1. SUMMARY OF THE PROJECT
The purpose of the project is the creation of a production and trading enterprise; products - children's play furniture made of cardboard. Given the demographic growth in the country, the increase in the number of children in recent years, this project seems appropriate for implementation. The price segment is low, which is also a serious advantage against the backdrop of the difficult economic situation in the country. Location - Belgorod.
The business plan is based on a detailed analysis of the market situation, production technology, competitive environment and other data. Key performance indicators of the project are given in Table. one.
Table 1. Performance indicators
Payback period (PP), months
Discount payback period (DPP), months
Net present value (NPV), rub.
1 205 784
Return on Investment (ARR), %
Internal rate of return (IRR), %
Profitability Index (PI)
2. COMPANY DESCRIPTION AND INDUSTRY
Since the project’s products are a combination of home furniture and developing toys for children 5–8 years old, several related markets should be considered: the market for children's toys, the market for children's furniture, and the market for furniture made of cardboard. In general, all of them are part of the market for children's goods, the state of which shows the state of each of its components in an enlarged manner.
Experts note some qualitative changes in the market for children's goods against the backdrop of the economic crisis. The fall in demand affected only the premium segment, while the middle and economy segments grew in 2015 by 7% and 20%, respectively (the economy segment grew by more than 50% for some groups of goods). On average, in monetary terms, in 2016 the market is expected to grow by 5-7%, however, experts say that this increase is caused by rising prices. In physical terms, there is a decrease in volumes of about 5% compared to the previous year.
In addition to a shift in demand towards the low price segment, there is also a tendency towards an increase in demand for developing goods. Manufacturers begin to produce more durable and less expensive goods. The greatest stability in demand is demonstrated by products for newborns of daily demand.
Drivers of growth in the production of furniture for children are the emergence of a larger number of children (more than 24 million people, of which 5–9 years old - 8 million people), in particular, thanks to state support programs for young families, as well as successful import substitution in this segment market thanks to the support of the Ministry of Industry and Trade in the framework of the subprogram "Industry of children's goods."
Another trend in the children's goods market is a significant increase in the share of online trading, which accounts for about 20% of total sales. In the structure of sales by product categories, in the first place is children's clothing (30%), in second place - children's toys (24%).
The project involves the creation of a trade and manufacturing enterprise in Belgorod. Products - children's furniture made of cardboard. Distinctive features of this type of product are given in Table. 2.
Table 2. Features of children's furniture made of cardboard
The company is focused primarily on the economy segment (80% of the product line). Sales market - Russia, sales channels - wholesale sales to large retail chains.
Opening own production is not economically feasible. Cardboard cuttings (the main prefabricated furniture parts) are made and packaged by order at the pulp and cardboard mill in accordance with the drawings and the terms of reference of the project. Instructions are ordered from the printer. Coloring kits are purchased in bulk on the basis of stationery. Further, the project employees carry out the final configuration of the sets and send them to retail chains.
3. DESCRIPTION OF GOODS AND SERVICES
Project products - folding furniture made of cardboard: highchairs and tables of various models. Unassembled are cardboard plates packed in plastic film. The kit includes assembly instructions and a coloring kit. Thus, the product has a dual function: as a developing designer that you can color yourself, it, at the same time, is furniture that can be used in games and in everyday life. Furniture is assembled without glue.
The project has developed four sets of furniture, consisting of a table and one or two chairs each. Models differ in shape, size, number of parts, material quality, composition of coloring kits. Characteristics and description of the kits are given in Table. 3. The cost of each set consists of:
The cost of cardboard cutting
Delivery to the buyer's warehouse
Table 3. Product Description
Sasha and the cardboard factory
The most simple set of dense moisture-proof cardboard. Minimal set for coloring
Chair, table,, coloring kit, assembly instructions
gone With the Wind
Enlarged set: a large table and two chairs made of thick moisture-resistant cardboard. Medium Coloring Kit
Table, two chairs,, a set for coloring, assembly instructions
From waste paper
The most economical option from recycled cardboard. Minimal set for coloring
Chair, table, coloring kit, assembly instructions
A set of standard size with a large number of precast parts made of thick moisture-resistant cardboard and a maximum set for coloring
Chair, table, coloring kit, assembly instructions
Table 4. Costs of materials and production
GOODS / SERVICES
COSTS UNITS, rub.
TRADING VALUE, %
UNIT COST, rub.
Set "Sasha and the cardboard factory"
Gone with the Wind Set
Set "From waste paper"
The products are intended for use by children aged 5-8 years. Thanks to the performance of moisture-resistant cardboard, they can be used both at home and outside the home: in the country, in nature, etc. The instruction is designed in such a way that a child can understand it with a little help from adults and assemble the furniture on their own.
The target audience:
Retail: Parents of low- and middle-income children 5–8 years old
Wholesale: preschool educational institutions, catering with children's zones, event-agencies, etc.
Implementation is carried out through large retail chains (80% of the volume) and directly to preschool institutions under contracts (20% of the volume). When entering the distribution network, it is necessary to pay an initial fee “per shelf” in the amount of 100, 000 rubles for each network (at the initial stage, cooperation with two networks is assumed). These costs are included in the investment costs of the project.
In Tab. 5 provides an assessment of the competitiveness of products based on its performance in comparison with other types of children's furniture. The rating is set on a five-point scale using expert judgment; 1 point is the worst value.
Table 5. Comparative evaluation of product competitiveness
Product Category by Material
Folding metal frame
Thus, children's furniture made of cardboard is highly competitive, primarily in terms of price and safety, which is of great importance today. In addition, none of the competing types of products has a similar developmental function, which is an additional advantage for the project.
With the development of the project, it is possible to expand the range, which will not require additional costs for equipment, an increase in staff, etc. All products are designed with regulatory requirements in mind:
GOST 19112-78 “Products from paper and cardboard. Technology. Terms and Definitions"
GOST 19301.1-94 “Preschool furniture. Functional table sizes "
GOST 19301.2-94 “Preschool furniture for children. Functional sizes of chairs ”and others, including tests of stability, reliability, selection of materials for manufacturing, etc.
4. SALES AND MARKETING
As an analysis of open sources has shown, there are currently no manufacturers on the Russian market specializing in cardboard children's furniture. Three manufacturers of cardboard furniture, which were found through search engines and printed product catalogs, produce furniture for promotions and food retail. Children's furniture is offered by them on request. In addition, there is one player on the market that produces houses from dense cardboard of varying degrees of complexity. Thus, none of these enterprises can be considered as a direct competitor to this project.
Products are sold in bulk both in retail chains of children's goods, and directly in preschool educational institutions. Sales region is the Central Federal District of the Russian Federation. The population of the region is 39 million. Approximately 5% of them are children aged 5-8 years (1.95 million people). Market capacity - 162 500 units. monthly production, given that cardboard furniture has an average life of 1 year. Given the specifics of the product, the population’s commitment to traditional materials (wood, plastic), the project can count on a volume of 2% -3% of the market (about 3500 units / month). However, at the moment, production capacities allow producing and packing no more than 2000 units, which is taken as the planned value when calculating the financial plan. In the future, the expansion of production capacity is possible.
The pricing policy of the project takes into account the characteristics of the target audience of the project. At a low cost of production, a rather high profitability is incorporated in it (120% -150%). The average marginal income is 39 rubles / unit. At the same time, the price level is significantly lower than the prices of similar products from traditional materials (on average, 30% -50%).
The investment costs include the cost of entering two large retail chains (200, 000 rubles), as well as the costs of a start-up advertising campaign, which involves carrying out promotions in network stores with the distribution of leaflets (50, 000 rubles). In the future, monthly expenses in the amount of 20, 000 rubles for the promotion of products on social networks vk.com, ok.ru, Instagram are assumed.
Table 5. Planned sales
GOODS / SERVICES
AVERAGE PLANNED VOLUME OF SALES, units / month
PRICE FOR UNIT., Rub.
VARIABLE COSTS, rub.
Set "Sasha and the cardboard factory"
Gone with the Wind Set
Set "From waste paper"
1 302 425
5. PRODUCTION PLAN
For the manufacture of project products, three-layer packaging cardboard is used. The front side has a smoother texture, on which you can apply images using watercolor paints or gouache (coloring kits).
Drawings of products developed by the project initiator suggest a transverse arrangement of the waves of the cardboard layers relative to the load, which provides higher product strength. The main operations with raw materials (cutting and punching) are carried out in accordance with the drawings and technical specifications by the supplier. The selection of a contractor is given special attention, since product quality is a determining factor for the success of a project.
Since the project receives actually finished and packaged products, the purchase of production equipment is not required. Only equipment for confectioning and final packaging of products is needed: assembly tables, tools for sealing plastic bags, etc.
The production plan takes into account the seasonality factor and is ahead of the sales plan by about one month. The demand curve has the lowest values in winter and autumn, demand grows in spring. Sharp peaks occur in August (before the start of the school year) and December (before the New Year).
The delivery of finished products to the buyer's warehouse is carried out by the transport company, the delivery cost is included in the cost of production (allocated to variable costs).
6. ORGANIZATIONAL PLAN
One of the main factors for the success of the enterprise is the conformity of product quality and its operational characteristics to the expectations of the target audience. Given the low cost of sets of cardboard furniture, one should not expect high demands from customers. However, product quality is still being designed at the design stage of the drawings. Therefore, this process needs special attention. The initiator of the project is directly involved in the development, also serving as the manager and chief technologist. He has relevant engineering background and experience in the furniture industry. In addition, he carries out leadership functions, conducts ongoing market research, and negotiates with key partners and suppliers.
Interaction with buyers is carried out by sales managers who combine their activities with the functions of merchandisers. In addition, they are promoting social media (SMM).
The entire process of project implementation can be divided into three phases: preparatory, pilot and mass production.
During the preparatory phase, the project initiator creates drawings, searches and selects the contractor, as well as suppliers of additional materials. The experimental phase involves the manufacture of prototypes, their completion; initial negotiations are held with retail chains; At the same time, the selection and hiring of project employees is ongoing. The phase of mass production involves serial production and a gradual exit to planned sales volumes.
Table 6. Staffing and payroll
Number of people
$ 219, 500.00
Social Security contributions:
$ 65, 850.00
285 350, 00 ₽
7. FINANCIAL PLAN
The financial plan is designed for a five-year period. Calculation for a longer period does not seem appropriate due to the high probability of changes in market conditions. In particular, with the successful implementation of the project, one should expect the appearance on the market of similar products and, as a result, toughening competition. Thus, it is likely that in five years the project will be beneficial to stop, or to change the profile of activity.
The financial plan takes into account all the income and expenses of the project. Revenues are expected only from operating activities, investment activity is not planned. Costs are divided into investment, variable and fixed.
The main item of investment costs is the cost of entry into retail chains (“shelf fees”). In addition, costs are envisaged for the production of the first batch of products and for the formation of a working capital fund that covers the losses of the enterprise until it reaches its payback. The total required investment volume is 1.1 million rubles, of which 0.7 million are the own funds of the project initiator. The lack of funds is planned to be covered with a bank loan for a period of 60 months at a rate of 20% per annum. Credit holidays - 3 months.
Table 7. Investment costs
Confection Line Equipment
Entrance to the distribution network
Starting advertising campaign
Production of the first batch of products
1 100 000 ₽
₽ 700, 000.00
Required borrowed funds:
400 000 ₽
Variable costs include all costs of production, packaging and transportation of products and are given in Table. four.
Fixed costs include utility bills, communications, advertising and depreciation of fixed assets and intangible assets. The size of depreciation deductions is calculated by the linear method; a useful life of five years has been adopted.
When comparing different taxation schemes, the STS was issued with the object “income minus expenses” (rate - 15%). Form of incorporation - IP.
A detailed financial plan is provided in App. 1 to this business plan.
Table 8. Fixed costs
AMOUNT PER MONTH., Rub.
Communication and Internet
67 500 ₽
8. EVALUATION OF EFFICIENCY
The effectiveness of the project is determined on the basis of the financial plan, as well as on the basis of simple and integrated performance indicators (Table 1). To account for changes in the value of money over time, cash flow discounting is used. The discount rate is 9%. On the one hand, such a rate provides an acceptable level of performance indicators, on the other hand, it reflects the relative conservatism of the project with low investment investments; product and production technology known to the market.
Gross revenue of the first year of sale - 11, 265, 976 rubles; net profit (after tax) - 2 089 745 rubles. Gross annual revenue after reaching the planned sales volumes - 13 349 856 rubles; net profit - 3, 094, 674 rubles.
Simple and discounted payback period - 7 months. Net present value (NPV) - 1.2 million rubles. Return on Investment (ARR) is 22.73%. The internal rate of return (IRR) is 16.77%. Profitability Index (PI) - 1.1. All these figures indicate a sufficiently high investment attractiveness and effectiveness of the project.
9. WARRANTIES AND RISKS
Project risks may be related to internal and external factors. Internal can include:
Low product quality / inadequate consumer expectations. Constant monitoring of product quality should be envisaged, as well as the creation of a base of alternative contractors in case of a decrease in the quality of work performed by the current contractor.
Poor sales / low sales. The initiator personally performs the function of monitoring the department and its results. If necessary, takes on negotiations with customers.
External factors include:
Decreased solvency of the population. Since children's furniture is not a basic commodity, we should expect a drop in demand for it. On the other hand, such a fall will be offset by a shift in solvent demand from higher price segments to the budget, in which the project operates.
Rising prices for raw materials. To compensate for it - in the event of a global price increase - is possible only by reducing the profitability of the enterprise. In the event that the price increase reaches a critical level, the company must be liquidated, taking revenues. Given that there are almost no tangible assets in the project, the business can be considered highly liquid.
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