Tempo Probiotics Bar Business Plan Proposal Susie Chang Elizabeth Huang Tanner Johnston Michelle Smarsh Tempo Probiotics Bar Business Plan Proposal Table of Contents Executive Summary 3 1.0 Introduction 1.1 Opportunity & Value Proposition 5 1.2 Company Overview 6 1.3 Vision Statement 7 1.4 Mission Statement 7 1.5 Objectives 7 2.0 Operations Plan 2.1 Organizational Structure 8 2.2 Building Plan 8 2.3 Average Business Day 9 2.4 Planned Capital Budget 9 2.5 Operating Costs 10 2.6 Working Capital 11 3.0 Human Resources Plan 3.1 Human Resources Structure 12 3.2 Management Team 12 3.3 Manufacturing Employees 13 3.4 R&D Consultant 13 3.5 Human Resources Strategy 13 4.0 Marketing Plan 4.1 Competitor Analysis 14 4.2 Segmentation 16 4.3 Targeting 17 Page 1 Tempo Probiotics Bar Business Plan Proposal 4.4 Position 17 4.5 Products and Services 18 4.6 Place 19 4.7 Pricing Strategy 21 4.8 Promotional Strategy 21 4.9 Marketing Budget 26 5.0 Financial Plan 5.1 Financial Model 27 5.2 Business Valuation 28 5.3 Financial Statement Projections 29 6.0 Conclusion 30 Appendices A Financial Projections 31 B Building Floor Plan 32 Page 2 Tempo Probiotics Bar Business Plan Proposal Executive Summary The business plan details our proposal for a capital investment to expand our Tempo Probiotics Bar into a Canadian success. Tempo is a premium nutritional bar that is convenient for consumers, contains no milk products and helps your digestive health. We are asking for $100,000 to grow our business from a local success making bars in our kitchen to a nationally recognized product sold in health food and fitness stores. In return for your investment you will receive a 10% stake in the company and a seat on the Board of Directors. Your investment will be used to buy large production kitchen equipment, lease a commercial production space, and fund marketing expenditures during our growth stage. We are a local Vancouver company that would like to lease operations space in Maple Ridge. We are currently selling to local stores and are in negotiations with Lululemon, The Running Room and Mountain Equipment Co-op for national distribution. We would like to also expand to specialty health food stores, such as GNC and Whole Foods Market. The four original founders currently make up the Board of Directors and the management team. In addition to the management team that covers the general, operations, human resources and marketing managers, Tempo will also use a research and development consultant and additional manufacturing employees to grow the company. Page 3 Tempo Probiotics Bar Business Plan Proposal Our intended market is young urban professionals and baby boomers. Both groups have discretionary income, are first to act on health trends and typically have a vested interest in fitness. The Tempo Probiotics Bar is a high quality product and will benefit from wordof-mouth from these groups. We also plan on using social media forums (website, Facebook, Twitter), print ads, event placement (samples in marathon race bags), and instore promotion (taste tests and coupons) to market our product. The Tempo Probiotics Bar will be a first mover in Canada and is growing at the perfect time to build on the digestive health movement in a new and innovative way. Page 4 Tempo Probiotics Bar Business Plan Proposal 1.0 Introduction 1.1 Opportunity & Value Proposition The opportunity arises from the focus on healthy-eating and a good digestive system in many people’s diets. DANONE’s Activia yogurt has captured consumers’ attention with the positive benefits of probiotics for digestion in their yogurt. With the vast population being baby boomers, and the active lifestyles of young urban professional we feel that they are the main beneficiaries of this type of nutrition. As they age, there is an increased chance of developing intestinal problems. However, since it is expensive to try to target both the baby boomer market as well as the young urban professionals, we will first work to target the young urban professional. Once we have gained product acceptance in this target market, we will grow our strategy to target the baby boomers. This will be discussed further in the marketing section of the report. We have developed a travel-friendly source of probiotics that does not require refrigeration and appeals to those who are lactose intolerant. Currently, there are no prominent brands of nutrition bars, targeting probiotics. The industry of fibre and nutritious bars exist, but this specific type of bar is still quite obscure, in what we have assessed as a potentially large market. We will build our brand image to be the firstmover and number one supplier of this unique and tasty snack. 1.1.1 Why Probiotics? Probiotics are live bacteria cultures that help maintain a healthy digestive system. Research has shown that there are numerous potential benefits of consuming probiotics, including lowering the risk of colon cancer, managing lactose intolerance, lowering blood Page 5 Tempo Probiotics Bar Business Plan Proposal pressure and cholesterol, and improving the immune system. Two trends in the modern day North-American lifestyle are causing poor digestive health: the increase in obesity, and increase in stress levels. With the obesity epidemic on the rise, many people turn to extreme diets to lose weight, which have significant negative impacts on digestive systems. Various sugar substitutes used for dieting have been proven to cause digestive discomfort and disease. Regarding stress levels, there is no system in the body that is more responsive to mind-body influences than the digestive tract. When we get sick, we tend to focus on the physical level, but our emotions and stress severely affect our digestion in a profound way. With the increased pace of our daily routines; comes increased stress, ultimately leading to increased digestive problems. Probiotics have been proven to be preventative in nature by preparing the digestive system to combat various levels of stress and poor diets. Our strategy will be to promote the benefits that consumers have knowledge of already and inform them of the other benefits not yet known. 1.2 Company Overview Tempo Probiotics Bar began two years ago in Vancouver, BC when a group of graduate students came up with an idea to create a nutrition bar that is pleasant-tasting, yet has all the health benefits for the daily routine, with an emphasis on digestion. We realized no such bar existed in the market or if it had, it had yet to gain any popularity. The delicious bar was mastered in one of our kitchens and tested for nutrition contents. Once testing was approved, the bars were distributed to friends, family, and neighbours. After receiving praise and acceptance from people in their 20’s to late 50’s, we decided to reach out to the public starting with small athletic stores and local fitness centres. We Page 6 Tempo Probiotics Bar Business Plan Proposal now have started negotiations with larger companies such as Lululemon and The Running Room, to capture the attention of health-enthusiasts. After developing market research and gauging consumer interest in those select stores, we have determined a high level of existing demand and that consumers appreciate the convenient form of daily nutrition which emphasizes healthy digestion. We would like to expand our production in order to manufacture and sell to more grocery retailers and larger athletic retailers. In maintaining the premium image and quality, bars will be sold individually at organic and health food stores, including Whole Foods, Capers, and GNC. We have met with the buyers of each store and they have expressed interest in selling our product at their stores. We now require the capital and labour to enable us to mass produce the bars to meet their demands. 1.3 Vision Statement “The #1 source of nutrition and probiotics in North America” 1.4 Mission Statement “To be the quick, delicious, probiotic snack for people wherever they go” 1.5 Objectives 1. In 2 years, to be sold in organic supermarkets across Canada 2. In 5 years, to be known in North America as the on-the-go, tasty, probiotic snack. Page 7 Tempo Probiotics Bar Business Plan Proposal 2.0 Operations Plan 2.1 Organizational Structure The company will function as a corporation and will be incorporated in the province of British Columbia. A corporate structure is appropriate due to the nature of the business and the benefits incorporation can provide (i.e. access to the small business deduction, greater access to capital by issuing shares to equity investors, mitigation of the risk of liability). There will be 5 seats on the Board of Directors, four of which will be the original founders, and 1 of which will be an equity investor. The four original founders will be majority shareholders. Combined, the founders have backgrounds in accounting, science, law and entrepreneurship. The company will develop an Advisory Committee, made of health experts and experienced business owners to provide advice. This Advisory Committee will be volunteer-based; with no salaries will be paid to those on the committee. Local Vancouver health experts have already shown interest in being part of the committee. 2.2 Building Plan An industrial facility will be leased in the suburbs of the lower mainland (i.e. Maple Ridge) as rent is less expensive than in the city of Vancouver. The building will be approximately 3000 square feet and be able to hold the required capital equipment and all employees. The layout of the building will be basic and practical. The refrigerators will be located near the mixing equipment and preparation area. The packaging machine and labeler will be in a separate area near the loading bay. There will be a second level Page 8 Tempo Probiotics Bar Business Plan Proposal in the facility where the administration offices are located for marketing, human resources, and the general manager. See Appendix B for the proposed floor plan. 2.3 Average Business Day The average business day in the manufacturing process consists of mixing, forming, and packaging individually-wrapped bars. The facility will have a capacity of producing 2000 bars per day, operating from 9:00am to 5:00pm, Monday to Friday. Production will be adjusted according to the level of demand. The general manager oversees the manufacturing process by doing quality control checks throughout the day and processes any financial transactions required for the day. The marketing manager will be planning promotions and organizing sales with buyers. Human resources will be organizing the employees’ work schedules and payroll. 2.4 Planned Capital Budget The company currently uses outdated and inefficient equipment to produce the Tempo Probiotics bar. In order to match the growing demand, the company plans to invest in the following equipment: Industrial Mixing Machines: Given that probiotics bacteria are sensitive to agitation and irregular temperatures, an appropriate mixing machine which controls temperature and mixing speed is essential. In-House Packaging Machine: Currently, the company outsources packaging of the product. However, given the sensitive nature of the bacterium, there have been issues in the past regarding inappropriate temperatures for packaging and Page 9 Tempo Probiotics Bar Business Plan Proposal inventory storage of the bars. As such, the company will produce its own packaging and labeling for the bar. After speaking to various manufacturing companies and receiving recommendations, we have found a packaging machine and labeling machine that will meet the growing demand. Industrial Dishwasher: Given the variety of flavors the probiotics bar offers, the two mixing machines will be changed multiple times throughout the day. The manufacturing process will gain efficiencies by having an industrial dishwasher which decreases the mixing-machine change-over time significantly. Refrigerator: The ingredients of the probiotics bar include agave nectar, dates, and various fruits. Two large refrigerators are needed to hold the required ingredients. For more information on the planned capital budget and costs associated, please refer to Appendix A, tab 1. 2.5 Operating Costs 2.5.1 Rent: Location The rent for the office location described above is currently $1,200 per month. This rent includes heat and water, but does not include electricity. Electricity has been allocated to each bar in the calculation of variable overhead. 2.5.2 Salary Expenses The salary expenses include the costs paid out to the management team and Research and Development consultant, as described within the Human Resources Plan. The management team will consist of 3 managers, and one general manager. The managers Page 10 Tempo Probiotics Bar Business Plan Proposal will be working full time, with salaries ranging from $55,000 to $65,000 per year. The research and development consultant will be a part-time researcher. 2.6 Working Capital The Company does not plan on keeping large levels of inventory on hand, given the perishable nature of the probiotics bar. As such, inventory levels will stay low, at $20,000 of inventory and raw materials at all times. Given that the company is pursuing growth, cash is essential. As such, the company will manage cash tightly. Appendix A, tab 3 shows a preliminary cash flow analysis, showing positive cash flows in year 4. Page 11 Tempo Probiotics Bar Business Plan Proposal 3.0 Human Resources Plan 3.1 Human Resources Structure 3.2 Management Team The management team consists of three managers – operations, human resources, and marketing – who will all report to the general manager. The general manager oversees all operations and handles all the finances of the company. He has the responsibility of reporting to the Board of Directors. All managers have many years of experience in their field. The operations manager had previously worked for a manufacturing plant of a consumer food product. She will be in charge of the daily operations at the plant, including allocating work to the manufacturing employees. The marketing manager is in charge of promoting the brand and products. In addition to promotions, she will also be monitoring potential competition. The HR manager deals with employee relations as well Page 12 Tempo Probiotics Bar Business Plan Proposal as payroll and benefits. The general manager will receive an annual salary $65,000 while the three other managers will receive $55,000. 3.3 Manufacturing Employees There will be 10 workers in manufacturing when producing at full capacity. They will be trained by the operations manager for their specific job requirements, which includes mixing, assembly, and packaging. These workers consist of part-time and full-time employees with a starting wage of $12/hour. 3.4 R&D Consultant An expert of probiotics and microbiology will be hired as a part-time research and development consultant. As the company’s specialist in probiotics and nutrition, he will answer any consumer enquiries based on his research. He will also help develop new products as the company intends to expand its line of products. The consultant will report to the Board of Directors and work alongside the general manager. 3.5 Human Resources Strategy There will be no formal training program as each manager brings in their experience from previous employment. Each manufacturing employee will be trained on the job by the operations manager. In addition to the technical capabilities of each manager, they each have a keen interest in healthy living and an active lifestyle, as well as a financial interest in the company. Page 13 Tempo Probiotics Bar Business Plan Proposal 4.0 Marketing Plan 4.1 Competitor Analysis Currently in the market, there are a variety of competitors that we face, both direct and indirect. Described below are the details of our main competitors and the effects that these competitors will have on the Tempo Probiotics Bar. 4.1.1 Activia Yogurt Activia is a yogurt which contains the probiotics bacteria and is distributed through “big box” grocers. Activia has also done extensive television advertising which has exposed the general public to the benefits of having probiotics as part of their daily diet. Activia is an indirect competitor to the Tempo Probiotics Bar as its probiotics ingredient requires refrigeration to keep the probiotics alive; as well a yogurt product produces a different taste that may not appeal to all people. Activia’s price point is about $5.00/8pack ($0.62/serving). 4.1.2 Attune Attune currently has three different products: chocolate probiotics bar, granola probiotics bar, and probiotics munch bar. Attune products are also gluten free and are advertised to “contain more calcium, more fiber and less sugar than most yogurts”. Attune is currently only available in the United States in large grocers such as Safeway and Vons, but also specialized stores such as Pharmaca, New Leaf Community markets, and Planet Organics. Attune also has an online store where customers can order directly from Attune; however Attune only ships to addresses in the United States. Page 14 Tempo Probiotics Bar Business Plan Proposal Attune products must be refrigerated to keep the probiotics alive and are located in the yogurt aisle. Due to the need for refrigeration, Attune competes directly with yogurt products such as Activia and is an indirect competitor to the Tempo Probiotics Bar. Attune products are also sold for $1.99/bar when sold individually, or $12.18/7 pack ($1.74/bar), or $34.44/21 pack ($1.64/bar). 4.1.3 Pop Culture Probiotics Pop Culture Probiotics currently has two product lines: On the Go Probiotics Yogurt and Granola Bars (includes a yogurt fruit and nut bar, and a chocolate chip granola bar), and Oatmeal with Probiotics (Maple Brown Sugar Oatmeal, and Strawberries and Crème Oatmeal). Pop Culture Probiotics has also patented a strain of probiotics called Ganeden BC which can survive harsh environments of heat and pH. Pop Culture Probiotics do not require refrigeration, thus they present as a direct competitor to the Tempo Probiotics Bar. Pop Culture’s Granola Bars are sold for in a 5 pack for $6.45 ($1.29/bar) or in a 15 pack for $18.38 ($1.23/bar). The Oatmeal products are sold for in a 3 pack for $5.37 ($1.79/1.5 oz) or 12 pack for $20.41 (41.70/1.5 oz). Pop Culture currently only distributes their products through their online store. 1.1.4 Renew Life Renew Life is a digestive care company with a variety of health products. They have 6 different product lines: probiotics, cleansing, enzymes, oils, fiber, and other specialty products. Renew Life’s products are only available in the United States and can either be purchased online or through specialty health food stores. Renew Life’s probiotic product line presents itself as an indirect competitor to the Tempo Probiotics Bar, as its delivery method of the probiotics is in capsule form Page 15 Tempo Probiotics Bar Business Plan Proposal 4.2 Segmentation 4.2.1 Demographics: Baby Boomers and “Yuppies” Baby Boomers are those that are now in their 50s + who have worked their whole lives, may have just finished raising their kids and are getting close to retirement, and may now be looking to take care of their own health as they age. “Yuppies” are young urban professionals in their 20s or 30s in professional careers and have discretionary income that they enjoy spending on high quality items. They tend to be driven and strive to succeed in many aspects of their lives. 4.2.2 Geographics: Urban and Suburban Dwellers Our market segment will be urban dwellers that live and work downtown which is consistent with the yuppies demographic. As well as suburban dwellers which is more consistent with the baby boomers demographic who have raised their children in the suburbs, and have kept their family home in the suburbs. 4.2.3 Behavioural: Heavy Users The Tempo Probiotics Bar is a high quality item, and if the yuppies see the value in the bar, they tend to stay loyal to a product brand if it continuously delivers to their standards. Yuppies also tend to be less sensitive to price fluctuations as they are willing to pay a high price if they see the value. Thus if it increases in prices at the grocery store from one week to the next, they will still buy it regardless if they see it as part of their dietary necessities. The yuppies also tend to be highly motivated individuals who strive for success in various aspects of their life such as careers, family, fitness and health. As such, yuppies are willing to make monetary investments to achieve successes in these fields, and will be willing to pay the high price if they see that it is making a positive difference in their health and fitness. Page 16 Tempo Probiotics Bar Business Plan Proposal Baby boomers are more sensitive to price fluctuations and may be more difficult to gain their loyalty. If prices were to increase from one week to the next, baby boomers are more likely to reach for a less costly item. Due to this, it is even more important that we gain strong brand loyalty to win over the baby boomer demographic. Also, since the baby boomers are ending their child-rearing days and may be more focused on their own health now, they may be willing to spend their discretionary income on ensuring that they stay healthy and fit. 4.3 Targeting As stated above, we will be targeting the yuppies demographic as well as the baby boomer demographic. Since it is costly to target both of these demographics, we will first work to target the yuppies demographic as they have higher discretionary income, are less price sensitive and are more loyal to the brands that they like. We can target the baby boomer generation after our product has successfully gained acceptance with the yuppie demographic. 4.4 Position To the health conscience individual, Tempo Probiotics contains the highest quality probiotics bar that is essential as part of a healthy lifestyle. It is a quick and convenient snack that can be carried in your bag, and is not sensitive to temperature fluctuations that is beneficial to people of all ages. Page 17 Tempo Probiotics Bar Business Plan Proposal 4.5 Products and Services The Tempo Probiotics Bar is a high calorie bar with a high concentration of quality probiotics and fibre. There are a variety of benefits to having probiotics as part of a regular diet. These benefits include: Prevention of colon cancer Improving Immune Function and preventing infections Reducing inflammation Managing urogenital health Improve symptoms if irritable bowel syndrome Preventing harmful bacterial growth under stress Lowering cholesteral Lowering blood pressure The main factor that sets Tempo Probiotics Bar apart from products such as Activia and Attune is that Tempo does not require refrigeration. This increases the convenience for consumers to travel with the product while still receiving the full benefit of the live probiotics. Our live probiotic ingredient will be patent protected, making it difficult for potential competitors to replicate. Although Pop Culture Probiotics products also do not require refrigeration, they have not penetrated the Canadian market yet, allowing Tempo Probiotics to be the first mover in the area. Page 18 Tempo Probiotics Bar Business Plan Proposal The shelf life for the product is six months and since Tempo does not need to be refrigerated it also increases the flexibility for retailers to decide where in the store they’d like to place the products. Also the cost of delivery from the manufacturing plant to the retailer will also be less costly as we will not require refrigerated trucks to deliver the product. 4.6 Place Our future manufacturing facility will currently be located in Maple Ridge where we will be close to our suppliers. Our strategy is to target our efforts to the Vancouver area. Vancouver currently is the 3rd largest metropolitan area in Canada with a population of about 2.3 million. The yuppie population makes up about 15% of Canada’s total population, thus there are over 300,000 people in our primary target market. In Vancouver, we are distributing the Tempo Probiotics Bar through small independent retailers, gyms, and various athletic stores. Our goal is also to penetrate the health food chain stores such as GNC and healthy food markets such as Whole Foods Market and Capers Community Market. We believe that at stores like these we will be able to establish stronger brand loyalty as well as leverage the reputations of the retailers. Small independent health food retailers will provide for a strong base for the Tempo Probiotics Bar to first gain customer acceptance. Since these are small retailers, owners of these retailers are motivated to provide high quality service to their customers to sell the products. Also, at small independent retailers we will have increased flexibility when it comes to incentives and promotional ideas to implement to increase sales of the Tempo Probiotics Bar. We have also reached out to fitness centres that also provide dietary services at their gyms to recommend, promote, and distribute our product. We believe that our yuppie Page 19 Tempo Probiotics Bar Business Plan Proposal demographic tends to frequent these fitness centres and by having the Tempo Probiotics Bar associated with fitness centres will give it a more credible reputation of its health benefits. Since the Tempo Probiotics Bar will not require refrigeration this makes it simple for these fitness centres to carry our product. By placing our products in these fitness centres, our product will also be easily accessible to our target market, thus increasing the volumes of our sales. Also if we are able to penetrate any franchised fitness centres such as World Health Club, we will also be able to increase our geographic reach beyond Vancouver. We are also currently in negotiations with other fitness stores to also distribute our product. These fitness stores include Lululemon, The Running Room, and Mountain Equipment Co-Op. We believe that these retail outlets are a good fit for our product and that we are reaching out to meet the needs of the same target group. All of these fitness stores have high quality products with good brand reputation, higher prices and high customer loyalty. Our ultimate goal is to gain access to the “big box grocers” We hope to get the Tempo Probiotics Bar on the shelves of Costco where heavy users of the product will be able to buy it in bulk. At GNC, sales staff who are knowledgeable in their products will be able to inform customers of our products and provide credible information and excellent service to our customers. As well, at specialty heath foods such as GNC we will be able to command a premium price that reflects the high quality nature of our product. Also, since GNC is a national chain, we will also be able to use GNC as a starting base to expand into other metropolitan cities. Page 20 Tempo Probiotics Bar Business Plan Proposal At Whole Foods Market, which is specific to Vancouver and Toronto, we can leverage Whole Foods Market’s reputation of providing the highest quality of natural and organic products and providing excellent service to their customers which has resulted in high brand loyalty. Since our values are a good fit with Whole Foods Market, and we believe that our target market would shop here that this distribution stream will prove to be very profitable. Finally in about 3 years, after we have achieved success in these smaller markets, and have established a strong customer following, we will work to get our product on the shelves of Costco to be sold in bulk products. This will increase the volume of sales of Tempo as well as give our loyal customers a volume discount when purchased here. 4.7 Pricing Strategy We will be using a premium pricing strategy for the Tempo Probiotics Bar. The price point for the Tempo Probiotics Bar will be $3.50/bar. This price per bar is significantly higher than the price of our competitors. The higher price point implies that we have significantly higher quality products with a higher concentration of live probiotics in each bar, as well as the specific type of probiotics that we have developed to withstand temperature fluctuations resulting in increased convenience for customers. This pricing strategy is consistent with our primary aim to target the yuppies demographic, as they have the discretionary income to spend on this product and appreciate high quality product. 4.8 Promotional Strategy 4.8.1 Communications Objective Page 21 Tempo Probiotics Bar Business Plan Proposal Our objective for our promotional strategy is to communicate to our target market that the Tempo Probiotics Bar is a high quality probiotics bar that is essential to one’s daily diet. To achieve this objective, we must first inform our target market of the necessity of probiotics in one’s diet and the benefits of probiotics. Second, we need to differentiate ourselves from our competitors and ensure that Tempo is perceived as the premium brand with the highest concentration and quality of probiotics and there is also the added convenience to the customer as the live probiotics do not require refrigeration. Finally, we will need to communicate to our target market where they can buy our product. We will need to inform them that the Tempo Probiotics Bar will be found at local gyms, The Running Room and other specific stores where they are available. We will then direct them to our website, where all of the above communication objectives will also be reiterated. 4.8.2 Communications Strategy To reach our target market of yuppies, we will be using a mix of social media tools, sponsoring sporting events, gaining credibility through print media, and in-store promotions. As our target market have high technological skills, lead active lifestyles and usually aware of events in the communities, we need to use the communication mediums to reach them. 4.8.3 Promotions Mix Social Media Website Page 22 Tempo Probiotics Bar Business Plan Proposal We will use the website first to provide informative information about the health benefits of probiotics and how it should be part of one’s everyday health regime. We will then use the website to introduce our Tempo Probiotics Bar and how it is different from other products on the market. There will also be a page informing customers the nearest location where they can buy the Tempo Probiotics Bar. In addition, we will also have an online ordering system available for those outside the Vancouver area who would like access to the bar. In addition, we should have a link or product label on our distributors’ websites, such as the fitness center’s website to show that our product is available at their locations. Facebook Currently, Facebook has 400 million active users worldwide, and our target market of yuppies are heavy users of Facebook. Facebook is also a very inexpensive way to generate brand recognition and exposure. People also tend to be more trusting and more willing to purchase or try products that their friends use, thus Facebook can be used as an alternative from “word of mouth” communication. Facebook also has versatility as to what can be done with it. A group for Tempo can be created, and we will be able to market new products, display events that we are sponsoring, inform customers of in-store promotions and gain a direct communication line to those users of our product. Twitter Page 23 Tempo Probiotics Bar Business Plan Proposal Much like Facebook, Twitter can be used to inform our target market of events that we are sponsoring, and current promotions. We will also be able to grow a following where we can directly communicate with our consumers. Events Marathons and City Runs Our yuppies target market lead active lifestyles and strive to succeed in everything they do. They tend to enjoy challenges such as marathons and other running events. Thus, these events would be an excellent way to reach our target market if we sponsor the events and provide our product in their running kits that they would receive or also have a booth with samples of them at the event itself. By doing this, we are introducing our target market to the product, thus gaining brand exposure. Charity Events By sponsoring charity events, such as those for Canadian Cancer Society or Colectoral Cancer Assocation of Canada we will be able to gain exposure to those who care about these issues or have been affected by it. We will be able to reach a wide audience at such events, as there will likely be newspaper, radio and television advertising where the primary sponsors will be named, and we will be able to show that our company lives our product’s values and that we care about issues facing the community. Tradeshows As a new product, we should use the opportunity of tradeshows to market our product and find potential buyers. At industry tradeshows, there will Page 24 Tempo Probiotics Bar Business Plan Proposal be buyers from stores looking for new products to put on store shelves. Thus we whould capitalize on these opportunities and invest in knowledgeable sales staff to represent Tempo Probiotics bar at the tradeshows as well as provide samples, and brochures to give to the buyers. Print Media Health Magazines To increase our credibility as a product that has legitimate health benefits, we should place ads or submit articles about probiotics in health magazines. Such a magazine that we could use is Canadian Health and Lifestyle. This specifically targets our Canadian market, thus the advertising cost should also be lower. As well it is a magazine that is targeted to the young working professional with other articles about nutrition, lifestyle, relationships. They also have a featured product in every issue, and it would increase our product exposure signifnicantly if we were a featured product for an issue, and included an in-store coupon in the magazine. In Store Promotions Taste Tests These taste tests will occur at events that we sponsor, such as city runs or marathons as well as stores where our products are available. Since our product is a food type product, we need to allow consumers to try the bar to see if they enjoy the taste. Consumers may have a pre-existing bias that since it is a healthy product, it may not be very tasteful. Thus we Page 25 Tempo Probiotics Bar Business Plan Proposal must dispel pre-existing notions and show that the Tempo Probiotics Bar is not only healthy and beneficial to ones’ health but also tastes good. Coupons Coupons are the final step to entice the customer to purchase the product. As the coupon will give a certain dollar amount off of the purchase price of the product, or give incentives when buying items in increased volume, it increases the chances that the customer will follow through and purchase the product; especially if the customer feels a sense of urgency. To create that sense of urgency, the coupons should have a short expiry date so that the customer makes the purchases immediately. 4.9 Marketing Budget Refer to Appendix A, tab 6 for the marketing budget breakdown. Page 26 Tempo Probiotics Bar Business Plan Proposal 5.0 Financial Plan 5 year projections for the balance sheet, income statement, statement of retained earnings and cash flows are included in Appendix A, tabs 2, 3 and 4 respectively. 5.1 Financial Model Given that the company has planned to incorporate, a financing model consisting of both debt and equity will be used. In order to fund our initial acquisition costs as well as operating expenses within the first 3 years of the business, we require initial cash investment from both debt and equity sources of $125K. 5.1.1 Debt Financing We have arranged with a reputable lending institution debt financing, with the following terms: Initial Loan $25,000 Term 10 years Interest Rate 12% The company plans to take out this loan on July 15, 2010, and will use the funds to purchase the capital assets needed, as discussed in the Operations section, above. 5.1.2 Equity Financing Page 27 Tempo Probiotics Bar Business Plan Proposal The company requires an initial equity investment of $100K. These funds will be obtained from family members and friends, as well as the founders of the company. To ensure that the investors are appropriately remunerated, dividends are scheduled to be paid in year 5, the company’s second year of positive cash flows. The dividend policy will be determined by the Board of Directors at each annual meeting. The magnitude of dividends will be based on availability of cash flows from operations, as well as the opportunity cost of dividend payments (i.e. growth of the company). As shown in Appendix A, tab 3, we expect cash flows from operations to be positive in year 4, and as such we expect to declare and pay a dividend in year 5. However, the amount of dividends shown is only for presentation purposes, and may vary based on cash availability. 5.2 Business Valuation Based on the financial projections for the company, our analysts have determined that the net present value (NPV) of this company is large and positive at $1.3M. The NPV calculation represents and estimates the present value of the future economic profits of the company. In order to predict future earnings, estimates must be used. We have estimated that growth will increase substantially during the first 5 to 6 years of operations, followed by smaller levels of growth thereafter. Our analyst has calculated the NPV based on a required rate of return of 25% to equity investors, which is typical for this type of business and its level of risk. 5.3 Financial Statement Projections Page 28 Tempo Probiotics Bar Business Plan Proposal As shown in Appendix A, projected financial statements (balance sheet, income statement, statement of retained earnings, and statement of cash flows) have been prepared. Note that the significant assumptions within these projected statements include demand and growth throughout the years. All cost of sales are based on the company’s average historical cost to produce the Tempo Probiotics Bar, taking into account new efficiencies created from revisions to operations (such as in-house packaging and labeling). Other significant costs include capital assets to be purchased (see Appendix A, tab 1). The costs used in the model are based on quotes from retailers who sell the assets our company requires. Page 29 Tempo Probiotics Bar Business Plan Proposal 6.0 Conclusion The Tempo Probiotics Bar is a new healthy bar that is easy to transport. Tempo will build on the trend of digestive health started by Activia yogurt, but with a twist – no need for refrigeration and can be eaten by lactose intolerant consumers. Tempo is a bar sold at a premium price and will be the first of its kind in Canada. Being the first mover, and marketing towards yuppies and baby boomers both with high levels of discretionary income and knowledge of health trends, will help make the Tempo Probiotics bar a great success. In order to reach our target market, we plan to market to these groups through social and print media, events and in-store promotions. Tempo has been a local Vancouver success for two years, and is currently in negotiations to sell its products to Lululemon, The Running Room and Mountain Equipment Co-op. In order to meet the high growth in demand for this unique product, and take advantage of being a first mover in this industry, we must increase manufacturing capacity. Studies show that the importance of digestive health in today’s society is increasing dramatically. We feel that Canadian’s need and deserve this product. Your investment of $100K will expand our company, thereby allowing the Tempo Probiotics bar to grow from a local Vancouver creation to a national household name. Page 30 Tempo Probiotics Bar Business Plan Proposal Appendix A Financial Projections Appendix is excluded from this document due to presentation limitations. Please refer to supplementary Excel files for financial information. Page 31 Tempo Probiotics Bar Business Plan Proposal Appendix B Building Floor Plan Page 32