life.” The mission statement emphasizes the importance of being detail-oriented and our focus on serving people of all ages. Our target market resides in the Greater Vancouver area, which has a very diverse population. According to the 2006 statistics Canada Census, 50% of people living in Vancouver are legally married and these are our targets for children and family portraits. Moreover, 30% are not married, which includes children and people that are never legally married and they are our target group for the children, graduation, and wedding pictures. 3 4.0 The Marketing Plan 1 The marketing plan discusses the product and services, pricing, and promotion for the business. 4.1 Business Analysis Our business has five business segments: Chinese and South Asian events We want to celebrate the diverse nature of residents of the Lower Mainland, by recognizing different cultural traditions through our photography. The Chinese and South Asian cultures value wedding portraits of the bride and groom in numerous poses and elaborate costumes, against various backdrops. Children’s Pictures Portraits for children target babies to children under 12 years of age. With our props and outdoor studio, we can also capture children at play. Parents and children may select different theme packages or create their own individual unique portfolios. Some of the theme packages are fruit, fairies, and holidays. Our theme selection also includes clothing for different minority groups with a main focus on the Chinese and South Asian market. Graduations We have gowns for graduations from high school, as well as universities. We also have photographers that are available to attend graduation ceremonies. Wedding Pictures Wedding packages are available through a combination of our indoor themed weddings as well as outdoor garden views. On-site photographers are also available to capture that special day in your life. Family Portraits Our two indoor studios can accommodate up to approximately 30-50 members for family pictures. 1 Image. Retrieved June 28, 2009 from http://www.facebook.com/album.php?aid=64901&id=576615978&op=30#/photo.php?pid=1572927&id=57661597 4 4.2 Pricing Wishing Stone will charge two types of fees: sitting fees and portrait fees. The sitting fee will be charged for setting up the studio and taking the pictures, which includes the number of frames. Additionally, for certain packages, make-up and clothing will be included in the sitting fee. The sitting fee will range from $50 to $100, with an addition $50 for additional photographs taken outside. The portrait fee will be charged for the end product, depending on the number and sizes of photos purchased. Portfolio packages will range from $1,000 to $3,000, with individual pictures ranging from $50 to $100. A digital copy of the pictures will cost $150. 4.3 Promotion Extensive promotion is needed at the initial stage of operation to promote awareness of our business. Our company will set up a website with our portfolio and pricing packages listed. Also, pictures of our outdoor studio will be presented. The main focus of our website will be to promote the outdoor studio. We will also advertise using brochures at wedding chapels for wedding pictures, hospitals for baby and family pictures, and in school newsletters for graduation pictures. To attract and expand our customer base, we will provide discounts for first time clients. In the long term, less advertising will be needed and the main source of promotion will be through word-of-mouth referrals. 4.4 Place Wishing Stone Photography will be situated in the Steveston area of Richmond, British Columbia. This location allows us to have an outdoor studio at a relatively fair price and is in close proximity to the metropolitan area for client convenience. With our theme packages that are designed for Canadians as well as minorities, which focus on the Chinese and South Asian market, locating the business in Richmond allows us to be in closer contact with our target market. 4.5 Strengths and Weaknesses Our competitive advantage resides with our variety of props as well as the outdoor studio. We offer a range of services to meet our clients’ needs. With our variety of props the clients have a wide selection 5 of clothing and theme packages that our clients can choose from. Some of the theme packages are specifically designed to target minorities, such as the Chinese and South Asian communities since they have the highest income level on average. The outdoor studio also allows clients to incorporate nature views into their pictures without the cost of traveling to different locations. However, this outdoor studio also has the disadvantage of limiting the clients’ choices to what we have in the studio. To accommodate those that want personalized pictures, we have photographers that can be in attendance at events to take pictures. 4.6 Projection of Revenue and Marketing Expenses As there will be growth in our capital assets such as the addition of props, our revenue will also grow along with additional purchases. However, revenue is expected to grow faster than capital purchases, as props can be reused. For every 1% growth in capital assets, our revenue is expected to grow by approximately 3 times. With 5% annual growth in capital expenditures, the revenue growth is expected to be 15%. Marketing expenses do not fluctuate significantly with the change in revenue since these are mainly upfront expenditures. The website maintenance cost would be higher initially since information regarding promotions and portfolios need to be updated. However, as our business becomes more established, minimal website maintenance will be needed and the cost levels off, to approximately $2,000 per year which consists mainly of the costs for the website server and promotional updates. Due to the long-term goal of relying on word of mouth for business promotion, the marketing expense in the future is minimal. The initial decrease in market expense is approximately 75% since extensive marketing is needed at the initial stage. During later periods, the annual decrease in marketing expense will be approximately 30% per year. Project revenue ($) Projected marking expenses ($) Year 1 Year 2 Year 3 Year 4 Year 5 379,200 449,162 532,033 630,193 746,464 26,000 8,000 5,500 4,450 3,715 6 5.0 5.1 The Operations Plan 2 Company Ownership The business will be run as a corporation to limit liabilities and ease transfer of ownership. Creators Alina Ding, Joanna Gou, Annabella Seto, and Gwen Yip will each contribute $25,000 to obtain equal ownership. Losses incurred in the early years are expected to be used up quickly in years of profit. 5.2 Location The Steveston area has been chosen as it is a middle- to upper-middle class neighbourhood, which falls into the niche of our target market. Business will take place in a bungalow home that is zoned for commercial use. Please see Appendix 1 for the main floor and basement floor plan. 5.3 Operations The studio will be open from Thursday to Sunday from 10 am to 5 pm and by appointment to accommodate special requests such as an evening photo shoots at our outdoor studio. The operating manager, two photographers, and a receptionist will work in the office on a day-to-day basis. Rooms are placed with consideration to a regular house floor plan. When clients arrive to the house, they enter the building through the front entrance. Upon entering the house, they are greeted by the receptionist and introduced to Wishing Stone’s gallery of photos, which are displayed all around the foyer. The receptionist determines what type of services the client wants by asking a series of questions. An appointment will be made with the operations manager for a later date if a custom package is required. Otherwise, the receptionist will book an appointment for the client with one of the photographers on staff. If the two photographers on staff are fully booked, the receptionist will record the date and time that the client requests and contact a contract photographer on the company contractor list to book an appointment. All appointments are entered and stored in a data base on the receptionist’s computer. Also, upon booking of an appointment, a sitting fee is collected from the client. The receptionist 2 Image. Retrieved June 28, 2009 from http://www.caribbeanhi.com/weddings/images/stories/wedding_gazebo.jpg 7 contacts the clients one week before the scheduled appointment to confirm the day and time to avoid missed appointments. The two photographers and operations manager check their appointments on a daily basis. If an appointment is required with the operations manager, then the client will have a meeting in the office or consultation area on the main floor, in the NE corner of the house. The operations manager will determine the pricing for the client and fill out a pricing form, which is directed to the receptionist. The receptionist then enters the pricing information and books an appointment for the client on the computer. If the client chooses to have a photo shoot at the house, they will have their photos taken in the basement in either Studio 1 or 2 or in the backyard for outdoor photos. A storage room is located in the basement that stores extra props and costumes for photo shoots. Washrooms are located on the main floor and basement for clients to change if required. The two photographers stay on site taking photos for clients while make-up artist applying make-up for the next customer. Once all clients have all left for the day, the operating manager will back-up the computer and close the studio. Photographers will have access to the studio to accommodate afterhours appointments. Photos are edited digitally before printing in the digital lab on the main floor, east of the receptionist area. The printing of photos will be done in-house by photographers. There is also a laundry room and kitchen on the main floor to accommodate client and staff needs. If a photo shoot is taking place offsite, the photographer will make arrangements for their own travel, and submit an expense report for reimbursement. During the initial appointment, the manager, photographer, and client can determine the number of hours that the photographer will be working. One of the shareholders will provide the studio with accounting services. Her duties are mainly accounting related, and will be performed on weekly (bookkeeping, deposit), bi-weekly (payroll), monthly (utilities bills, monthly financial statement) and annual basis (e.g. property taxes, annual financial statements, tax returns). 8 5.4 Supply/Cost of sales Analysis Supplies are mainly related to photo finishing, including laser paper and folders, folios, albums, easels, and ink. No supplies will be kept on site except for a week’s supply of laser paper and ink. Clients will be provided with a catalogue with pictures displaying the “end look” they can have. Based on a client’s selection, supplies can be purchased from professional photography stores or an online supplier such as Pro Studio Supply. Due to the wide selection of suppliers, the risk involved in supplies is low. 5.5 Cost of Sales and Operating Expenses Projects costs of sales and operating expenses (excluding payroll) are as follows (Please see the financial projections for detail): Cost of sales ($) Other operating expenses ($) 5.6 Year 1 Year 2 Year 3 Year 4 Year 5 274,289 280,880 297,775 317,582 339,909 186,948 175,923 179,402 184,643 190,495 Working Capital Plan The following is a description of how working capital will be monitored and managed: Liquidity Management – use of liquidity ratios and cash flow to manage liquidity. No significant cash is on hand. Inventory Management – Limited inventory is carried on hand. The only supplies we will carry are one week’s supplies of laser paper and ink. Accounts Receivable – We will not offer credit to our clients. All revenue will be paid either by cash or credit card upon booking of an appointment or when pictures are purchased. Accounts Payable – All picture supplies (i.e. frames, laser paper, etc.) will be paid by cash upon purchase. We will take advantage of payment terms provided in other accounts payables such as utilities, insurance and internet. On average, accounts payable will be outstanding for 15 days. 5.7 Capital Budget The capital budget consists of the Steveston bungalow and property, lighting equipment, computer equipment, software, props, studio backdrops, costumes, furnishings and appliances and renovations, which total $606,300. Cameras will be personally owned by each photographer and therefore excluded 9 from the capital budget. The capital budget is expected to increase at 5% on an annual basis to account for additional props, costumes and other miscellaneous items that may be purchased. Steveston Bungalow and Property Lighting equipment Computer equipment Software Props (swing set, wishing well, gazebo Studio backdrops Costumes Furnishings and appliances Renovations Total 5.8 Capital Expenditures 525,000 5,000 5,000 800 8,000 4,000 3,000 8,500 50,000 609,300 Cash Conversion Cycle Since there are no accounts receivable in the business, and the average days of payable is 15 days, the CCC will be -15 days. In other words, we will obtain free financing from those accounts payables. 10 6.0 3 Human Resources Plan Photography is a creative outlet, and Wishing Stone Photography aims to allow its photographers and artists the opportunity to share their creativity with clients. We want to attract artists who want to share their talent, but not be burdened with business responsibilities. General Manager Receptionist Photographer 6.1 Photographer Make-up Artist (contracted) Design Artist (contracted) The Business We will promote an atmosphere of openness, creativity, and sharing. We encourage open communication between all members of the group, as well as those invited to help us during busy periods. We want our staff to work together, sharing ideas, and allowing their creativity to shine. A general manager will oversee the operations, but seek ideas from other staff members. The shareholders will also be actively involved in the administrative and accounting activities of the business. 6.2 Operations Manager The operations manager will oversee the business and be the first point of contact for clients. He or she will have initial meetings with clients, and determine what their preferences are. They will then match the client’s needs to a photographer, and then introduce the parties. At that point, the photographer 3 Image. Retrieved June 28, 2009 from http://www.jackiehewett.com.au/images/family_portrait_time4.jpg 11 will become the client contact, with the operations manager providing full support. The operations manager must be someone who is creative and understands photography, but also understands business. We will search for potential operations managers through discussion forums for photography, publications and word-of-mouth. Required Skills Photography and editing Problem-solving Time management Financial and budgeting Understanding and communicating clients’ visions Job Description Daily Oversee operations Attract and hold initial meetings with clients Assess and approve expenditures Resolve conflicts with employees and clients Discuss scheduling and ‘creative’ needs with staff Monthly Approve work schedules Analyze financial results Review client appointments (specifically for large events) Assess need for contracting additional photographers Communicate results with shareholders Yearly Evaluate managers and staff 12 6.3 Receptionist The receptionist will be responsible for the day-to-day general and administrative tasks of the business. This person will be the first person that potential clients see or speak with, so we are seeking someone who is open and friendly, and well-organized. We will search for potential receptionists through discussion forums on photography, publications, employment websites, and word-of-mouth. Required Skills Organizational Problem-solving Job Description Daily Schedule appointments Order supplies Greet clients onsite Invoice clients and process payments Provide general assistance where needed 6.4 Photographers We want to attract photographers who are creative and love what they do, but do not want to be burdened with the business activities. We will seek potential photographers through trade publications and word-of-mouth. We will start with two photographers on staff during office hours, who will also be available for afterhour appointments, to accommodate client schedules. As we will have two studios, the yard, and be available for on-site photography at events, we will be able to accommodate more than two parties at a time. When this is the case, we will hire contract photographers. When operations are busy enough that we frequently have to hire contractors, we will add another full-time photographer. Required Skills Photography and editing Understanding and communicating clients’ visions 13 Ability to accept others’ ideas Job Description Daily Meet with clients to understand their vision Manage photo sessions (both onsite and offsite) Develop/print portraits Review portraits with clients Advertise packages available 6.5 Set Designer Our portraits are not plain and boring; they are set in unique backgrounds and landscapes. We require someone who can picture clients sitting on large stones, with a waterfall flowing into the river behind them. We want someone who can use the outside garden and gazebo to show a romantic evening with flowers and candlelight. As not all clients will require specialized settings, we will contract a set designed as needed. Required Skills Understanding and communicating clients’ visions Able to accept others’ ideas Can build and develop a set/backdrop Landscaping Job Description Meet with clients to understand their vision Attend photo sessions (both onsite and offsite) Review portraits with clients Advertise packages available 6.6 Make-up Artist A make-up artist will be scheduled as needed for clients’ who wish for a little extra in their portraits. This person will be hired on a contract basis, as not all clients will require his or her services. Required Skills Cosmetics 14 Understanding clients’ vision Job Description 6.7 Meet with clients to understand their vision Attend photo sessions (both onsite and offsite) Assess materials/make-up needs Projected Human Resource Costs Salaries Operations manager Receptionist Photographer 1 Photographer 2 Set Designer Make-up artist Total Year 1 50,000 28,000 35,000 35,000 22,000 16,000 186,000 Year 2 52,500 29,400 36,750 36,750 23,100 16,800 195,300 Year 3 55,125 30,870 38,588 38,588 24,255 17,640 205,065 Year 4 57,881 32,414 40,517 40,517 25,468 18,522 215,318 Year 5 60,775 34,034 42,543 42,543 26,741 19,448 226,084 Accounts for an estimated 5% increase each year, to account for 3% inflation and general wage increases. Benefits 15% of Salaries Year 1 27,900 Year 2 29,295 Year 3 30,760 Year 4 32,298 Year 5 33,913 15 7.0 4 The Financial Plan Wishing Stone will generate most of its revenue from two streams: graduations and weddings. The majority of the cost of sales will consist of payroll expenses for the photographers and make-up artists as well as 60% of overhead costs such as utilities and insurances. Currently the gross margin is approximately 28% and will be increasing every year at about 10% due to inflation of 3% and additional expected sales growth. 7.1 Risk Analysis There are some risk factors in the business due to the high leverage by financing the capital assets through mortgages; over the projected period, we will have a debt-to-equity ratio of 2. However, our ability to generate an average return on the assets of 8% will allow us to reduce the financial risk. Due to this highly leveraged structure, our business expects to generate an average return on equity of 30%. Since there are no credit sales, all of our revenue will be cash sales, which significantly reduces our liquidity risks. Year 1 Debt-to-equity Return on assets Return on equity 2 -9% -28% Year 2 2 0% 0% Year 3 Year 4 2 9% 30% 2 15% 55% Year 5 2 22% 92% Average 2 8% 30% Our financial projection also presents a worst case scenario whereby sales are decreased by 20%. Under the worst case scenario, additional financing may be needed to finance the cash flows in the earlier years. However, the worst-case scenario is less likely due to our specialty in theme weddings and our outdoor studio. 4 Image. Retrieved June 28, 2009 from http://thepicturelady.net/images/senior.jpg 16 8.0 Conclusion We are seeking an external equity investment of $100,000. Under the business model discussed above, a 33% internal rate of return can be generated from the investment. We are looking for someone who is not only willing to contribute the money but also interested in providing memories for others. 17 Appendices 5 5 Image. Retrieved June 28, 2009 from http://www.lovelyparents.com/UserFiles/2008/3/31/grand-parents.jpg 18 Appendix I – Wishing Stone Photography Floor Plan Main Floor 19 Basement 20 Appendix II - Statistics Canada Demographic Information British Columbia Total - Age groups 15 to 19 years 20 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 to 69 years 70 years and over Aggregate after-tax income $'000 93,351,357 1,012,905 3,745,331 12,868,880 20,761,738 23,776,104 16,336,186 4,571,204 10,279,259 93,351,501 20,128,477 56,096,632 3,302,554 Total - Legal marital status Never legally married (single) Legally married (and not separated) Separated, but still legally married Minority Groups Chinese South Asian Black Filipino Latin American Southeast Asian Arab West Asian Korean Japanese 6,971,894 4,502,660 449,640 1,550,185 475,917 557,246 144,441 473,278 563,135 740,077 Vancouver 15 years and over by legal marital status Never legally married (single) Legally married (and not separated) 3 Separated, but still legally married Divorced Widowed Population 1,752,390 597,755 888,310 49,980 128,040 88,300 Immigrant population by age at immigration Under 5 years 5 to 14 years 15 to 24 years 25 to 44 years 831,265 59,885 142,265 179,825 339,675 Source: Statistics Canada, 2006 Census, retrieved on June 22, 2009 from http://www.statcan.gc.ca/startdebut-eng.html 21