Business plan - Ease-Stress De-stressing Stations - Full Report

Ease-Stress Express De-stressing made easy

Business Plan

Course: GM 600

Center: Alpharetta

Instructor: Prof. Tom Wichser

By: Laurie Chester

Alessandro Lima Pulkit Bhatnagar

December 18, 2010

Ease-Stress De-Stressing Stations – Business Plan Page 2

� Executive Summary … … … 03

� Company Profile … … … 05

� Organizational Structure … … … 08

� Marketing Plan … … … 09

� Competitive Scenario … … … 19

� Operations Plan … … … 24

� Financial Plan … … … 37

� Valuation … … … 39

� References and Image Credits … … … 40

� Appendices … … … 42

� Acknowledgement … … … 49

Note: This Business Plan is prepared towards partial fulfillment of the course: Business Planning Seminar being instructed by Prof. Tom Wichser for the November 2010 session at the Alpharetta campus of Keller Graduate School, DeVry University. The logo for Keller is

reproduced here as a student and not an endorsement by the School. The content of this report has been prepared by the authors and without any intention of infringement or harm. Images and Data have been sourced through Google, and credits or references are included

where applicable. However, these may not be exhaustive and any other omissions can be pointed out and will be duly included. Also, the authors plan to implement the business idea and hence any readers of this report should consider the contents of this report copyrighted, proprietary and confidential. Any replication or usage for the purpose of commercial activity or business profit should be done only after taking consent (in writing) from the authors.

Contents


Executive Summary:

Stress has become a major problem today. It leads to low productivity, as well as

mental and physical issues. Companies are losing $300 billion in profits each

year because of low productivity related to stress. Doctors are experiencing an

increase in the number of patients suffering from being overly stressed.

People are trying a variety of products to de-stress, buy these products have

various side-effects, or their costs may become prohibitively high. It has become

a necessity to produce a product that will be able to eliminate stress in a positive

manner and that can be used for a lifetime of stress management.

The answer to this problem is Ease-Stress Express’ De-Stressing Solutions. It is

not just a product, but an experience. It consists of a massage chair inside an

acoustically optimized cubicle with an LCD monitor and surround-sound. The

massage chair will gently relax muscles while soothing sights and sounds relax

the mind. Users will immediately feel refreshed, relaxed, and de-stressed.

The product can be customized to meet the specific needs of the user. It allows

an individual to choose a variety of sights and sounds that make each feel

relaxed. These include nature sounds, nature sights, music, motivational

lectures, or religious material and chants.


The product will initially be marketed in the Atlanta, Georgia and Charlotte, North

Carolina areas. These locations have been chosen because of their strong

industrial and business concentrations. Innovative marketing strategies will be

adopted to make stressed out nurses, teaches, emergency workers, etc as

advocates of our product and thereby unleash positive word-of-mouth and build

credibility. Displays for customers to experience the product will be positioned at

airports, trade show, schools, doctor offices, and sports events. The product will,

in large part, market itself. Once customers experience the product and feel the

benefit, they will want one immediately. A social networking website will add to

the sharing experience of each user.

The office and warehouse will be located in Smyrna, Georgia. The company will

start with approx 20 employees including 4 management, 6 sales, and 10

operations. Each director has expert knowledge of business areas, so outside

professional assistance will be kept to a minimum, in the first year. Materials for

production will be purchased locally. Assembly is fairly simple, so there will be

little lead-times between purchase orders and delivery.

The result is a product that will be unique and in a niche by itself. We anticipate

high demand, and as we show in our financial section, the paybacks are within a

couple of years with high returns for investors.

All in all, we offer investors an opportunity of a lifetime.


DeDeDeDe----Stressing Made Easy:Stressing Made Easy:Stressing Made Easy:Stressing Made Easy:

Ease-Stress Express, ESE, is a company which provides de-stressing stations.

These stations provide consumers with a way to de-stress, on their own time,

schedule, and in an environment where they want to. They are designed to allow

consumers the ability to have 30 minutes of uninterrupted time – time to relax,

unwind, meditate, and just leave all their worries behind. During this time, the

consumer can choose to take a 3-D adventure to a beautiful rainforest, quiet

waterfall, serene beach, or soar high above the clouds. They could choose to

listen to motivational speeches or expert opinions on how to maintain a healthy

lifestyle. They could choose to listen to prayers and chants from their religion of

choice. Or – they could enjoy the powerful sounds of total, unblemished silence.

Any of this, while getting a relaxing gentle message using the company’s

proprietary ESE-stressTM technology. The choice is theirs.

A refreshed mind and a relaxed body is the perfect concoction for a productive

employee.

Whatever their choice, an employer can be certain that their employees will

return to their duties, rejuvenated and blissful. ESE’s solutions, not only help

users reduce stress so that they feel better personally, but have also been

proven in improving workplace productivity.


What’s in a Name?

Ease-Stress Express, ESE, states the two main goals of the company in its

company name. The goal is to provide the customer with the ability to not only

ease their stress, but to do it on their own time and within the constraints of the

work environment. The name is designed to reflect the convenience that users

will feel while using the product, and the calmness they will experience after

each session.

Identification of Gap / Product Need:

Stress is one of the most significant problems that we face today; and somehow,

each day compounds stress-related problems even more. Family pressures,

social obligations, constant anxiety about the future, the list is endless! But for

most people - the top of the list belongs to work-related tensions and profession-

linked worries. As more and more Americans are facing tough economic times,

more and more are bringing that stress to work with them, adding to their stress

at work. The cycle continues, when they take work-pressures home to create

more friction in an already fragile eco-system.

A few facts about stress in the work-environment:

• 1 million employees are absent on an average workday due to stress

related problems - National Safety Council estimate.


• 78% of employees describe their jobs as being stressful.

• 75-90% of visits to primary care physicians are for stress related problems.

• Stress can directly or indirectly be linked to heart attacks, hypertension,

diabetes, asthma, chronic pain, insomnia, allergies, headache, backache,

various skins disorders, cancer, accidents, suicide, depression, immune

system weakness, decreases in the number and function of white blood

cells, ad infinitum.

• United Nations National Report even calls Job stress as the 20th Century

disease.

But the most important statistic for corporate America is:

• USD 300 billion is lost annually, on stress-related compensation claims,

absenteeism, reduced productivity, employee turnover, accidents, health

insurance costs, and direct medical & legal expenses.

ESE’s de-stressing solutions are designed to help employers get more

productivity out of their employees. Increased output per worker can result in

substantial revenue and profit growth for the organization. A de-stressed

employee can be an enthusiastic individual with their energy and motivation

acting as catalysts for other employees as well. ESE’s solutions are ideal for

individual employees who want to improve their quality of life and for employers

who wish to grow their businesses. ESE’s solutions are an investment that

managers recommend as they pay for themselves over and over again.


Form of Company (LLC):

Ease-Stress Express will be formed as a Limited Liability Company. There are

several reasons for this decision. LLC’s offer advantages that will benefit the

company. Members will avoid double taxation by forming as a LLC rather than a

corporation. This pass-through of income will allow less paperwork for the

company and reduce the high costs of certified accounts that might otherwise be

needed. On-line forms are available to create an LLC, and this will also help keep

costs to a minimum while still adhering to legal and tax laws.

Organization Tree:

Chief Executive Officer

(Professional Manager)

Marketing

Account Managers

Corp Comm

Operations

Production

Quality

Supply Chain

Finance & Admin

Accounting

Controller

Financing

Technology

Online Presence

Software & Content

ERP / SCM / CRM

Strategy

Forecasting

New Business Development


Marketing Plan

Mission: To create products of positive environment which provide customers

with an alternative method of reducing stress to enhance wellness

and business productivity.

Vision: To become the leading non-drug stress relieving product company in

the industry.


Marketing Mix:

Product:

ESE offers products which give customers the ability to de-stress on their own

time, and in their own environment. Each de-stressing station consists of:

1. Fully-reclining, leather, whole-body massage chair providing a

comprehensive automated massage, with heating and vibration options.

2. A 6’x10’x8’ cubicle with acoustic insulation. (Optional)

3. A 30” LCD monitor on front-facing inside wall. (Optional)

4. A programmable touch-enabled LCD console to control all aspects of the

experience, with 1 TB memory to store music, audio, video and animation.

5. An acoustically-optimized headset to provide high-fidelity sound.

Metal Framing

Acoustic Insulation

Recycled Plywood

LCD Panel

Surround Sound

Massage Chair

PRODUCT PLACE PRICE PROMOTION

PEOPLE PROCESS PHYSICAL EVIDENCE


Users can decide on how long they want to use the station or employers can fix

an upper time limit. Recommended activity time is 30 minutes to 1 hour. Users

also have the flexibility of choosing between a variety of music, motivational

audio lectures, 3D animations or high-definition videos that have been selected

by experts and are proven in relaxation therapy. The cubicle and monitor are

optional and are targeted towards work-environments where there is a lot of

noise and surrounding activity. These will be used for creating a sound-proof

ambience and to enhance the visual aspect of the experience.

Place:

Ease Stress Express will begin marketing in the metropolitan areas of Atlanta, GA

and Charlotte, NC in year 1. The combined population of these two metro areas

is over 7 million (Atlanta – 5.4 mn, Charlotte – 1.7 mn), and both cities have

witnessed significant growth in the last decade.

While Atlanta has the fourth-largest concentration of Fortune 500 companies and

is the primary transportation hub of the South-East, Charlotte has grown to

become the second-largest banking center in the US. A large number of

manufacturing giants have production facilities in these two cities. Similarly,

service industry companies are major employers as well. Both cities are well

connected by air, road, rail and are within a day’s driving from major US ports.

The two cities have also been relatively less hit during the economic downturn

and are expected to bounce back quicker than other US cities.


The five year plan will first see ESE spread out into the South-East (in years 2 &

3), in the six states of Georgia, North Carolina, South Carolina, Florida,

Tennessee and Alabama. The target markets in these states would be decided on

the basis of home industries, employment rate, employee base, tourism

popularity, economic status, etc. The third phase of the rollout in years 4 & 5,

will see ESE’s coverage grow to the entire East Coast, and the states of

California, Texas and Nevada. The intent will be to target states and cities with a

high concentration of companies (CA, TX), as well as cities which are alternative

destinations for fun, relaxation and having a good time (NV, CA).

ESE’s manufacturing facility as well as our distribution center will be located in

Atlanta, Georgia. There are a number of prospective unused facilities that are

being considered. Negotiations are on with property managers and the final

choice would be made depending on the best deal offered.


Price:

Pricing for the product will be based on a cost-plus model. The raw material,

labor and variable overhead costs will be covered by the price of the product and

a substantial margin would be added to recover the initial capital costs quickly.

Since the business works on a low initial investment, but very high working

capital model, therefore the product price will need to also account for short-

term financing costs.

There are three product categories: The “Regular” model will comprise of the

massage chair, the control console and the headset, and will be priced at

$12,000/- (incl. tax). The “Deluxe” model will comprise of an additional sound-

proof cubicle, and the price of the model would be $25,000/-. The target market

would be manufacturing and service setups which have a lot of physical activity

happening on their premises, which leads to high decibel levels. The “Elite”

model will include a 42” LCD screen and a vast selection of content. Since the

target market for this will be the CXO levels and high-end business users, the

price tag for the Elite model would be $50,000/-.

The Deluxe model would come with six months of free upgrades available at 30-

day intervals. The Elite model would be offered with a two-year warranty, and

free upgrades every 30 days to new content added on ESE servers.

- 10,000 20,000 30,000 40,000 50,000 60,000

Elite

Deluxe

Regular Price in $ per unit


Promotion:

The promotions strategy would be implemented in multiple phases.

The most critical aspect of the promotions strategy would be to generate positive

word-of-mouth publicity through viral marketing and innovative advertising

campaigns. A social-networking website would be at the crux of this strategy. A

representative webpage for a user is shown in the image below. This has been

explained in greater detail in the operations section. The target segment would

be centered around high-stress jobs like teachers, nurses, emergency services,

stock brokers, etc. Getting a positive reference from these would carry additional

credibility as these professionals desperately seek methods to de-stress

themselves during and after a hard-day’s work.

www.your-de-stress-zone.com

HOME MUSIC VIDEOS CHANTS SAVED PROFILES FRIENDS REFER BUY MORE

TRANCE WATER GANDHI

Enjoying a massage & a motivational lecture by Gandhi.

Feeling better already.

WHAT FRIENDS FIND RELAXING

MUSIC

SIMILAR INTERESTS

WHAT FRIENDS RECOMMEND

GOSPELGANDHI PARTNERS


The initial plan would be to create awareness of our product and the advantages

of ESE’s de-stressing solutions in Atlanta and Charlotte. The Sales team would be

advocates of the products and would double-up as the Business Development

team. This would be a five member team serving different geographical areas.

A two-pronged awareness strategy would be used: 1) Direct 1-on-1 interaction

with CXO level executives and HR departments as well as soft-surveys with

employees in various formats about their interest in our product. 2) Non-

conventional Trade-show participation – i.e. tying up with organizers for

providing free de-stressing stations and taking permission to distribute catalogs

& product flyers. Mobile billboards and mobile demo stations will also be

circulated through the city at peak traffic hours and will be targeting employees

with free demo sessions in parking lots, cafeterias, etc.

The second phase of promotions would coincide with the commercial launch of

the product and would be executed by having high-visibility demo stations at

increased footfall & wait-time locations like Airports, Hospitals, Dentists,

Government Offices, etc.


The third phase of the strategy would come 12-18 months later, and would be to

have an all-encompassing media campaign to supplement the efforts of the

direct sales team. This media coverage will consist of billboards, promotional

material, radio, internet and television advertising. Expositions and Conferences

would still be a significant part of the promotions strategy. ESE will become a

member of the local Chamber of Commerce in both metro target areas, as well

as joining other groups, such as SHRM, which will grant access to C-level

managers and HR representatives.

Extended Marketing Mix

In addition to the original 4 P’s of marketing, an additional 3 P’s have been

added to make up what is known as the extended marketing mix.

People:

The people, who are initially making up the Ease-Stress Express, will be the

original owners that will recruit additional personnel for sales team and

operations. Incremental recruitment will be done through the operational year

with the scaling of business. Administration, finance & accounting, technology

and delivery personnel will be added as needed. Trainees, willing to work for free

but getting credit hours would be encouraged, and will form a significant part of

the work-force. This would allow us to keep manpower costs down.


The customer segments to be targeted can be broadly classified as those in high-

stress jobs (like teachers, nurses, emergency services, etc) and high-waiting

(high-boredom) locations (like airports, hospital waiting rooms, post offices, etc).

A minor customer segment will be trade show participants (exhibitors can use

our massage chairs as a method to attract visitors to their booths).

Process:

The manufacturing process is explained in more detail in the Operations Plan.

The responsibility of the sales process (including prospecting, pre-sales

marketing, actual sale, after-sales support, up-selling/cross-selling) by which the

product will reach the consumers will lie with the Marketing & Sales team.


Cold-calling and pre-decided appointments will be part of the scheduling process

for the sales teams. Additionally, they will have to bear responsibility for the

initial awareness building and subsequent advocacy of the product. The entire

customer-approach to after-sales cycle is shown below. The sales team would

also be in-charge of after-sales support once the installation has happened at

customer’s facility. A basic functional understanding training module would also

be administered by the sales team during installation. Maintenance and warranty

will also be discussed at the time of installation.

Physical Evidence:

The tangible aspect and benefits of the product notwithstanding, there will be

additional elements associated with the service delivery, which will also be used

for customer delight. This will include continued follow-up with current customers

to ensure their satisfaction of the product and service.


Regular updates for the software/content as well as periodic maintenance will

add to the life and value associated with the product. It is the word-of-mouth

advertising that will drive the success for the product. Another form of physical

evidence will be the demo sessions that will be offered at various trade shows

and conventions. A lively website and attractive marketing collaterals will also be

key physical evidence attributes.

Competitive Scenario:

While the narrower purview can be considered to include the wide range of

automated massage chairs; however the broader context would include any

activity or product that can relieve stress.

We carried out a representative survey to consider how people map the costs,

risks and side-effects associated with any stress-relieving techniques with the

corresponding benefits that the techniques bring. The summarized chart is given

below.

The survey consisted of a rating matrix that responders had to fill. The matrix

(with the average ratings) is shown below. We also asked the responders to list

some risks associated with each technique. This would explain important criteria

that people consider while doing a risk-benefit analysis related to any stress-

relieving technique.


IDEAL

COST, SIDE EFFECTS

DE-S

TR

ESSIN

GB

EN

EFIT

S

Low High

Low

Hig

h

Drugs,

Liquor

MedicationChurch,

Religion

Pets

Recreation,

Sports

Food

Yoga,

Meditation

ESE-

De-Stressing Solutions

S. No. Technique 1 2 3 4 5 6 7 8 9 10 Associated Risks

1 Medication X Side Effects, Addiction, Money, Health

2 Recreation / Sports X Injuries, Cost, Convenience

3 Alcohol / Drugs X Consequences, Addiction, Social Status, Health

4 Pets X Commitment, Convenience, Lifestyle Change, Immediate Results?

5 Yoga / Meditation X Cost, Convenience

6 Church / Religion X Choice, Convenience, Immediate Results?

7 Food X Health, Weight, Cost, Overall Effectiveness?

8 Others

9 ESE Solution X


SWOT Analysis:

Strengths:

• Local job creation.

• Belief in company product.

• Strong & unique value propositions - like helping decrease job related illnesses, increasing employee & company productivity, increasing morale / job satisfaction.

• Cheaper than other commercial stress relievers (Gyms, Food, Drugs, etc.).

• Made from local and / or recycled material. (“green effect”)

• Quick order-to-delivery cycle.

• Customizable.

Weaknesses:

• Professional management leader (founders are strong in their respective areas – but lack management experience).

• Direct / pre-existing contacts with CXO levels.

Opportunities:

• Potential to partner with other stress-relieving products to market to customers.

• Potential to partner with content providers (Books, videos, digital wallpapers, candles, herbal teas, supplements, etc).

• Downward integration by becoming a complete store for various de-stress products.

• Global sales through a franchising/licensing model.

• Migration opportunities into a licensing/content/software model for getting sustainable revenues and high profit margins rather than being dependent on product sales.

Threats:

• Businesses trying to reduce overhead may not be willing to purchase in current economy.

• Lack of initial financing.

• Other established stress-relieving products.

• Location / convenience of other stress relieving products.


Porter’s Competitive Forces Model:

Bargaining power of Suppliers: (Risk – Low)

ESE will be purchasing materials and

components that can be bought

through many different suppliers.

This allows ESE the advantage of

keeping costs down and prices at

levels that will allow us to meet our

target gross profit.

The possibility of easy substitution of suppliers will also keep vendors on their

toes, thus ensuring quality materials at competitive prices. Long Term Supply

Agreements and sourcing from low-cost countries/vendors will also add to the

profitability.

Bargaining power of Customers: (Risk – Low)

ESE will be able to obtain and retain customers through customer delight,

product differentiation and brand loyalty. ESE provides a unique market niche in

the stress relief industry. Since the universe of target customers is so large and

because the customer base will not be negotiating for orders together, therefore,

the threat of collective bargaining from customers to reduce prices or offer

higher value addition is minimal. However, ESE will be proactive to reach-out to

customers to incorporate their needs in a customized package to ensure

repeated customer-delight.


New market entrants: (Threat Level - High)

There are many companies entering the stress relief product market. Most

concentrate on separate items such as candles, hand massagers, music, herbal

supplements, etc. These companies have low entry barriers for getting into the

market. However, companies attempting to enter the market to duplicate ESE

will have a relatively harder time due to financing requirements as well as the

late-mover disadvantage. ESE is also trying to build a strong Intellectual property

portfolio to discourage new market entrants, but till the time this is in place, the

risk from new market entrants remains high. We will be mitigating the risk by

utilizing our first mover status and quickly building mind-share and market-share

to entrench ourselves in the market-space.

Substitute products: (Risk – Low)

While there can be many stress-relieving products or lifestyles, there are few

true substitutes for the ESE product. ESE is a unique experience that provides

multi-dimensional relaxation by incorporating sight, sound, and touch-related

relief at the same time that cannot be gained by using individual products offered

by other businesses. Hence, the threat from substitute products is low.

Traditional Competitors: (Risk – High)

The stress relief market is an ever-increasing one. It is anticipated that

companies will continue to produce new products and various nutritional methods

for reducing stress. Lifestyle changes can also be considered as traditional

competitors. These pose a high threat level.


Operations Plan

Facilities:

Location:

The manufacturing plant will be located at Olympic Industrial Blvd, Smyrna, GA.

This location is very near I-75 and I-285, giving us an advantage of easy access

to several roads. This location will also allow us to offer a faster delivery to

customers located in Georgia and neighbor states.

The space to be utilized for the assembly facility is actually part of a leased

property, and the owner will be sub-letting 14000 sq. feet. for our operations.

Another advantage of the facility is a back-door access directly to a rail-road

which will allow us to move goods and products quickly when we expand into

other geographies.

Proximity to raw material vendors is

another key reason for selection of

this property.

The assembly facility will have a total 14000 sq ft to be internally divided as:

• 6500 sq ft for assembling area;

• 3300 sq ft for inventory;

• 2000 sq ft for quality testing;

• 1300 sq ft packaging & delivery;

• 700 sq ft for offices; and

• 200 sq ft for lunch area.

A showroom will be located in Buckhead or Alpharetta, where there are high

concentrations of corporate offices and high-end hotels. The showroom area will

have 2000 sq ft, in which, 1600 will be designated to the showroom and 400 sq

ft will be converted into offices, including a small meeting room of 200 sq ft.

Office

space


Cost of Facilities:

The assembly plant located in Smyrna will have a starting lease of 3 years, with

provisions to extend it by another two years. The first six months have been

negotiated to have zero rent and for the balance duration of the contract, the

rent has been negotiated at $3,000.00 per month – which is nearly 50% of the

current market prices. The lease at the showroom location will be for 1 year, with

an option to renew annually. The monthly payment negotiated is $5,500.00

($66,000 for the whole year).

Equipments:

The company will be purchase different items for both locations. For the

Showroom space, all the office supplies and furniture can be bought after a price

comparison between stores like: Office Depot, Staples, Ikea, and Office Max.

Laptops and laser printers will be purchased from HP or Dell.

Showroom Equipment:

Equipment Quantity Price Total

Laptops 4 $600 $2,400

Desks 5 $250 $1,250

Executive chairs 4 $300 $1,200

Regular chairs 12 $120 $1,440

32” TV monitor 1 $350 $350

Couches (waiting area) 3 $500 $1,500

Cabinets 8 $150 $1,200

Laser Printer 1 $400 $400

Offices supplies $600

Total $10,380


Assembly plant Equipment:

For the assembly location in Smyrna, the equipment will be purchased from

different stores, as below:

• Power tools, Compressors, Miscellaneous Tools – Home Depot, Lowes or

Arbor Freight;

• Tables and chairs – Costco or Sam’s Club;

• Steel shelves – Cisco Eagle;

• Metal Cabinets, Office supplies, Office chairs, Office supplies – Office

Depot, Office Max, Quill;

• Delivery Truck – private sellers (Isuzu NPR HD);

• Laptops and Laser Printer – HP or Dell.

Equipment Quantity Price Total

Power Tools $11,800

Lunch area tables & chairs $380

Steel Shelves 10 $600 $6,000

Metal Cabinets 8 $270 $2,160

Delivery Trucks 2 $30,000 $60,000

Compressors 2 $650 $1,300

Miscellaneous Tools $3,000

Office chairs 4 $120 $480

Laptops 4 $550 $2,200

Laser Printer 1 $400 $400

Office supplies $400

Total $88,120


Estimated Costs at Startup:

Item Price Total

Utilities (monthly) $4,000 $48,000

Equipments (once) $98,500 $98,500

Corporate Website (once) $2,600 $2,600

Phone (monthly) $1,000 $12,000

Leases (1 year) $84,000 $84,000

Construction Supplies (once) $8,000 $8,000

Inventory $100,000 $100,000

License & Permits $4,500 $4,500

Total $357,600

Permits:

To being operating an assembly facility in the city of Smyrna, the company will

have to contact the Business License Division that administers

business/occupation taxes; and then apply for the city’s business license.

Generally, business license fees or occupation taxes are based on projected gross

revenue derived by the business from within the State of Georgia for the

calendar year or the total number of employees operating from the Smyrna

location in the state of Georgia. The fee charged is the larger amount from the

two fee schedules ("Business license guide," 2007).

Before opening the showroom in downtown Atlanta the following procedures

have to be done: apply for the Business Tax Certificate, which are issued on a

calendar year basis and must be renewed each year by February 15th; register as

a new business; verify zoning laws – if any modifications are needed, then an

application needs to be made.


Business and Occupation taxes for the city of Atlanta are based upon total

reported gross receipts generated from the business location within the State of

Georgia. The tax for the current year is based upon actual gross revenue.

Taxes are computed (after a Flat Tax of 50.00 for the $10,000) by using the rate

appropriate to your Business Tax Class. The business will be assessed on

maximum gross revenue of $100,000,000 in any one-tax year ("Business license

tax," 2010).

Production Plan:

Production of an ESE de-stressing station will start after a sale has been made,

and the customer has submitted a formal Purchase Order. Every de-stressing

station will be individually built after receipt of the order. This allows us to offer

our customers a choice of three types of stations (Regular, Deluxe and Elite) as

well as to minimize our inventory requirements. Since the factory is located next

to the material suppliers, there would not be a long lead-time for receipt of

correct raw materials – this would keep our materials inventory levels down too.

Production will be divided into the following stages: order receipt, inventory

check, supplies order, manufacturing, mid-inspection, repairs, finished goods,

second inspection, quality control, packaging and Ex-Works. These stages have

been defined in brief below.


Order receipt: At this stage, the sales department will inform the production

line that a sale has been made and a Purchase Order has been received. The

sales person will specify the model and the expected date of delivery.

Inventory check: Once the order receipt is received and complete, the

inventory will be checked to find all necessary parts, and to keep these ready.


Order balance supplies: In case of any missing parts to complete the unit,

these will be ordered from the neighboring suppliers with a 24-hour revert time.

Inspection: All ordered parts will be inspected on receipt. Parts will be tested

for flaws and quality defects.

Assembly: After all necessary parts are available, workers will start to build and

assemble the walls (sides) and the ceiling. The metal framing and acoustic

materials will be installed as per the unit ordered.

Mid testing: Phase 1 testing would include checking the structure sturdiness

and the acoustic insulation. Necessary tests will be done for the same. These

procedures will ensure elimination of problems that can prove costly in terms of

money and time at the end.

Repairs: If there are any faults identified, the corrective repairs will be carried

out before continuing. After completion of the necessary repairs a retest will be

done, to certify that everything runs normally.

Finished Goods: This is the stage where assembly will be complete, including

surround-sound speakers inside the cubicle; and LCD consoles testing with the

massage chair as well as the LCD TV + remote.

Quality Control: An independent assessment from a non-production team

member will be done to test various aspects of the de-stressing unit.

Packaging & Delivery: Each component will be disassembled, packaged and

transported carefully to the customer premise for final installation.


Assembly time estimation:

When a customer places an order, the estimated sales-to-delivery cycle for each

order will be as following:

Model Estimated Production Time Estimated Delivery & Installation Time

Regular 2 weeks 1 day

Deluxe 2.5 weeks 2 days

Elite 3.5 weeks 3 days

Estimated cost of production:

Model Components Cost of Production Gross Margin

Regular • Completely reclining, plush leather,

fully accessorized massage chair.

• LCD Console

• Acoustically optimized Headset

$ 7,800/-

35%

Deluxe • Completely reclining, plush leather,


• LCD Console.

• Metal-framed, recycled-plywood,

sound-proof box.

• Acoustically-optimized surround-sound

speakers.

$ 16,500/-

34%

Elite • Completely reclining, plush leather,


• LCD Console.

• Metal-framed, recycled-plywood,

sound-proof box.

• Acoustically-optimized surround-sound

speakers.

• Turkish carpet.

• 30” LCD panel with remote.

$ 22,500/-

55%


Production Quantity Estimation:

Management has a sales forecast of 300 Regular model de-stressing stations for

the whole year of 2011. The Deluxe model has a sale forecast of 90 units.

Finally, the Elite model has a sales forecast of 12 for the entire year. Additionally,

another 20 Elite units will be needed in the first month of operations to act as

demonstration and marketing units – these will be considered as inventory.

Based on these numbers, production of the stations will have to be fast, thereby

leaving room for no errors. Thus, an efficient workforce and work process will be

of paramount importance. Assembling the right manpower, doing proper

scheduling and correct labor division among workers will help to improve

efficiency of the company’s operations.

The production plan will be to assemble 10% extra units as a safety buffer. Thus,

Regular models assembled would be 330 units, 100 Deluxe models and 34 units

of the Elite models (incl. 20 models for inventory/marketing/demonstration).

Workforce:

Initially, the operating team would comprise of:

Production/Assembly line: 10 employees (incl. 2 for Quality Control and 2 for

Packaging).

Installers: 6 employees to move around and assemble the finished product at

the customer’s location (incl. 2 drivers).


Inventory:

Our inventory will be using the JIT (just in time) system. This system will allow

our company to buy the necessary materials when we have a new order.

Thus, inventory & warehousing costs will be low. However, an emergency supply

of all items would be maintained as buffer stock. Additionally, 20 Elite models

that will be used for marketing and demonstration purposes will be considered as

inventory and will contribute to the inventory costs.

Using this system will provide us with the benefit of minimizing any inventory

taxes at the end of the fiscal year, which is the law in Georgia – a huge

disadvantage for starting businesses.

Suppliers:

The company will initially maintain a few choice suppliers – which are within the

immediate proximity of the company’s facility. As market share increases, ESE

management will look towards suppliers in low-cost economies. Also, long-term

supply agreements and economies-of-scale discounts would be negotiated.

The following list gives the names of the initial suppliers:

• Metal framing – Dietrich UltraSteel Framing

• Acoustic Insulations – Dynamat

• Recycled plywood – Home Depot


• Fabrics – Charlotte Fabrics

• Massage chair – Brookstone

• 30” monitor – Brands Mart

• Surround sound systems – Brands Mart

Delivery & Assembly:

Delivery will be done by the company’s trucks with the company’s own delivery

team, which are also the installers. A team would be comprised of 3 trained

installers (incl. 1 doubling up as driver). The trucks will be equipped with GPS to

avoid any delay in the delivery process.

Both trucks will be internally prepared to accommodate all parts, with proper

packaging done - so that any transportation-related damage is minimized. In the

trucks, all sides will be covered with expanded polystyrene foam; the floor can be

covered with heavy duty carpet.

Each de-stressing unit’s sides and roof will be wrapped in plastic bubble-wrap to

prevent any damage while transporting. The chair and other items would be

wrapped in moving blankets & boxes and further ensconced in heavy bubble

plastic.

Installers will be trained to minimize wastage of packing material, so that the

same material can be re-used, thereby reducing packaging costs.


Warranties, Upgrades, Support:

Standard warranties of 1 year will be given for all models. The warranties will

cover parts failures, workmanship and assembly of the station. Any other issues

such as misuse or intentional damage will not be covered. Extended warranties

will be available to purchase for all customers after the first year of use.

A customer will be always allowed to upgrade the station, without having to buy

a whole new unit. This customer will have to pay only the price difference for the

upgrade. Also, for the Elite model customers, they will receive 6 months of free

software upgrades in 30 day intervals.

Tech support or training will be offered to those customers that purchase any

Regular or Deluxe model at the time of installation. Customers buying the Elite

model will receive the same tech support and training at the installation, plus 30

days free of charge tech support over the phone.


Financial Plan:

ESE intends to do gross sales of $ 6.45 million in its first year of operations. We

are also projecting a 5 year compounded annual growth rate of 45% to reach $

41.6 million in 2015, which will be our fifth year of operations. As explained in

the preceding sections, the growth curve is expected to remain steep because of

the way the sales territories and market share will be increased.

The company is also looking at gross margins of 35% - 37%. With increased

production efficiencies and economies of scale, there is a further possibility for

higher gross margins. The Net profit (after tax) is expected to be $ 470,000 for

the first year, with 2015 net profit projected at $ 6.5 million (16% margin).


This is a very healthy margin for a production/assembly company. However, it is

not as high as pure-play software or content companies. The long term financial

goal of the company is to move towards even higher profit margins to emulate

the software sector. Since, the company’s strategic vision is also to move

towards a more software-focused and social-network oriented model to garner

sustained revenues, hence a further upside to profit margins should be expected

by investors.

The company is also maintaining a healthy net cash flow over the five years.

While the first year will have some negative cash flows on account of initial

inventory building and marketing expenses, the subsequent years will witness

good cash flows. Also, the ending cash balances will steadily keep increasing.

Efficient use of cash will include repaying debt early, buying out equity partners

and looking for quicker international markets investments.


Initial Investments:

The four partners will initially be pooling in $25,000 each to make a pool of

$100,000. We have also been able to secure $400,000 in SBA Financing (Small

Business Administration) from Bank of America at very healthy interest rates. An

additional $500,000 is being sought from angel investors to take the paid-up

capital to $600,000 and initial cash available at $1 million. The money will be

used for buying equipment, working capital needs and for payment of salaries.

Valuation:

We have used the Gordon Model to calculate the value of the business at the end

of year 5.

Terminal Value = (Cash Flow of the Terminal Year) * (1 + g) / (ks - g)

g = annual constant growth rate of cash flow = 3%

ks = discount rate required by investors = 40%

Cash Flow Terminal Year = Year 5 cash flow = Year 5 net after tax

income plus year 5 depreciation) = 6,533,135+130,159 = $ 6,663,294.

Therefore, company value = $ 6,663,294 * (1+3%) / (40%-3%)

= 18,549,169/- = ~ $ 18.5 mn.

This is approx 3x of Net profit and 7x of Net Cash flow for Year 5, which is also

as per Industry Standards.


References:

City of Atlanta, Business Tax Division. (2010).Business license tax instruction manual. Atlanta, GA:

Marietta City, Business License Division. (2007).Business license guide. Marietta, GA:

Employee Energizer. (2010). Employee Energizer Facts. Retrieved November 2, 2010 from

http://www.employeeenergizer.com/ee_facts.php

Hareyan, A (2004, August 7). Workplace Stress: Expensive Stuff. Retrieved November 9, 2010

fromhttp://www.emaxhealth.com/38/473.html

Pohl, C (2010 , October 19). Less Stress, More Profit – The Value of Corporate Stress Management Training. Retrieved

November 9, 2010, from http://www.evancarmichael.com/Work-Life/1877/Less-Stress-More-Profit--the-Value-of-

Corporate-Stress-Management-Training.html

Wittern, M (2007, February 6). $300 Billion Cost of Workplace Stress. Retrieved November 9, 2010 from

http://denver.yourhub.com/Parker/Stories/Business-News/Story~179652.aspx

Image credits:

Company Logo - http://artandbusinessconsulting.com/services_we_offer.htm

Massage Chair - http://image.made-in-china.com/2f0j00HevTGCRaRPkE/Deluxe-Massage-Chair-DF-1688F5-A-.jpg

LCD panel - http://www.bhphotovideo.com/c/product/716857-REG/NEC_P551_AVT_S521_AVT_LCD_Display.html

Office table - http://t3.gstatic.com/images?q=tbn:2IEDxehzPOMO1M

Business Traveler – http://static-

p4.fotolia.com/jpg/00/08/05/43/400_F_8054368_Zm9xzZaLx5jNe8g7cx25JqcrvhdLcQT1.jpg

Trade show - http://www.tucsonexpocenter.com/images/trade_show-3.jpg&t=1

Tired nurses: http://news.rutgers.edu/focus/issue.2007-11-27.8621072070/nurses_-_tired.jpg

Happy Nurse: http://www.plu.edu/~beckersl/img/nurse.jpg

Tired teacher: http://www.crossdaily.com/pictures/105/T/Tired_Sunday_School_teacher_105050473.jpg

Happy teacher: http://www.wcasd.net/literacy/Teacher%20reading.gif


Angry business traveler - http://www.featurepics.com/FI/Thumb300/20100219/Airport-Delay-Cartoon-1464671.jpg

Business traveler - http://s3.amazonaws.com/pixmac-preview/000045626437.jpg

Tired employee - http://www.lrionline.com/wp-content/uploads/Stressed+out_1727_18802195_0_0_9206_300.jpg

Happy employee - http://t1.gstatic.com/images?q=tbn:Ua3lBZnkSSplZM:http://images.clipartof.com/small/31322-

Clipart-Illustration-Of-A-Happy-Red-Haired-Computer-Geek-Man-In-A-Blue-Suit-Working-On-A-Computer.jpg&t=1

Nurse: http://comps.fotosearch.com/comp/UNN/UNN590/medical-clothing-chart_~u14431432.jpg

Firefighter: http://www.clipartreview.com/_images_300/A_firefighter_running_with_a_fire_hose_100326-154761-

914009.jpg

Cops: http://t0.gstatic.com/images?q=tbn:KMZkyDChZKYZCM:http://images.clipartof.com/small/31326-Clipart-

Illustration-Of-A-Male-Caucasian-Police-Officer-Standing-Proudly-With-His-Black-Female-Partner.jpg&t=1

Teacher: http://www.cartoonclipartworld.com/school/images/77002_500.jpg

Employee: http://drbenito.co.uk/wp-content/uploads/2010/03/0511-0703-0118-

4212_businesswoman_multitasking_clipart_image.jpg

Plane: http://www.airventures.net/Portals/2/plane%20clipart.jpg

Waiting room: http://www.fotosearch.com/bthumb/IMZ/IMZ007/rhu0021.jpg

Mobile billboards - http://www.guerrillabillboards.com/mobile-billboard-images/madeyoulook-mobile-outdoor-advertising-

truck.jpg

Airport lounge - http://www.holidayextras.co.uk/images/hximages/airport-lounges/stansted-lounge-3.jpg

Trade show massage - http://www.mymassageguy.com/Images/chair.gif

Facility photo+layout -

http://www.loopnet.com/xNet/MainSite/Listing/Profile/Profile.aspx?LID=16845962&SRID=1306301738&StepID=101

Appendix A: Sales Projections – Year 1.


Appendix B: Sales Projections – Years 1 to 5.


Appendix C: Projected Income Statement – Year 1.


Appendix D: Projected Income Statements – Years 1 to 5.


Appendix E: Projected Cash Flow Statement – Year 1.


Appendix F: Projected Cash Flow Statements – Years 1 to 5.


Appendix G: Projected Balance Sheet Statements – Years 1 to 5.


Appendix H: Selected Financial Ratios.

AcknowledgementAcknowledgementAcknowledgementAcknowledgement

A Spanish missionary was visiting an island when he came across three Aztec priests.

“How do you pray?” the missionary asked.

“We have only one prayer,” they answered. “We say, ‘God, you are three, we are

three. Have pity on us.’ ”

“A beautiful prayer,” said the missionary. “But I’ll teach you one even better.”

The padre taught them a prayer and then continued on his path of evangelism. Years

later, when he was returning to Spain, his ship stopped again at the island. From the

deck, the missionary saw the three priests on the shore and waved to them.

Just then, the three men began to walk ON the water toward him.

“Padre! Padre!” cried one of them, approaching the ship. “Teach us again that

prayer which God heeds. We have forgotten how it goes.”

“It doesn’t matter,” responded the missionary, witnessing the miracle.

Similarly, a teacher is not one who educates, but one who can make his students understand the magnitude of his teachings. A teacher is never petrified to lead by example but also knows when to step back into the shadows and allow his students to develop into their own persona and spirit. A teacher is always ready to guide but is modest enough to listen to any silly idea his students put forth. We are grateful to Prof. Tom Wichser who personifies these virtues and who has guided us through this project. He gave us a free hand allowing us to learn from our mistakes, while at regular intervals kept making astute observations which helped us navigate through ubiquitous information for this significant project. We would also like to thank Lisa Rogers, who started off with the group and gave some very valuable inputs to the plan, but had to leave midway for personal reasons.

Laurie Chester Alessandro Lima

Pulkit Bhatnagar

Business plan - Ease-Stress De-stressing Stations - Full Report

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