Hey Hey & Herbs
Hey Hey & Herbs offers Yr 1 Soft Drinks, Beer; Yr 2&3 Cent Candy and Snacks to all size Sari Sari stores in operation area. The business has a strong market position and a coherent strategy. It has established clear steps to achieve its objective of becoming the primary soft drink distributor for the puroks within the barangy over the next 3 years.
Hey Hey & Herbs has set targets that they are committed about achieving. Next year the business will achieve sales of P1245400. Sales will grow by 12 percent each year to reach the figure of P1959661 at the end of the period. By the final year of this plan the business will be achieving a net profit of P560102. This will represent a good return and provide sufficient retained earnings for future development plans.
Hey Hey & Herbs is formed as a Sole Proprietor. This is an appropriate legal structure for this type of business and will fit well with its objectives. The management team will review this structure as the business develops.
Hey Hey & Herbs is well placed to offer Yr 1 Soft Drinks, Beer; Yr 2&3 Cent Candy and Snacks in the market. The management team have the experience and competencies to deliver the targets they have set themselves.
The General Manager has knowledge and experience of Marketing Director of large globally known brand. Knows management requirements for SME business..
Logistics also local and has developed expertise in scheduling and rotating distribution., Logistics, has developed expertise in Knows the community in depth and the complexity of routing deliveries..
Admin is organized and has a good rapport with community., Customer Service, is goal driven and brings knowledge of Knows most target market shop owners and has both sales and call center experience as CSR..
The management team are committed to growing the business by providing excellent customer service and building a strong credible brand. This will be demonstrated through their trustworthy relations with customers and other stakeholders. The management team take their responsibility seriously and are committed to an ethical approach to business.
In summary, Hey Hey & Herbs has the appropriate legal form, resources, values and management team to succeed. The combined effect of these factors provides a strong foundation to achieve a robust and profitable business.
Hey Hey & Herbs intends to target all size Sari Sari stores in its area with its Yr 1 Soft Drinks, Beer; Yr 2&3 Cent Candy and Snacks. This market represents a good opportunity for the business to capitalise on its Local owner with good community relations. we will provide stock rotation to keep the market live. (advantage) This will provide a strong market position from which to develop the business.
Hey Hey & Herbs faces some competition, as would be expected in this attractive market.
Company X is the closet competition. it has strengths but we can capitalize on its weaknesses. is the main competitor. It has some strengths, but its critical weakness is its distance and meeting demand. . This will restrict its capacity to compete.
Company Y also has a weakness that diminishes its effectiveness in the market. also has a weakness that diminishes its effectiveness in the market. In this case the weakness is its ability to manage themselves to be profitable. Also do not have solid supply line..
Company Z also does not maintain a specific delivery program or have stock when needed. is also a potential competitor, but again it has an exploitable weakness. In this case the weakness is its
Hey Hey & Herbs will be able to exploit the weaknesses of its competitors to gain market position.
In summary, the high demand for the Hey Hey & Herbs offer and the weaknesses identified in its main competitors provide an attractive market opportunity.
Hey Hey & Herbs has the objective of becoming the primary soft drink distributor for the puroks within the barangy over the next 3 years & over the next five years. The management team has identified key steps to achieve the five year objective and exploit the identified opportunities. These will be systematically implemented over the period.
Step 1: Secure required supply channels to meet year one break even target.
Step 2: Build client base taking on the retailers that previously purchased from Company Y and Company Z.
Step 3: Use an attractive MDF provided by Brand to attract further Sari Sari shops.
Step 4: Maintain warehousing and management to meet stock and supply requirements.
Step 5: Maintain solid supply agreements ensuring our stock is always ready to deliver.
The selection and sequence of these actions has been carefully chosen to produce the full potential of the business opportunity and ensure that the targets are achieved. The management team will continuously monitor the business performance against the targets and make necessary adjustments. At all times the focus will be on achieving the key objectives.
In summary, Hey Hey & Herbs has clearly identified opportunities and a systematic plan with clearly articulated stages to achieve its five year objectives.
Table 1 below shows a projected income statement for the five years of the plan. This demonstrates how the targets will be achieved. The projections have been carefully constructed and are based upon realistic assumptions (see appendix A).
In the first year of the plan Hey Hey & Herbs will achieve sales of P1245400, a gross profit of P896688 and a net profit of P196688. In 2020, midway through the plan, the business will achieve sales of P1562229, a gross profit of P1124805 and a net profit of P353055. By the end of the plan the business will achieve sales of P1959661, a gross profit of P1410956 and a net profit of P560102.
The figures demonstrate a steady growth in sales and gross profit during the period of the plan. The business becomes profitable in year one of the plan, which is earlier than many similar rivals and demonstrates the strength of the business model. This will provide a solid financial foundation to develop its plans. The average sales growth of 12 percent across the period is healthy and demonstrates the potential of the business. The predicted sales and growth are realistic given the strengths of the business and the attractiveness of the market.
Years........ ....2018 ....2019 ....2020 ....2021 ....2022
Sales........ .1245400 .1394848 .1562229 .1749697 .1959661
Cost of Sales ..348712 ..390557 ..437424 ..489915 ..548705
Gross Profit. ..896688 .1004291 .1124805 .1259782 .1410956
Expenses..... ..700000 ..735000 ..771750 ..810337 ..850854
Net Profit... ..196688 ..269291 ..353055 ..449445 ..560102
Table 1: Income Statement Forecast 2018 to 2022 (P).
Table 2 below shows a projected cash flow for the five years of the plan. This demonstrates the liquidity of the business during the period.
Hey Hey & Herbs has based the cash flow on the assumption that they will be offering customers 10 days credit. This is in line with industry norms and should be competitive within the market. Suppliers are assumed to offer 30 days credit. This is also realistic given the current practice within the industry. The business achieves a positive cash carried forward position in year one. By the end of the five years the business has a positive cash position of P1969992. This shows the robustness of the business and its ability to generate cash to support future plans.
Years........ ....2018 ....2019 ....2020 ....2021 ....2022
Cash from A/R .1211279 .1390753 .1557643 .1744560 .1953908
Cash to A/P.. ..320050 ..387117 ..433571 ..485600 ..543872
Expenses Paid ..700000 ..735000 ..771750 ..810337 ..850854
Net Cash..... ..191229 ..268636 ..352322 ..448623 ..559182
Cash B/Fwd... ..150000 ..341229 ..609865 ..962187 .1410810
Cash C/Fwd... ..341229 ..609865 ..962187 .1410810 .1969992
Table 2: Cash Flow Forecast 2018 to 2022 (P)
Hey Hey & Herbs has a coherent plan for future success. It is well positioned to target all size Sari Sari stores in local. The management team have provided a clear objective of becoming the primary soft drink distributor for the puroks within the barangy over the next 3 years in the five year period. The financial targets have been shown to be realistic given the strengths of the business and its strategic position. The management team is committed to achieve the strategic goals. They have a clear plan of strategic stages to realise the potential of the business and generate healthy returns for all stakeholders.
The following assumptions were made in developing this plan.
1. P1245400 sales in the first year. This level of sales is realistic given previous experience and the turnover of similar firms within the sector.
2. 12 percent annual growth in sales. This level of sales growth is achievable given the attractiveness of the market and the coherent strategic plans of the management team.
3. 28 percent cost of sales. This cost of sales percentage is in line with the sector average. The cost of sales percentage is expected to remain stable during the period of the plan.
4. P700000 expenses in the first year. This level of overhead expense is in line with similar size businesses within the sector.
5. 5 percent annual growth in expenses. This expense growth takes into account changes in overhead as the firm develops.
6. 10 days customer days credit. This is in line with industry terms of trade and should be competitive.
7. 30 days supplier credit. This is realistic given the terms normally offered by suppliers.
8. The cash flow forecast assumes that receivables and payables are settled before the next period.
9. The cash flow does not take into account the acquisition of fixed assets from cash generated.
10. P150000 equity cash injection. This equity is confirmed to be available and ready to be invested in the business.
11. Equity cash injections are assumed to be made at the start of the plan.
12. These figures take into account inflation.
13. These figures are realistic given the current market situation and expected trends.
14. While a conservative approach has been taken to projections and an attempt to factor in risks, like all predictions there is the potential of unexpected factors.