Supermarket Business Plan

SUPERMARKET
BUSINESS PLAN

By HB Consulting

Henry Bolap, MBA 5/10/13 Confidential copy

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Confidential Statement

This business plan contains information that Tabasamu Inc. considers proprietary. By
accepting this plan of activity, the recipient acknowledges the proprietary nature of the
information contained herein and agrees to keep confidential all such information.

Disclaimer

Published in 2015 by HB Consulting
Inc. 2015 @ HB Consulting Inc.
www.HBConsulting.ca
HB Consulting Inc. produced this business plan to provide information about ethnic
supermarkets.

Every care has been taken to ensure that the content is useful and accurate. HB
Consulting Inc. and any contributing third-parties shall have neither legal liability or
responsibility for the content or the accuracy of the information provided.nor for any loss
or damage caused arising directly or indirectly in connection with reliance on the use of
such information.

Copyright: Material in this publication may be freely quoted or reprinted, but
acknowledgment is requested, together with a copy of the paper containing the
quotation or the reprint.

Recommended citation:
Bolap, H-L (2013). Supermarket Business Plan, HB Consulting Inc.

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Table of Contents

Confidential Statement...............................................................................................................2
Disclaimer ..................................................................................................................................2
Table of Contents.......................................................................................................................3
EXECUTIVE SUMMARY .......................................................................................................7

Introduction .......................................................................................................................... 7
Company Description.........................................................................................................7
Industry analysis..................................................................................................................7
Market analysis....................................................................................................................7
Marketing plan.....................................................................................................................8
Management team and company structure......................................................................8
Operations and development .............................................................................................8
Financial projections ..........................................................................................................8

Status and offering .............................................................................................................9

COMPANY DESCRIPTION.....................................................................................................9

Company Summary .................................................................................................................9
Business Ownership...............................................................................................................9
The problem ...........................................................................................................................9
The solution ............................................................................................................................9
Current status ........................................................................................................................10

Milestones Achieved........................................................................................................10
Milestones remaining.......................................................................................................10
Funding sought .................................................................................................................11
Legal status and ownership.............................................................................................11

Industry Analysis .....................................................................................................................11

Summary ..............................................................................................................................12
Key ratios (Institute, 2014) ..................................................................................................12
Critical Success Factors (Munger, Levy, Krishnan, & Grewal) ..........................................13
Industry trends .....................................................................................................................13

Trends that favor the industry .............................................................................................14
Trends working against the industry ...................................................................................14

Market segmentation................................................................................................................15

Target market selection........................................................................................................15
Target market size and trends ..............................................................................................16
Buyer behavior.....................................................................................................................17

South Asians: ......................................................................................................................17
Filipinos: .............................................................................................................................17
Blacks: ................................................................................................................................. 17

General ................................................................................................................................. 18
Competitor Analysis ............................................................................................................18

Direct competitors...............................................................................................................18
Indirect competitors ............................................................................................................18

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Future competitors ..............................................................................................................18

Competitive analysis grid ....................................................................................................19
Annual sales and market sales .............................................................................................19
2016 Customer Acquisition Projection................................................................................20
Estimate of Annual Market Share........................................................................................20

Marketing Strategy...................................................................................................................20

Financial Objectives.............................................................................................................20
Marketing Objectives...........................................................................................................21
Positioning strategy..............................................................................................................21
Value proposition.................................................................................................................21
Points of differentiation .......................................................................................................21
Brand Strategy .....................................................................................................................21
Customer value, satisfaction, and loyalty ............................................................................23
Corporate identity ................................................................................................................23
Message................................................................................................................................ 23
Marketing Mix .....................................................................................................................23

Pricing strategy....................................................................................................................23
Product strategy...................................................................................................................23

Distribution and sales strategy .............................................................................................24
Sales Process (Cycle)...........................................................................................................24
Promotion............................................................................................................................. 26
Other promotional activities ................................................................................................26

Advertising .......................................................................................................................... 26
Sales promotion...................................................................................................................26
Events & Experiences .........................................................................................................27
Public relations and publicity..............................................................................................27
Direct & interactive marketing............................................................................................27

Website ................................................................................................................................27

Management Team and Company Structure............................................................................27

Introduction .......................................................................................................................... 27
Management team................................................................................................................28
Skill Profile and Gaps in Management Team ......................................................................28
Summary ..............................................................................................................................28
Ownership and Compensation .............................................................................................29
Board of Directors................................................................................................................29
Outside directors ..................................................................................................................29
Inside directors.....................................................................................................................29
Board of Advisors ................................................................................................................29
General Advisory Board ......................................................................................................29
Customer advisory board .....................................................................................................31
Other professionals ..............................................................................................................31
Organizational Chart............................................................................................................32

Operations Plan and Service Development Plan .....................................................................33

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Introduction .......................................................................................................................... 33
General Approach to Operations .........................................................................................33
Back Stage (Behind the Scenes Operations Activities) .......................................................33
Front stage (What the Customers See and Experience).......................................................34
Business location .................................................................................................................34

Advantages of location........................................................................................................34

Facilities and Materials ........................................................................................................35

Building ............................................................................................................................... 35
Store Layout ........................................................................................................................36

Government Codes and Regulations....................................................................................36

Operations Strategy and Plans .................................................................................................36

Relationship between Business Strategy and Operations Strategy......................................36

Development Status and Tasks ................................................................................................37

Timeline ...............................................................................................................................37
Milestones ............................................................................................................................37
Retrofitting of Building........................................................................................................38
Challenges and risks ............................................................................................................38

Costs......................................................................................................................................... 38

Design and Development Budget ........................................................................................38
Intellectual Property.............................................................................................................39

Appendices............................................................................................................................... 40

Management bio and resumes..............................................................................................40
Drawings and specifications of the supermarket interior design .........................................41
Proforma financial statements (see excel template).............................................................43

Introduction .........................................................................................................................43
Base Year ............................................................................................................................43
Assumptions ........................................................................................................................ 43
Income Statement................................................................................................................43
Balance Sheet ......................................................................................................................43
Cash flow ............................................................................................................................43
Income statement chart .......................................................................................................43
Balance sheet chart..............................................................................................................43
Cash flow chart ...................................................................................................................43
Cumulative free cash flow chart .........................................................................................43

Business procedures and policies (see attachment) .............................................................44

Purchasing ...........................................................................................................................44
General accounting..............................................................................................................44
Cash management ...............................................................................................................44
Credit ................................................................................................................................... 44
Collection ............................................................................................................................44
Cash receipts .......................................................................................................................44

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Account payable..................................................................................................................44
Inventory .............................................................................................................................44
Payroll .................................................................................................................................44
Fixed-Asset .........................................................................................................................44
Treasury............................................................................................................................... 44

Marketing materials .................................................................................................................45

Draft Logo............................................................................................................................45
Summary of feasibility analysis, including customer reaction to the product or service ....46

Supporting industry research ...................................................................................................47

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EXECUTIVE SUMMARY

Introduction

By the year 2016, Statistics Canada forecasts that the Canadian ethnic
population of visible minorities will reach 22 % of the total Canadian
population. Based on the common food portion of consumer spending,
visible minorities will spend about $15 billion dollars on food. A gap
observed in the industry is the shortage of supermarkets that focus
exclusively on the Canadian ethnic population of visible minorities, who
prefer a different type of shopping experience than that of mainstream
customers. Tabasamu will fill this gap by opening a supermarket that will
focus exclusively on that clientele.

Company Description

Tabasamu is proposing to operate a 10,000 square foot facility initially in
NDG/CDN district in Montreal. This area is ideal for the supermarket—it is
the most multicultural community in Montreal as there are at least 23
ethnic groups.
Designing and operating a supermarket solely for visible minorities is a
unique challenge. As a result, the operations of the supermarket will be
geared toward (1) providing service excellence cost efficiently, (2) achieving
standardization and personalization, and (3) maintaining continuous
innovation.

Industry analysis

Tabasamu will compete in the supermarket industry (NAICS 445110). The
$87.5 billion is in the mature stage of its life cycle. Growth is being driven
primarily by ethnic grocery sales which are expanding by a whopping 16 %
per year.

The industry is highly competitive. Supermarkets on average, earn around 2
to 3 percent net profit. The critical success factors are service, quality, and
price.

Market analysis

Cote des Neiges-Notre-Dame-de Graces (CDN/NDG) is the business trade
area. The market analysis indicates that approximately 75,000 people of

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visible minorities live in the area.

Tabasamu income and net profit goals are as follow:

Year Projected income Net income
2016 $2,750M $17K
2017 $3,103M $20K
2018 $3,577M $21K

The company is confident that its projected income and net profit goals are
achievable.

Marketing plan

The overall objective of marketing activities is to ensure the supermarket
has the most affordable and friendly one-stop solution for shopping of
ethnic food.
The company’s points of differentiation will be a (1) well-trained and
knowledgeable staff providing service excellence, and (2) experiential in-
store layout and design to facilitate product selection.

Management team and company structure

Tabasamu will have a five-member Board of Directors, a four-member Board
of Advisors, and 7-member Customer Advisory Board.

Operations and development

Tabasamu will sign a seven-year lease, subject to funding, for the 10,000
square foot facility it plans to occupy. The contract will include an option to
buy the premises at the end of the term.

The facility will require $750,000 in retrofitting. An architectural firm
experienced in designing supermarkets suitable to an ethnic clientele will
create the preliminary plans.

Financial projections

The business plan will include a full set of proforma income statements,
balance sheets, and cash flow statements.

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Status and offering

Tabasamu is seeking $175,000 in investment capital.

COMPANY DESCRIPTION

Company Summary

Tabasamu is proposing to operate a 10,000 square foot ethnic supermarket,
specifically for people of visible minorities, in Montreal.

Business Ownership

Tabasamu’s founder is confidential The company headquarters is classified. You
can reach the owners via e-mail at [email protected]

The problem

The owner is married to a woman from Central Africa. He likes eating his home
country’s staple dishes. But he also dreads the moment when he is asked to
shop for ingredients. It means running from one ethnic store to the other,
swerving and foraging between unorganized shelves and layout, or getting
lackluster customer care. In short, the experience is physically exhausting and
mentally draining, and the choice is overwhelming and intimidating, which in turn
increase the financial and the social risks of choosing the wrong product. He now
relies on ethnic restaurants to satisfy his ethnic food cravings.

These awful shopping experiences have triggered in him, the necessity to
innovate. He has made it a goal to open an ethnic supermarket, where shopping
environment is fun and family-friendly, and the product selection is adventurous
but simplified. In November and December of 2014, a feasibility analysis was
completed. It validated the idea for the supermarket.

The solution

To accurately determine the interests and preferences of its potential clientele, in
November 2014, the company distributed its concept statement and a
questionnaire to a random sample of 100 people of visible minorities in its
potential trade area.
Based on the results of these efforts and the ongoing research, Tabasamu will
offer its members the following mix of products and services:

1. Fresh fruits and vegetable section
2. Non-durable goods and convenience produce

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3. Checkout counters
4. Clean and organized shelves
5. Clean bathrooms
6. Warm and friendly outdoor displays
7. Warm, knowledgeable, and friendly staff
8. Large selection of authentic, ethnic and mainstream products;
9. Parking spaces;
10. Appealing, inviting, and friendly in-store design and shelves layout
11. Specialty and high-quality products such as personal care, ready-

made food sections, or top-notch bakery
12. Raw ingredients
13. Hair oils, skin creams, hair dyes
14. Coffee mix, roasted coffee, RTD-coffee private label items;
15. Specialty fruits, vegetables, meats, and DVD’s

Current status

Tabasamu is poised to commence operations on January 1, 2016.

Milestones Achieved

1. First screening, feasibility study, and prospects’ surveys;
2. Business plan completed;
3. Five-member management team selected;
4. Board of directors, general advisory board, and customer advisory

board in place;

Milestones remaining

5. Incorporate business
6. Apply for trademark and copyrights;
7. Sign a seven-year lease, subject to funding;
8. Hire three other members of the first management team;
9. Gather investment by the management team and angel investors;
10. Apply for federal and provincial grants;
11. Secure a line of credit;
12. Hire architect and interior designer to plan building retrofitting;
13. Conduct a series of focus groups, visits other ethnic supermarkets,

and ad hoc meetings of the advisory boards to prepare the retrofitting
of the building, and begin selecting merchandising display equipment;
14. Retrofit building;
15. Make final decisions on merchandising display and equipment;
16. Begin hiring and training staff and employees to open business;
17. Ramp up marketing and public relations initiatives;
18. Start offering “pilot” supermarket tour to solicit feedback from

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potential clients;
19. Host three open houses for new members;
20. Have a grand opening with media and start operation;

Funding sought

The founders are seeking $175,000 in investment capital.

Legal status and ownership

The business is a Limited Liability Corporation incorporated in the province of
Quebec which is owned by the management team and an angel investor. The
ownership schedule is available in the “Management team and Company
Structure” section of the plan.

Industry Analysis

Tabasamu Supermarket competes in the “Grocery stores” industry (NAICS 4451 and SIC
5411). Grocery stores are the traditional destination for consumers looking to stock up
on many of the items they use on a day-to-day basis. The need for the shoppers to
continuously replenish their pantries and refrigerators result in frequent trips to the
supermarket. Well-known companies in the industry in Canada include Loblaw, Metro,
Costco Wholesale, Safeway, Walmart, and Sobeys. The top five retailers account for 80%
of the total food sales. The industry also includes other groups such as specialty food
stores, beer, wine and liquor stores, and food and beverage stores. The largest segment
of the sector, food and beverage stores (NAICS 445) represents 50% of the sector
revenues (Staciwa, 2014).

Industry size, growth rate, and sales projections

Trade size 2009 2010 2011 2012
$74B $78B $80B $82B
2013 N/A N/A N/A 6885
Industry sales: 116,203 113,793 106,391 103,843

$84B 2011 2012
# of establishments: 2.5% 2.5%

6,814
Employment:

105,917

Industry Growth Rate 2009 2010
2.8% 5.4%
2013
Industry sales:

2.4%

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# of establishments: N/A N/A N/A N/A -1%

Employment: N/A -1.7% -9% -2% 2%

Industry Sales Projections (Development, 2014)

2015 2016

Industry sales: $85.68B $87.39B
2%
Growth rate: 2%

86 Annual Sales Sales Growth
84 Rate

82 6 5.4
82 80 5

78 4
78 3

74 2.8 2.5 2.5 2.4
74
2
70 1
2009 2010 2011 2012 2013 0

in billions 2009 2010 2011 2012 2013

in %

Summary

The industry is in the mature phase of its lifecycle. Growth is being driven primarily by
grocery retailers increasing their selling space, growing their retail networks, and
expanding existing stores through new acquisitions. Due to the increasing competition in
the grocery industry, most grocers competed with price slashing or price matching
activities. Retailers also focused on expanding their retail network to more densely
populated urban areas, by introducing smaller format urban concept stores with lower
square footage compared to regular stores. Ethnic shops, although a rising preference
among buyers, do not receive as much focus from major retailers as it should.

Key ratios (Institute, 2014)

2012 2013
2.3
Profit (%) 2.3 1.7
30
Debt-to-worth 2.1 1.7
14.0
Gross margin (%) 30 7.5
510
Current ratio 1.5 20.5%

Inventory Turnover 14.7

ROA 6.6

Sales per square foot ($)N/A

Labor & Occupancy costs N/A

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Cost Structure Ratios Percent of cost
Item 8.8%
Wage 76.4%
Purchases 1.1%
Depreciation 3%
Rent 0.4%
Advertising 1.6%
Utilities 2.3%
Profit

Critical Success Factors (Munger, Levy, Krishnan, & Grewal)

The key success factors in the industry are:

Store factors: Retailers that can distinguish themselves with unusual and exciting store
atmosphere add value to the shopping experience.

Service factors: One of the primary drivers of excellent service is the convenience that a
particular store provides. Grocery retailers need to ensure that their store service
personnel are well trained to provide five levels of comfort: decision convenience, access
convenience, transaction convenience, benefits convenience, and finally post-benefit
convenience.

Merchandise: Retailers that excel in merchandise management do so in one or two ways.
First, they concentrate on finding unique merchandise that appeals to their target
market. Second, they ensure enough merchandise is where the customer wants it, and
when it wants it.

Price: Price is a critical factor that consumers consider in ascertaining the overall value of
an offering. Understanding what the customer is being asked to forego in exchange for
what they get, is the key to the ability of grocery retailers to deliver superior value.

Supply chain: Optimal supply chain management requires integrating suppliers,
manufacturers, warehouses, stores, and transportation intermediaries into a seamless
value chain.

Technology: The use of technology goes hand-in-hand with superior supply chain
management.

Industry trends

Some environmental and business trends affect the growth and attractiveness of the
grocery store industry.

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Trends that favor the industry

 On-the-go consumers, busy but constantly connected. Grocers can no longer
expect shoppers to come to them;
 Store format: small-box outlets dotting the competitive landscape, locating closer
and closer to where buyers live, work, and play;
 Supermarket food delivery: online and mobile shopping are ramping up, and drive-
through windows for quick order pickup concept fundamentally non-existent today
is gaining traction;
 Reconfiguration of store spaces particularly since a greater number of routine
purchases is online;
 Focus on health and wellness: as healthcare concerns more shoppers, especially
the baby boomer, grocers will need to hone their health and wellness offers,
characterized by fresh foods, natural and organics and wellness solutions;
 Fresh produce is a primary driver for consumers in deciding where to shop.
According to a Packaged Facts survey, seventy-five percent of consumers say the
produce department is the most important.
 The ethnic revolution: Canada’s population is expected to grow at 1.2 % annually.
Therefore, a greater proportion of Canadians will be from a visible minority group in
the future;

Trends working against the industry

 Weak population growth: Decreasing population growth and household size,
driven by low birth rate and an aging population, may depress sales as smaller
families spend less in grocery stores;
 Competition from alternative retailers: By buying in enormous volume, mass
merchandisers, and warehouse clubs have become low price leaders. In addition,
time-starved consumers are spending a greater percentage of food dollars way
from home at restaurants;

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Market segmentation

The ethnic grocery market is segmented by ethnic background and socio-behavioral
variables.

Ethnic % Socio- %
background behavioral
South Asian 28 Emulators 11
Chinese 21 Seekers 19
Black 14 Reachers 24
Filipino 8 Attainers 27
Arabs 7 Elites 5
West Asian 4 Conservers 14
Korean 3
South East 3.5
Asian
Japanese 1
Latino 5
Other 4
Source: (Grocer, 2013)

Target market selection

The business targets South Asian, Filipino, and Black segments of the grocery
clientele in the city of Montreal. They represent 13% of the visible minority population of
Montreal (Canada S., 2011).

Two of the largest and most influential socio-behavioral sub-segments are the Reachers
(24%) and the Attainers (27%). Reachers tend to be older, around 40. Often, single
parents who are also caring for elderly relatives. They have a median income of $28,000
and seek the greatest value for their money. Attainers have a greater sense of self and
solid plans for the future. Their median income is $55,000, and they want ideas and
information to improve their quality of life.

The following factors led to the decision to select these prospects:

Between 2006 and 2011, the most significant immigration wave in Montreal came from
Philippines (13%), Africa (11%), and India (10%).

Visible minorities represents a $5-billion retail opportunity—a projection of what
manufacturers will sell from cheese to bicycles, in five years, according to Nielsen data.
In addition to this, Perry Caicco—of CIBC World Markets—estimates that 70 % of all
growth in Canadian consumer spending over the next ten years will come from Asians
and South Asians.

 Asian shoppers compartmentalize their shopping. In fact, according to a
study presented at the Canadian Grocer Conference (Grocer, 2013), Asian
consumers or more likely to visit two or more stores to find all or most of the

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items on their shopping list on a routine planned shopping trip.

 Traditional grocery stores are not meeting the needs of the ethnic
population (Androich, 2010). It is quite common for new immigrants to struggle
with feelings of loneliness and frustration. New immigrants rarely mention
companies and brands except banks when asked who made them feel welcome
in Canada.

Target market size and trends

The communityt of Cote-des-Neiges-Notre-Dame-De-Graces (CDNNDG) will house
the first supermarket. The following steps were taken to estimate the size of the target
market.

Step 1: Determine Tabasamu trade area:

We feel that the CDNNDG district represents a reasonable approximation of Tabasamu’s
commercial area. Most retail outlets obtain the majority of their business from a 5-to-10
mile radius of their location because people are not willing to drive further if a similar
service is available.

Step 2: Determine the number of people of South Asian, Filipino, and Blacks in
Tabasamu’s trade area.

According to the City of Montreal electoral district report (Montreal, 2014), there are 74
268 people of visible minorities living in the CDNNDG district: Blacks (9.1%), South Asian
(3.3%), and Filipinos (1.3%) for an estimated population of 10,397 people.

Step 3: Determine the total size (in dollars) of Tabasamu’s target market for 2015.
Grocery stores have one revenue driver.
Revenue Driver #1: Annual food expenditure

The average annual food expenditure is $7,161 (Montreal, 2014). $7,161 X 10, 397
people = $74, 452,917.

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Buyer behavior
Factors influencing purchasing decision.

South Asians:
 Asian consumers view grocery shopping as a weekend excursion i.e. fun and
family time, so they are more likely to have entire family ( 3 generations) on
shopping expedition (Grocer, 2013);
 56% of Asian shoppers actively seek a demo in-store before buying (Grocer,
2013).
 South Asians tend to purchase a lot of raw ingredients. They make their meals
from scratch.
 Asian specialty fruits, vegetables, meats, and dvds fill South Asians shopping cart.
 South Asian highest growth product categories are hair oils (23%), skin creams
(22%), and hair dyes (23%).
 South Asian consumers guiding principles when it comes to grocery shopping:
trust e.g. Halal and quality e.g. 100% natural.
 The majority of grocery purchases by South Asian newcomers is done in ethnic
stores which offer convenient locations, low prices, and a variety of ethnic foods.
 South Asians favor familiarity. Word of mouth and referrals from trusted friends
are highly regarded sources of information. Print media is another important
source of awareness, especially South Asian newspapers and grocery store flyers.

Filipinos:
 Fish is central in Filipino meals. Dinner is usually a traditional Filipino meal shared
among family.
 On average, they shop at ethnic stores twice a week (Inc., 2013).
 They are avid meal planners. Women will often prepare or partially cook food in
the morning before heading to work, such as marinating meat with spice.
 The highest growth categories are instant coffee mix (50%), roasted coffee (34%),
and RTD-coffee (14%).

Blacks:
 They spend 18% of their annual retail dollars on store brands; otherwise known
as private label items.
 The preferred foods of most immigrants from Sub-Saharan Africa include maize,
beans, rice, potatoes, cassava, groundnuts, green banana, plantain, cabbage,
millet, sorghum, potatoes, fish, beef, chicken, and wheat.
 46% of blacks are more inclined to buy from a company that would contribute a
small amount of money towards a child’s future for each purchase .
 Blacks also want to see positive, relevant depictions of their community (Wire,
2005).
 Ethnic Hair and Beauty Aids (HABA) is an important product category.
 They make three visits or less at grocery stores.

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 In the Burrell 40, 2011 study, 81% of Blacks believed that products advertised
using Black media are more relevant to them.

General
 The average ethnic household has 3.5 people versus 2.6 for other Canadians.
 On average, Asians spend the highest amount on grocery shopping compared to
other ethnic groups, while Filipinos spend the most of any Black group.
 Ethnic consumers prefer fresh over frozen, bulk over packaged and familiar
brands over new brands.

Competitor Analysis

Direct competitors

There are 20 Ethnic grocers (Pages, 2015) that serve the South Asian, Filipino, or
the Black grocery shoppers within the CDNNDG district. These are mainly mom-and-pop
stores with a few mainline grocery stores, but most ethnic stores in the area serve
particular population, i.e. Chinese, Filipino, etc.

The benefits of meeting the needs of more than one ethnic shopper, however, are
apparent to all ethnic grocers, who are starting to offer more and more authentic
products from outside their particular population. For example, Kim Phat, the largest
Chinese ethnic grocer in Quebec, is now catering to the black and Filipino community. For
the most part, the major ethnic grocers cater primarily to one particluar community.

Tabasamu supermarket is poised to establish a competitive advantage in CDNNDG by
excelling in the quality of the service delivered and by being excellent regarding cost and
the quality of products offered.

Indirect competitors

Ethnic restaurants have few physical features in common with ethnic grocery
stores. They provide conversational and gastronomical pleasures, a very different
experience from the visual and shopping experience of a grocery store. Despite these
differences in form and function, ethnic shoppers have the same objective when visiting
an ethnic restaurant: reconnecting with the cultural heritage and culinary traditions of
their native countries through food.

An increase in the growth rate of ethnic restaurants poses a threat to Tabasamu.

Future competitors

The profit margin in the grocery stores industry is slim. Profit margins hover
between 2 % and 3% on average. Most of the growth in the industry will come from
immigration, which is forecasted to double within the next ten years. As a result, ethnic
grocery stores are poised to experience double-digit growth in the next coming decade.

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Coincidentally, Canada major retailers are beginning to recognize the sales potential of
the immigration population, and a series of purchases concluded by some of the major
food retailers attest to that. For example, Metro recently acquired Adonis—the largest
middle-Eastern food retailer in Quebec (Dobby, 2015), while Loblaw purchased T&T
supermarket, the largest Chinese food retailer in Vancouver and Ontario (Strauss, 2015).
Other food retailers may or will follow suit. Tabasamu hopes to: (1) efficiently serve
multiple segments of the ethnic market, and (2) establish a strong brand before these
competitors move into the market.

Competitive analysis grid

Ethnic Grocers

Decision Factor Potential Mom-and-pop Adonis Kim Phat
Tabasamu store ethnic Disadvantage
Location Supermarket Even
grocers Advantage
Price Even Even
Even Advantage
Product Quality Even Advantage
& Authenticity Disadvantage Specific:
Disadvantage Advantage Chinese with a
Variety & Multi-niche few products
Selection Specific to Specific:
from other
owner’s region middle-Eastern regions

Specialty Even Even Even Even
products Advantage Disadvantage Advantage
Store Layout & Advantage Disadvantage
Design Even Even
Friendly Staff Disadvantage

Annual sales and market sales
The following steps were taken to estimate annual sales.
Step 1: Determine the number of annual shoppers Tabasamu supermarket will have.
Tabasamu target is 900 buyers within 12 months of opening its doors.
Step 2: Based on the 900 shoppers, what will Tabasamu annual sale be?
We are projecting 900 customers at the end of 2016 (first year of operations) followed by

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a 10 % growth thereafter. The supermarket will generate income in the following way:

Grocery revenues: Evidence provided earlier states that ethnic customers visit an ethnic
grocery store twice a week and spend annually around $4,000 on food.

For its first year, Tabasamu projects it will obtain its 900 customers in the following
order:

2016 Customer Acquisition Projection

Month Number of unique Monthly Food Annual Projected
customers expenditure($) Income ($000)
January 75
February 75 300 195
75 300 195
March 75 300 195
April 75 300 195
May 75 300 195
June 75 300 195
July 75 300 195
August 75 300 195
September 75 300 195
October 75 300 195
November 75 300 195
December 900 300 195
TOTAL $2 700 000

Estimate of Annual Market Share

The average annual food expenditure is $7,161 (Montreal, 2014). The total
available market in the CDNNDG district ($7,161 X 10, 397 people) $74, 452,917.
Tabasamu is looking to capture less than 3% of the available market by serving the
needs of more than one ethnic group. We feel this strategy is achievable.

Marketing Strategy

Marketing is everyone’s responsibility—our staff, our employees, our directors,
and our advisory board members.Our organization’s purpose: “Profitably inspire the
discovery of the rich culinary ingredients of the world”. Ourwhich our tagline “Tabasamu:
The Ethnic Market”.

Financial Objectives

We must attract unique shoppers, 900 buyers are our goal for the year 2016.. The
slogan: “We Care” will appear on all our internal documents and will be a central part of
our employee motivation and reward programs.

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The financial objectives:

Sales dollars: $2.7M in sales the first year;
Gross profit dollars: $702,000;
Gross margin percent: 30 %;
Net profit dollars: $22,800;
Market share: 3 %;
Customer weekly purchase value: $75;
Revenue per square feet: $510/ SQ. feet;

Marketing Objectives

1. Establish a strong brand recognition with a cross-cultural approach;
2. Establish a strong defensive position in the market;
3. Maintain a high level of customer service excellence;

Positioning strategy

Offer a one-stop solution to affordable, and authentic ethnic products in a friendly
shopping environment.

Value proposition

Buyers want more than a product off the shelf. They also want authentic products from
their homeland. We cannot only say: “We offer a great shopping experience and service.”
The entire organization will have to deliver on that promise in every interaction we have
with our prospects and customers. Our value proposition is one of customer intimacy.

Points of differentiation

 Experential shopping experience;
 Friendly and knowledgeable staff who cares;
 Warm, appealing and inviting in-store design, layout, and merchandising racks;
 Affordabe products;
 Services;
 Partnership;

Brand Strategy

The objective is to position our store as the friendliest and most affordable ethnic store.
base.

We offer the friendliest shopping experience for the purchase of affordable authentic
ethnic food. Our website, slogan, corporate identity, customer service, sales brochures,

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business name, in-store design, decoration and layout, merchandising rack, checkout
counters, and visual elements reinforce the message.

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Customer value, satisfaction, and loyalty

Every month, we will measure total customer satisfaction through the use of the
Net Promoter Survey (NPS):

“How likely are you to recommend our services and products to friends, colleagues, and
family?”

The goal is to maintain a customer recommendation rate of 9 out 10.
Corporate identity

The goal is to create professional and consistent templates for every touch with the
market. Our design will be bold, inviting, and clean to reinforce our value proposition.
Message

Our messages convey a friendly and warm personality to the target market.

The slogan: “A great way to shop.”

Marketing Mix
Pricing strategy

Tabasamu will adopt a value-based (as opposed to cost-based) pricing scheme
for its unique products and cost-based approach for its non-durable goods. A minimum
pricing policy will be implemented. The minimum price will be equal to the net profit per
product + the cost of buying per unit + the cost of marketing and sales per unit.

Pricing policy is influenced by:
1. Competitors’ prices;
2. Customers’ price sensitivity;
3. Product costs;
4. Customers’ perceived value;

Product strategy

The customer value hierarchy model is our product strategy. The five levels constitute the
model for maximizing buyer utility.

Fundamental level Service or benefit the customer is expecting by
visiting an ethnic grocer
Core benefit
Basic product Shoppers visit grocery stores to buy food.

Grocery stores will have sections with fruits and
vegetables, nondurable goods, and convenience
produces.

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Expected product Shoppers expect to find in grocery stores: checkout
Augmented product counters, fresh and affordable fruits and vegetables,
Potential product high-quality products, clean and organized shelves,
clean bathrooms, friendly staff, large selection of
goods, parking space, and appealing in-store layouts.

At this level, Tabasamu can exceed customer
expectations by providing specialty and high-quality
products that larger stores can’t or won’t stock such
as ethnic DVD’s, ethnic personal care and beauty
products, and top-notch bakery and prepared food
sections.
This level encompasses all the possible
augmentations and transformations the product
might undergo in the future. Product developments
such as cooking classes, banking services, money
transfer, catering services, community hall, import-
export, workshops and seminars on employment or
personal finance or home purchase, kids playground,
and an ethnic fast-food restaurant.

Distribution and sales strategy

Many shoppers spend one or two hours a week in a grocery store. Grocery costs are also
a significant part of most people’s monthly budget. Both factors indicate groceries are an
important purchase, therefore requiring a high degree of specialization. On the other
hand, grocery purchases are necessary, frequent, and nontechnical. That dictates a
placement strategy with low specialization.

Tabasamu will adopt a low-specialization distribution strategy. An extensive product
selection, and an appealing store layout also support a high-specialization approach.

As a result of the low-specialization features of our stores, our potential retail space
should ideally be located in an area where there is high foot traffic, proximity to public
transportation and highways, and lots of parking spaces. These characteristics make it
convenient for shoppers to buy at our stores.

Sales Process (Cycle)

A foundational aspect of Tabasamu’s sales and promotional strategy is its sales
process. The sales process is use to attract, retain, and grow the number of shoppers. It
is also the process in-house employee will follow to convert potential customers
efficiently

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The company has devised specific marketing tactics to support each step in the
conversion process. These tactics are a work-in-process and will invariably be enhanced
and revised as Tabasamu learns more about the characteristics of its target market.

Stage in Process Ways Tabasamu will support each
phase of the process
Prospecting (or sales lead) Word of mouth or referrals from
trusted friends;
The initial contact Referral from existing clients;
Qualifying the lead Store flyers;
Sales presentation Community events;
Meeting objections and concerns Website;
Closing the sale Partnerships with local employment
centers;
Partnerships with community groups;
Responses from in-language
newspapers;
Partnerships with local banks;
Weekly emails or newsletter;
Inviting store design;
All employees are trained in building
rapport with and helping shoppers;
All buyers are welcome into the store
by an employee;
A concierge station where a friendly
staff direct and assist clients;

Possibly membership fees of $10 per
year or 5 cents a day;
The exterior and the interior of the
store will have clean lines. The layout
and the traffic flow is carefully planned
to avoid long waiting lines
Products are well organized on
shelves;
In-store sampling;
In-store music;
Aisle touch screen to guide shoppers
through ingredients, recipes, history,
and culture;
Cultural themed weeks with sampling
and promotions;
All employees will be trained to ask
qualified prospects to join;
Travel reward program;

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Follow-up Thank you for your business is printed
on every invoice;
Fusion cookbook to every new
member;

Monthly e-newsletter;
Community events;
After-hours activities such as cooking,
yoga, or dance classes, movies,or
personal finance workshop;

Promotion

Our promotional motto: promote with consistency, often promote, and promote an
important point. As a result, our brand will be more memorable than those of our
competitors. The promotional budget will focus on the local market; especially in-
language newspapers. One-third will go into sponsoring events, one-third into sales
promotion and one-third into newspapers. Advertising copy will emphasize the
transformational appeal with a “Where great shopping happens?” theme. The advertising
execution concept will revolve around a happy immigrant family with young kids doing
their grocery shopping in a friendly environment.

Media Advertising Sales Events and PR & Direct
mix promotion experiences Publicity marketing
Audience Non-user/ Non-user/ Non-user/ Non-user/
No loyalty Non-user/ No loyalty No loyalty No loyalty
Objective status No loyalty status status status
Create status Create Create Create
Tactics awareness awareness awareness awareness
Build trial
Symbol among Festivals Community Website
Logo non-user events Blog
Print Press kits Social
Ads Exhibits media
Online
community

Other promotional activities (Kotler & Keller, p. 473)

Advertising
Display signs in front of the stores;
Symbols and logos to distinguish our brand;
Point-of-purchase displays;

Sales promotion
Cultural themed weeks with sampling and promotion;
Exhibits to encourage shoppers to discover other cultures;
Demonstrations during national days;
Targeting mail campaigns;
Booklets to provide information during the decision process;

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Events & Experiences

Tabasamu will support and embrace causes that are close to our target market’s hearts;
Participation in festivals such as Indian Diwali festival to share and experience our
c’ients' customs;

Public relations and publicity

Press kits;
Community relations;
News release;

Direct & interactive marketing

A forum for customers to post anecdotes, stories, comments and recipes;
Food blog inviting shoppers to blog about the food they discover on their travels;
Live DJ feed and interviews;
E-newsletters;

Website

The goal is to deliver information about our products and services in a compelling
manner. To that effect, we will combine two relatively new trends in website design:
responsive web design and HTML’s canvas. We will also secure the following domain
names:

www.Tabasamu.ca www.Tabasamu.com www.TabasamuExpress.ca www.TabasamuExpress.com
www.TabasamuBio.ca www.TabasamuBio.com
www.TabasamuMar www.TabasamuMar
ket.ca ket.com

Management Team and Company Structure

Introduction

Five guiding principles support our vision: (1) Teamwork: working together for a common
cause, (2) unity: decision-making through discussions and consensus, (3) accountability:
delivering on commitment, (4) Ethnic diversity: Diversity bridges cultural gaps, enhances
collective wisdom, and improve judgment, and (5) service and approachability: caring for
clients.

Employees are selected based on their qualifications for the job and their commitment to
serving the needs of our clients. We hire individuals who are friendly, innovative,
customer-focused, flexible, and results-oriented.

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Management team

1. Founder and CEO
2. Chief Financial Officer
3. Marketing and sales
4. Member care and relations

Skill Profile and Gaps in Management Team

The following skill profile depicts the most important skills required at the top
management team level of the company and where the gaps exist.

Executive
Leadership
Finance
Operations
Marketing &
Sales
HR/Recruiting
Customer Care
& Relations
Information
systems
Accounting

Founder X
Individual 1 XX
Individual 2 X
Individual 3 X
Gap 1 O
Gap 2 O
Gap 3 O

X= position filled, O= position vacant

Summary

Three significant gaps exist in the management team: the director of
HR/Recruitment, the director of operations, and the director of Information Systems.
These positions will be recruited and filled within six months. Until then, the Operations
position will be filled on a volunteer basis, while the HR/Recruiting and the Information
System is to be outsourced.

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Ownership and Compensation

Name Position/Affiliation Base % Personal
Compensation Investment in
Founde Co-founder and $70,000 31%
r CEO $60,000 15% Company
CFO $60,000 12% $100,000
CFO $60,000 12% $50,000
Marketing & Sales N/A 20% $37,500
Individu 10%
al 3 Customer Care & $250,000 $37,500
Relations
Individu Board Member & $100,000
al 4 Investor
$325,000
Angel
investor

Options
pool

Total

Board of Directors

Board members serves on a volunteer basis. There are three outside directors
and two inside directors. As of now, there are no plans to compensate board members.
All the board members live in Montreal. Although the board meets monthly, individual
board members will frequently interact with Tabasamu top management team.

Outside directors

1. A lawyer
2. The angel investor
3. A former supermarket owner

Inside directors
Founder and CEO, Tabasamu Ethnic Market
CFO, Tabasamu Ethnic Market

Board of Advisors

Tabasamu has two active boards of advisors. The general advisory board consists
of 3 members, and the customer advisory board consists of 10 members.

General Advisory Board

1. A Merchandising manager

Primary Role: To provide merchandising advice for developing the floor plan and three-

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dimensional displays to maximize sales.

2. Trade marketing manager

Primary Role: To provide advice on dairy, and product selection and to help shape
Tabasamu’s approach to retailing.

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Public Relations

Primary Role: To provide advice on PR campaigns and growing the customer base.

Customer advisory board

Members are chosen from our customer list. Their inputs are required on all
strategic activities: product selection, in-store promotions and events, promotional
materials, store layout and visual display, and customer service activities. Board
members serve on a volunteer basis for a one-year term.

Other professionals

Cabinet Comptable Beauregard provides auditing and general accounting services
(Home).

DSC, human resource consultants provides human resources counsel to SME businesses
(Home).

IT consultant. He has more than 20 years experience in information technology and
services. His professional experience includes working with Gap Gemini, and CGI, two
large IT consulting firms.

Simple Design, Christian Chiru. Christian Chiru has more than 20 years experience in
design, web development, and user interface (Chiru, Cristian).

Development Bank of Canada and the Local Economic Development Corporation are
federal and municipal agencies that provide financing and advice to businesses..

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Organizational Chart

Tabasamu wants everyone to play a pivotal role in the customer experience. As a
result, the organizational chart will be divided into activities that create and deliver value.
A maximum of 8 people will be part of an operation. We intend to remain as customer-
centric as possible to hasten the decision-making process and to react promptly to
environmental changes.

The Board of Directors is the executive council. The customer advisory board and the
board of advisors assist them. The collective wisdom that emerges from these two
advisory boards improves the board of directors’ managerial judgment and improves its
decision-making processes.

The senior staff reports to the CEO as shown below. Finance and accounting is a senior
Vice President position. COO, marketing, and sales, HR/recruiting, and member care and
relations are also vice president positions. Each VP will be responsible for their
respective employees

Board of Board of Customer
Advisors Directors Advisory Board

CEO

COO Finance and Information HR/Consulting
Vacant Accounting System Vacant
Member care &
Relations Consultant

Marketing &
sales

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Operations Plan and Service Development Plan

Introduction

Tabasamu operates an ethnic supermarket. The operating model and procedures
for the supermarket:

General Approach to Operations

One of the biggest challenges in operating a supermarket is to source products
that have a high turnover rate. Therefore, both backstage (behind the scenes) and front
stage (what the clients see and experience) operational issues are critical.

Back Stage (Behind the Scenes Operations Activities)

 Staff Selection: The staff and employees will be carefully selected. Along with the
skills they needed to perform their job, team members must be able to relate to
customers in a professional, thoughtful, and caring manner.

 Employee motivation: Our human resources strategies will strive to create an
environment in which people are comfortable being themselves, information is
transparent, and personal and organizational values are aligned.

 Employee orientation: All employees will go through a half-day orientation before
they begin work, during which they will become acquainted with the operations
manual, the philosophy, mission, vision, and objectives of the supermarket.

 Employee education: Staff members will routinely attend workshops and
conferences to have a better understanding of their functional roles. We will also
support employees’ personal interests by funding half the costs of any lesson or
course in which they register.

 Emergency plans: Emergency action plans, policies, procedures, and processes
will be established and documented in the operations manual.

 Operations Manual: An operation manual will be prepared to document and
articulate the day-to-day operational procedures of the supermarket.

 Supplier selection handbook: Suppliers will be evaluated based on competency,
capacity, commitment, control, product variety, cash, cost, consistency, culture,
environmental impact, and communication.

 Procurement process: This process will ensure that there is a systemic blueprint
for ordering, receiving, reviewing, and approving product purchases.

 Code of ethics

 Human resources manual

 Financial administration manual

 Employee orientation manual

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Front stage (What the Customers See and Experience)

 Operating hours: the supermarket is opened from 10:00 am until 7:00 pm
Mondays, Tuesdays, Wednesdays, Saturdays, and Sundays; and from 10:00 am
until 9:00 pm Thursdays and Fridays.
 Uniforms: All staff interacting with clients will wear either navy blue or white short-
sleeve polo with an embroidered logo, and dark blue pants.
 Workshops: Clients can participate in workshops on nutrition, cooking, time and
budget management and travel.
 Staff assistance: Staff will be available to answer or fulfill customers’ requests.
 Customers Tours: Each week after hours, the supermarket will provide a tour of
the facility to new members.
 Multipurpose room rental: The multipurpose room will be available for rent, by
members only, for special occasions such as birthday parties, anniversary parties,
and community events. Part of the reason for doing this is to make the
supermarket a central place in our customers’ lives.
 Hybrid room: This room will allow employees to conserve mental resources and
provide opportunities for restorative experiences such as mind-stimulating or
socially enyable games.
 Monthly newsletter: A monthly newsletter is emailed to clients with coupos and
rebates.

Business location

Tabasamu is proposing to open a single facility in Cote des Neiges/Notre-Dame de
Graces (CDNNDG) district.

Advantages of location

 Ideal community: CDNNDG has a higher percentage of Filipinos, Indians, and
Caribbean and Africans than national averages.
 Visibility and parking: Tabasamu supermarket will be located at the crossroad
between two busy thoroughfares, public transportation (metro and bus), and close
from downtown.
 Proximity to suppliers: Locating in an urban area provides us with easy access to
vendors.
 Proximity to universities: Tabasamu will be 10 miles from three different schools.
The proximity to schools gives us with access to a labor pool of young people from
various ethnic background. We plan to partner with schools to arrange work-study
internships for students.

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Facilities and Materials

Below, the activity required for making a decision on: product selection, store layout, and
merchandising displays.

 Visits to other supermarkets: Although there is not another supermarket exactly
like the one Tabasamu envisions, there are some supermarkets that have been
built and equipped specifically with an ethnic clientele in mind. A committee
comprising two members of Tabasamu management team, two general advisory
board member, and two customer advisory board members will visit supermarkets
to collect information and meet with the staff.

 Focus groups: We will conduct three focus groups with prospective members to
solicit their input regarding product selection.

 Attendance at industry trade shows: Tabasamu initial management will attend
SIAL—a tradeshow that showcases food from countries around the world.

 Advisory board: Both Tabasamu general advisory ncil and the customer advisory
board will be actively involved in providing input on important topics.

Building

Tabasamu will look for a 10,000 square foot facility that is available for lease. The
company will sign an option to lease the property for seven years, pending funding, with
an option to buy the asset at the end of the seven-year contract.

We are projecting to receive 900 unique shoppers by the end of 2016. The building will
need some retrofitting to suite Tabasamu’s needs. The building, after retrofitting is
complete, will feature the following rooms:

 One multipurpose room;
 A lobby;
 A hybrid room;
 Office space for the staff;
 Men’s and women’s restrooms;
 A small movie theater;
 A reception area;
 A reception dock;
 A 5,000 square foot warehouse space;
 A cold room;
 A kitchen for staff;
 A classroom/conference room for workshops;
 A commercial kitchen space for cooking workshops;
 A small restaurant area;
 50-car parking lot;

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Store Layout
 Seven aisles;
 Four cash registers equipped with Tec scanner;
 A freezer section in the middle of the store;
 Fruits and vegetables to the right of the store;
 Meat and dairy in the rear of the store;

Tabasamu will select merchandise displays that are friendly. A committee comprising the
COO, the Marketing Director, and one general advisory board member, and one customer
advisory board member will research merchandising options and will make a formal
recommendation to the management team.

Government Codes and Regulations

A committee comprised of the CFO, COO, and one advisory board member will investigate
and evaluate the provincial and federal codes and regulations that Tabasamu must
comply with if it occupies any chosen facility.

This committee will also be in contact liaison with the municipal authority to anticipate all
zoning, parking, and neighbored impact issues.

Operations Strategy and Plans

Relationship between Business Strategy and Operations Strategy

Tabasamu business strategy and competitive advantage hinges on four dimensions:

(1) Affordable products
(2) Extensive selection of ethnic brands
(3) Efficient supply chain management
(4) A friendly recognizable brand.

Our operations strategy, described previously, is expressly geared to meeting these
objectives, and will be updated on an ongoing basis. Our overarching goal is to
understand the needs of our clientele fully and to serve them in a caring and cost-
effective manner.

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Development Status and Tasks

Timeline

The following milestones have to be completed before the start of the operation.

Milestones

November- December 2014 Completed feasibility analysis

January 2016 Incorporate business
Select board of directors, and advisory boards
Applied for trademarks and copyrights

February- March 2016 Sign seven-year lease on building (subject to funding)
Hire architect and interior designer to retrofit the
building
Hire three other members for the management team
Conduct a series of focus groups, visits to other
ethnic supermarkets, and d hoc meetings of the
advisory boards to plan the retrofitting of the
building, and begin selecting merchandising display
equipment

April- June 2016 Obtain commitment for funding
Begin retrofitting of building

July- October 2016 Supervise retrofitting of building
Make final decisions on merchandising display and
equipment

November- December 2016 Begin hiring and training staff and employees to open
business
Ramp up marketing and public relations initiatives
Begin offering ‘pilot’ supermarket tour to solicit
feedback from potential clients
Host three open houses

January 1, 2016, Have a grand opening with media and begin
operation

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Retrofitting of Building

The 10,000 square foot building Tabasamu will occupy will require approximately $1
million of retrofitting to make suitable for the company’s purposes. Tabasamu will pay for
75 % of the retrofitting, and the building owners will pay 25%. An architectural firm,
experienced in designing supermarket facilities, will provide plans for the retrofitting.

The architectural firm considered the following individual issues when they drew the
facility blueprint.

Maximum use of natural light through installing additional skylights and windows;
Reduction in noise throughout the facility through the installation of special noise
reduction material; Installation of updated information systems;
Updating the color schemes and general décor of the facility;
An improvement of the ventilation system throughout the building so that the warehouse
can be warm;
Resurface the floor with uniqe material to alleviate concerns about slipping on the
surface;

Challenges and risks

The design, maintenance, and use of Tabasamu’s facilities have the following challenges
and risks.

 Completion of retrofitting. Any delay in completing the retrofitting of the building
would severely impact the planned opening of the facility on January 1, 2017.
 Purchase and installation of merchandising display equipment. The final decisions
for purchasing and leasing equipment will ramp up once there is funding. Any
delays in the shipping and installation of equipment would severely impact the
scheduled opening date.
Exceeding costs of budgeted items. Exceeding the budget would be problematic for
the firm financially.
Final clearances from the city.

Costs

Design and Development Budget

The budget associated with the building, to bring Tabasamu to its opening date, is as
follows:

Item Cost____
Retrofitting building $ 750,000
Inventory $ 100,000
Refrigeration $ 200,000
Sales and marketing materials $ 40,000

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Merchandise display $ 30,000
Other $105,000

Total $1,225,000
Intellectual Property

Patents: Due to the nature of the operations, we do not anticipate
filing for any patents.

Trademarks: Tabasamu’s distinctive marks, including its name, its logo,
its tagline, and its internet domain names are trademarked.

Copyrights: The Company will routinely copyright appropriate material.

Trade secrets Tabasamu considers the following contentl to be trade
secrets: operating manuals, employee orientation material,
client lists, lists of prospects, business plan, customer
surveys, suppliers and vendors, and financial records.

This material is not allowed to leave Tabasamu’s premises without the permission of an
officer of the company.

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Appendices

Management bio and resumes

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Drawings and specifications of the supermarket interior design

4
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Proforma financial statements (see excel template)

Introduction
Base Year
Assumptions
Income Statement
Balance Sheet
Cash flow
Income statement chart
Balance sheet chart
Cash flow chart
Cumulative free cash flow chart

4
3

Contents

Introduction This sheet

Base Year Data entry sheet for first year estimates/actual data

Assumptions Data entry sheet for assumptions relating to major line items

Income Statement Pro forma Income Statement

Balance Sheet Pro forma Balance Sheet

Cash Flow Pro forma Cash Flow Statement

Income Statement CharPt rojected Income Statement Chart

Balance Sheet Chart Projected Balance Sheet Chart

Cash Flow Chart Projected Cash Flow Chart

Cumulative Free Free Cash Flow Chart

Cash Flow Chart

Enter Data in Thousands of Dollars 2016

Base Year 2700
15%
Income Statement
1998
Revenue
Annual Revenue Growth Rate 702

Total Cost of Goods Sold 186
50
Gross Margin
160
Sales Expenses 250
Marketing Expenses
General and Admin. Expenses 0
Officers Compensation 0
Other Expenses 2 0
Other Expenses 3
Other Expenses 4 646

Total Operating Expenses 10 Year - Straight Line

Depreciation Assumption 28
Depreciation Expense
28
Operating Profit
0
Other Income (Expense) 3
Interest Income 12
Interest Expense
20
Pre-Tax Income
15%
Income Tax Rate 3
Income Tax
17
Net Income
0
Preferred Dividends 0
Common Dividends

Balance Sheet 31/12/2016

As of 100
65
Assets 0

Operating Cash 100
Marketable Securities 50
Accounts Receivable
Inventory 315
Other Current Assets
280
Total Current Assets 42

Gross Equipment 238
Accumulated Depreciation 167

Net Plant & Equipment 405
Other Long-Term Assets
720
Total Long-Term Assets
50
Total Assets 50
10
Liabilities
5
Accounts Payable 40
Short-Term Debt
Current Maturities 155
Taxes Payable
Other Current Liabilities 100

Total Current Liabilities 10 Years

Long-Term Debt 65
Term of Long-Term Debt
Other Long-Term Liabilities 165

Total Long-Term Liabilities 0
400
Preferred Stock
Contributed Capital 0
Retained Earnings
400
Shareholders Equity
720
Total Liabilities and
Shareholders Equity 500
5%
Cash Flow Analysis 8%
7%
Capital Expenditures
Interest Income Rate
Interest Expense Rate (Short-Term)
Interest Expense Rate (Long-Term)

Base Year Year 1 Year 2 Year 3 Year 4 Year 5

2016 2017 2018 2019 2020 2021

Annual Revenue Growth Rate 2,700 15.0% 15.0% 15.0% 15.0% 15.0%
Revenue 3,105 3,571 4,106 4,722 5,431

Cost of Goods Sold as a % of Revenue 74.0% 74.0% 74.0% 74.0% 74.0% 74.0%

Sales Expenses 6.9% 6.9% 6.9% 6.9% 6.9% 6.9%
Marketing Expenses 1.9% 1.9% 1.9% 1.9% 1.9% 1.9%
General and Admin. Expenses 5.9% 5.9% 5.9% 5.9% 5.9% 5.9%
Officers Compensation 9.3% 9.3% 9.3% 9.3% 9.3% 9.3%
Other Expenses 2 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other Expenses 3 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other Expenses 4 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Other Income (Expense) as a % of Revenue 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Interest Income Rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Interest Expense Rate (Short-Term) 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Interest Expense Rate (Long-Term) 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%
Income Tax Rate 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
Preferred Dividend Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Common Dividend Payout Ratio 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Operating Cash as a % of Revenue 3.7% 3.7% 3.7% 3.7% 3.7% 3.7%
Accounts Receivable as a % of Revenue 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Days Receivable
Inventory as a % of Cost of Goods Sold 0 0 0 0 0 0
Inventory Days 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Other Current Assets as a % of Revenue
Capital Expenditures 18 18 18 18 18 18
Other Long-Term Assets as a % of Revenue 1.9% 1.9% 1.9% 1.9% 1.9% 1.9%
500 111
Accounts Payable as a % of COGS 6.2% 64 73 83 96 6.2%
Days Payable 6.2% 6.2% 6.2% 6.2%
Short-Term Debt 2.5%
Current Maturities of Long-Term Debt 2.5% 2.5% 2.5% 2.5% 2.5% 9
Long-Term Debt 9 9 9 9 9
Taxes Payable as a % of Taxes 50
Other Current Liabilities as a % of Revenue 50 50 50 50 50 10
Other Long-Term Liabilities as a % of Revenue 10 10 10 10 10 50
Preferred Stock 100 90 80 70 60 170.5%
Common Surplus 170.5% 170.5% 170.5% 170.5% 170.5% 1.5%
1.5% 1.5% 1.5% 1.5% 1.5% 2.4%
2.4% 2.4% 2.4% 2.4% 2.4%
0
0 0 0 0 0 400
400 400 400 400 400

Depreciation Tables: Assumes: 10 Year - Straight Line

Year Capital Expenditures Base Year 1 2 3 4 5 6
6 6 6 6 6
1 64 28 7 7 7 7
2 73 274 32 8 8 8
3 83 315 36
4 96 362 42 10 10
5 111 11
416 48
Depreciation for the Year 57
479
Net Plant & Equipment 238 0

Data Shown in Thousands of Dollars

Base Year Year 1 Year 2 Year 3 Year 4 Year 5

2016 2017 2018 2019 2020 2021

Revenue 2,700 3,105 3,571 4,106 4,722 5,431

Cost of Goods Sold 1,998 2,298 2,642 3,039 3,495 4,019

Gross Margin 702 807 928 1,068 1,228 1,412

Sales Expenses 186 214 246 283 325 374
Marketing Expenses 50 58 66 76 87 101
General and Admin. Expenses 322
Officers Compensation 160 184 212 243 280 503
Other Expenses 2 250 288 331 380 437
Other Expenses 3 0
Other Expenses 4 0 000 0 0
0 000 0 0
0 000 0

Total Operating Expenses 646 743 854 982 1,130 1,299

Depreciation Expense 28 32 36 42 48 57

Operating Profit 28 33 38 44 50 56

Other Income (Expense) 0 000 0 0
Interest Income 3 200 0 0
Interest Expense 12 11 14 19 27 35

Pre-Tax Income 20 23 24 24 23 21

Income Tax 3 344 3 3

Net Income 17 20 21 21 20 18

Preferred Dividends 0 000 0 0
Common Dividends 0 000 0 0

Data Shown in Thousands of Dollars Base Year Year 1 Year 2 Year 3 Year 4 Year 5

Assets 2016 2017 2018 2019 2020 2021

Operating Cash 100 115 132 152 175 201
Marketable Securities 65 1 0 0 00
Accounts Receivable 000 0 00
Inventory
Other Current Assets 100 115 132 152 175 201
50 58 66 76 87 101
Total Current Assets
315 288 331 380 437 503
Net Plant & Equipment
Other Long-Term Assets 238 274 315 362 416 479
167 192 221 254 292 336
Total Long-Term Assets
405 466 536 616 708 815
Total Assets
720 754 866 996 1,146 1,317

Liabilities 50 58 66 76 87 101
50 50 50 50 50 50
Accounts Payable 10 10 10 10 10 10
Short-Term Debt
Current Maturities 566 6 65
Taxes Payable 40 46 53 61 70 80
Other Current Liabilities
155 169 185 203 223 246
Total Current Liabilities
100 90 80 70 60 50
Long-Term Debt 65 75 86 99 114 131
Other Long-Term Liabilities
165 165 166 169 174 181
Total Long-Term Liabilities
0 0 75 163 268 392
Surplus Liabilities
000 0 00
Preferred Stock 400 400 400 400 400 400
Common Surplus
Retained Earnings 0 20 40 61 81 98

Shareholders Equity 400 420 440 461 481 498

Total Liabilities & Shareholders Equity 720 754 866 996 1,146 1,317

In-Balance Test 000 0 00

Data Shown in Thousands of Dollars Base Year Year 1 Year 2 Year 3 Year 4 Year 5

Revenues 2016 2017 2018 2019 2020 2021

Earnings Before Interest & Taxes 2,700 3,105 3,571 4,106 4,722 5,431

Less Tax Exposure 28 33 38 44 50 56

Earnings Before Interest & After Taxes 4567 78

Plus Depreciation 24 28 32 37 42 48

Operating Cash Flow 28 32 36 42 48 57

Operating Working Capital 52 59 68 79 91 104
Less Increase (Decrease) in Operating Working Capital
Plus Increase (Decrease) in Other Long-Term Liabilities 155 178 205 237 274 316
Less Increase (Decrease) in Other Long-Term Assets 0 23 27 32 37 42
Less Capital Expenditures 0 10 11 13 15 17
0 25 29 33 38 44
Free Cash Flow 96 111
500 64 73 83
Less After-Tax Interest Expense (Income)
Less Amortization of Debt (448) (43) (49) (57) (65) (76)
Less Total Dividends
7 8 12 17 23 30
External Financing Surplus (Deficit) 10 10 10 10 10 10

0000 00

(61) (71) (83) (98) (116)