Business Plan

Business Plan
Paulownia IBG
Name: Ivaylo Milanov
IBM, 2nd year
1
Table of Contents:
Introduction………………………………………………………………………………………………………………………3
The Business………………………………………………………………………………………………………………………4
The Industry and Competitive Analysis……………………………………………………………………………….5
Market Analysis & Marketing Plan………………………………………………………………………………………7
Management Plan……………………………………………………………………………………………………………….9
Financial Analysis…………………………………………………………………………………………………………………10
Potential Risks and Contingency Plans………………………………………………………………………………….12
References……………………………………………………………………………………………………………………………13
Entrepreneurship: Marking & Feedback Sheet……………………………………………………………………14
2
Introduction
Executive Summary
Welcome to Paulownia IBG, a new idea for a greener future in the Dobrich region, Bulgaria. Paulownia
has been considered as the fastest growing tree in the world. The tree can grow up to five meters
during the first year. The wooden material has multiple uses and mainly in producing home furniture,
ship building air plane wooden parts and musical instruments. The idea of starting Paulownia IBG was
inspired by the constantly increasing demand for timber in the world. People all over the world use
wood for building boats, roofs, tools, furniture and even houses. However, deforestation another major
problem in our world has drawn the attention of many people from all over the world and when
knowing that there is a small but working solution to the problem each person can be a responsible
customer. That is why the objectives of the company are to supply part of these people with the
materials they need with the hope that in the future more and more people will understand, seek and
use the timber from Paulownia. Paulownia IBG is planning to begin its journey from Bulgaria and
continue developing internationally while meeting the high quality standards of wooden materials and
satisfying the needs of its customers wherever that might be.
3
The Business
Paulownia IBG is a private limited company. The structure of the Business is sole proprietorship. For
now the company offers trees for planting and leaves (Food Leaves) for animal fodder (for feeding
cattle, sheep and goats). In the future five years the company hopes to produce its first high quality
Woodstock used on the market. The company offers online catalogue, information about ordering and
contact information on the website: www.paulowniaibg.com . There is a gallery which includes pictures
of the land where paulownia is grown and stored. For meeting the expectations of the customers the
company makes sure that products are well selected and cared for before being send. The time it takes
for delivery within the territory of Bulgaria is from twelve to twenty-four hours after placing an order
and the company uses Econt as a delivering company. All orders over 99 leva receive free shipping.
Customers are not required to order a big quantity as to get a discount or a lower price for the products
they purchase. Paulownia trees and “Food Leaves” are sent with a small book which contains all the
benefits of planting such a tree and also a code on the very last page which gives the customer access to
different books about forestry in Bulgarian and English. That unique option is available thanks to the
local library “Dora Gabe” in Dobrich which has agreed on providing the company with an access code for
their website’s science directory that each reader is given when joining the library. The company is
proud of working with local intellectual institutions and that is why it is an important part of the
company’s ethics to help educate more people about trees and their vital role in our lives. Paulownia
IBG is caring for the future of our planet and by moving a step at a time forward in a well-planned route
the company’s goal to reduce the impacts of deforestation will successfully introduce a new way of
thinking. That is because trees are already part of the future and as a responsible entrepreneurship one
must understand that nature has given us the answers long before the problems have been recognized.
Despite the fact that technology is available to more people the problems related to trees and
biodiversity seem to pass us by without any special attention given to them.
4
The Industry and Competitive Analysis
The main competitors:
1. PAULOWNIA.BG ltd. – Located in Silistra, Bulgaria.
The company offers Paulownia trees for the price of 2.95 leva/tree when quantity exceeds 15
000 trees and 6.00 leva/tree when quantity is much smaller, for example 100 trees and that of
course is during the period starting from November to March next year. The company also
offers planting and watering services with professional machinery and equipment. These
services include consulting on how and where it is appropriate to plant Paulownia. The services
are not free of charge and must be paid for before actually enjoying their benefits. That is
without shipping expenses.
2. Paulownia Investments Projects – Located in EU, in Bulgaria the city of Ruse.
The company offers opportunities for small and medium sized investors -to own trees and the
chance to receive the return on their investment which can be used for future education or
when retiring. The amount in most cases seems promising depends on the initial investment of
course but that is a stable and secure investment which in the end will benefit the person many
times.
3. Velboy Ltd.- Located in Plovdiv, Bulgaria.
The company’s main activities include selling agricultural chemicals, seeds , field tools, and from
2009 it offers Paulownia trees. The firm has it own laboratory and testing fields.
4. Paulownia Development - Located in Romania.
The company offers Paulownia seeds. It offers complete planting services and information on
cultivation. And also it offers the opportunity to connect the customer with other Paulownia
timber producers as to be able to get information about the best available price on the market.
And the prices per/tree is about 8 leva and that does not include shipping costs. The company
also offers a one year warranty on its products and services. All purchases can be done online.
5. Paulownia Europa – Located in Romania.
The company is focused only in Paulownia trees. That includes trees for planting. Their offers are
as follow: For smaller quantities, up to 100 trees the prices per tree is around 13 leva and for
bigger quantities, more than 1200 trees the price per tree drops to 8.4 leva. That does not
include shipping expenses. However, the company has a good manufacturing base and has a
variety of trees.
It is clear by now that each competitor is trying to attract more customers by different strategies.
Moreover, their strength is that they have experience in growing Paulownia which of course gives them
an advantage over new Paulownia Growers. However, their weakness is mainly that they do not have
any customer reviews when entering their websites. The companies describe their products and their
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activities but they do not show any customer’s feedback related to them. That is why Paulownia IBG can
be positioned higher than most new growers because it cares about educating and involving people in
the process of doing business. All five competitors can be on the top spots but that is only for now
because there is much more to the business than just selling. There is an extra step that each company
should take in order to make itself more competitive and placing its products and services in the higher
rankings. And here the word rankings mean mainly business to customer relationships. This is crucial
nowadays and it is evident that some companies still do not reach their customers fully and successfully
in the end of each transaction. Simply, said the demand for a product might be increasing but the need
for communication has never been less important in this dynamic and rapidly developing industry.
6
Market Analysis & Marketing Plan
The target markets will be home furnishing manufacturers, ship building companies, construction
companies, big stores where wooden materials are being sold, foreign customers and of course local
shops where construction materials are being sold. And the other targeted market would be small and
medium sized farmers who seek an opportunity for themselves to grow trees for protecting their crops
from strong winds, having an additional source of food or want to grow their own wooden material that
they can use during winter times for heating and also for the timber itself. So that if they need to repair
something wooden they wouldn’t look for timber but only for an experienced carpenter who would do
an amazing job with this strong and reliable wood. And of course the tree will be available to all
gardener lovers who wish to add something new in their gardens or wish to surprise their neighbors by
planting Paulownia in the garden. No matter the reason people should be happy with the fact that trees
are reducing carbon emissions and Paulownia due to its fast growing abilities can be considered the
leader in this ongoing battle. And every year Paulownia IBG will organize events where people can learn
more about the tree by seeing it and planting it in the community they live in. These events will take
place in different parts of towns, cities and villages throughout north- eastern Bulgaria during autumn.
The marketing objectives include: reaching as many potential customers as possible by speaking to
them, making questionnaires concerning their opinion on the quality of wooden furniture they normally
buy, how accessible is the information about the wooden materials that are being used for
manufacturing them is., What are their expectations and demands for future products?, and of course;
What do they know about Paulownia?. This will provide up-to-date information on how random people
rate, see and understand the wooden industry as part of their home life. It is important to note that the
more of this information the company has the more it will gain confidence and knowledge that can be
hard to beat. Moreover, Paulownia IBG is looking towards finding new customers at all times and one of
the ways to attract them is by inviting them to the location where the trees are grown and stored. That
sense of trust among the business and the customer needs to be given a favorable environment for
existing. Next steps will be determined by the level of success from previous actions so considering the
strength and weaknesses of each positive and negative reply will give the observer a snap shot of the
business in this very moment. And to “solidify” the walls of the snap shot Paulownia IBG will make sure
that the company is customer driven and easily accessible so that whatever the problem is the solution
can be easily traced with the direct help of customers. That will help the business survive longer in
periods of bad economy. This is just part of what a company like Paulownia IBG can do to realize its
objectives and it should not be considered as enough but it should be adjusted every time a difficult
situation arouses. In market such as the wooden industry there are many customers who seek a reliable
material that can be offered at a reasonable price not only for one type of furniture but for a variety and
this objective can be satisfied through experimenting the quality of the wood as to prove the buyer that
this material is worth the price and that it will be used in multiple areas.
About the promotional strategy Paulownia IBG will focus on different types of advertising: billboards, TV
and Radio advertisements, fliers and Furniture Magazines, also online advertising and point of sale. This
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strategy can allow for a combination of different advertisings and can be more successful when changing
them throughout different times of the year. The promotion for trees and leaves will be done in the
appropriate seasons while promoting the wooden materials will be done during the whole year. This will
make sure that the company name is still known and used among different suppliers and customers in
general. The main focus at the beginning of each season (spring and autumn) for trees and leaves will
be billboards and the radio because this is the time when people can still drive safely even if they peek
through the window of their cars and the radio because most people in the Dobrudja region listen to it
for new agricultural advertisements. And for the timber furniture magazines and TV ads will be the best
form of advertising because people need to see it or let’s say experience it somehow. It needs to be
more appealing than the other two products because the targeted audience is more diverse. And by
using the different types of advertising products should become well known. All of the information that
needs to be included: product information, contact information and a good visual representation of the
company will be done with the help of an external company, so that the company keeps it professional
image among people. Furthermore, advertising can be expensive and it is better to find experienced
professionals who can guide a new company as it is Paulownia IBG through the unpredictable paths of
the business.
Paulownia IBG can achieve good sales if it works over carefully on the quality of the products and by
making sure the business is customer driven according to their needs. With the planting trees the
company can achieve a profit after the first year by offering them for sale at the price of 3.5 leva despite
the quantity the customer desires to purchase. This price will include GST and the customer will be able
to take advantage of the promotion of free shipping if the order amount is 99 leva or more. After the
first year there will be available about 10 000 trees for planting and about 500/ 10 and25 kg bags of
leaves available for sale. The price of leaves can be offered for the price of 20 and 30 leva according to
size respectively initially and can be increased if demand is higher or reduced if the demand is lower. If
the company is able to sell all the 10 000 trees it will be able to make a profit of 35 000 leva just for
selling the trees and from the bags of food around 13 000 leva if the assumption of 300/25 kg bags are
sold and 200/10 kg bags are sold is made. Of course there will be a difference in the numbers but most
likely people will be interested in the big bags of food because of the price difference per kilogram. And
later on after the 6th, 7th and 8th year the company can actually realize its goals of selling the first
wooden materials on the market for a price starting from 700 leva per/cubic meter and hoping to get at
least 1300 leva per/cubic meter for most of the timber that is going to be offered. Initially the land will
be 1 ha and there will be about 3000 trees planted and 5000 for cultivation and seeds stored in the
greenhouse but if sales from selling the other two products are going well more land and trees can be
purchased. So that time value of money can be applied to its maximum. This will allow for continuous
growth and can allow the company to expand its product availability and even can offer new services
such as offering tours to tourists and visitors to people who are interested in growing plants. It will be an
interesting sightseeing for those who have not seen Paulownia when knowing that the tree grows with
an exceptional speed for a short period of time.
8
Management Plan
Since the company will have initially one owner there will be many things that one person has to do.
From buying the necessary equipment to planting and selling the trees. This type of business can be
controlled by one person as long as there is a will to follow certain steps and an entrepreneurial way of
thinking. Finding clients is one of the major tasks and there will be time for doing this, especially when
the summer and autumn have not started yet. The tasks of the top manager include taking care of the
land, making sure it is secure and no harm has been done to the land while nobody is there. Visiting the
Paulownia garden at least three times per week during the first year as to make sure that trees are
watered regularly and for the small trees they will be taken care of additionally and that is why they will
be placed in a medium sized green house as to allow enough sunlight to reach them and to be able to
protect them from high winds and hailstorm. The manager will be responsible for all the manual work at
least for the first year because he needs to learn more about the land, the trees and the area where the
business is going operate. Making observations and research as well will be part of the manager’s duties.
He will need to promote the products on the market in an efficient way. Establishing new connections
will play a key role in the business future. That is why the manager needs to know every little detail
concerning the products. The manager should be familiar with new technology and information about
the wooden industry and how it is affecting the business as a whole. Also as a key competence would be
necessary to be able to make presentations and promote the products to other freely and with the help
of modern software applications such as Prezi and Microsoft Power Point. The manager has to know a
little bit from everything that he is doing and to try to master the key competences (working with
technology, solving problems related to new technology, communicating freely in at least two languages
and also finding and using available information about new innovations in the industry). It can seem like
a challenging task but without any risks there would not be any initiative to think analytically and to
experiment in new ways.
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Financial Plan
Paulownia IBG is considered to be a small company since it will operate with less than 10 people
working for it initially. The starting up costs will include :
1. Purchasing the land – 1 ha for about 10 000 leva.
2. Buying the necessary equipment that will include: field tools, a water pump and pipes for
watering the trees. – 5 000 leva
3. Constructing the greenhouse and storage room – 10 lv per square meter but no more than 15
000 leva for the construction
4. Advertising costs - 3-4 thousand leva that will include the creation of website, books for
customers, billboard and TV or radio commercials depending on the time during the day in
which they are going to be streamed.
5. And all other expenses: including insurance, maintenance expenses and traveling (since the
business is located in a village area close to Dobrich) will be around 5 000 leva for the first year.
6. Trees for planting and for future cultivation and reselling - 3x8000 or 24 thousand leva
All of these expenses add up to: 62-63 thousand leva for starting the business. And of course
from that point the inventory and the land as assets will be excluded from the calculations as
the time moves forward. Other important aspect of the business is the source of funds. Mainly
the idea is to use own money as much as possible so that there can be less dependence and
more freedom in decision making. However, with a good business plan the company can apply
for an European Grant which supports the development of agriculture in newly entered states
such as Bulgaria. And by knowing that north-eastern parts of Bulgaria are agricultural oriented
when talking about business that would not seem impossible. The other option is to apply for a
bank loan but that amount should not exceed 10 000 leva so that the money can be easily
repaid within a reasonable time frame, up to 5 years.
Forecast profit and loss account
Business: Paulownia IBG
Period: 1 year
Sales: 48 000 leva
Less direct (variable) costs:
Materials: 5 000 leva
Direct wages: Since only one person is the owner that will depend on the final outcome
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Total direct (variable) costs: around 5 000 leva or 0.48 leva per unit
Gross profit: 24 000 leva
Fixed costs :
Rent: no since the land will be bought not rented but for land purchase and construction 50 000
leva will be required
Advertising: 4 000 leva
Insurance: 500 leva
Transport/travel: 4000 leva
Telephone: 200 leva
Stationery/postage: 50 leva
Repairs/renewals: 500 leva
Other : 250 leva for land transferring rights
Total fi xed costs: 58 000 leva
For a period of three years the company can generate a profit of 144 000 leva if the company
can sell all the trees available for planting and the food bags all together. The monthly
expenses will be mainly: travelling and maintenance. But this also includes promoting the
products and purchasing new trees at the end of each calendar year.
The assets of the company can be increased if sales are as projected. And liabilities can be
lowered.
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Potential Risks and Contingency Plans
In the wooden industry logging can be a problem due to infrastructure. When storing and transporting
the materials to another location it is important to note that only experienced companies can offer
proper handling of the materials and shipping them to their final destination. Other risks can be the
weather because people cannot control what is happening in nature, certainly they can influence it to
some extent but in this case strong winds and hailstorms are more likely to happen without warning.
Another risk is the security part. It is necessary to make sure that the land is observed regularly or at
least supervised by video cameras or private security.
For the logging risk choosing an experienced company would be the best choice to avoid damage of
materials or further complications in transportation. It will simply reduce the stress when delivering the
most important part of the business the wooden materials to their first and one of the most important
customers for the company. Next, for making sure that trees grow safely observing the forecast
regularly and making sure that smaller trees are protected from breaking during winter times can
reduce costs and improve the overall performance. And finally for the security part having in mind that
it is better to hire a private company to observe the land when you are not there still remains the best
option. Even though internet video cameras are also an option, both ways are applicable and should be
used when investing in a business like this. Simply planning ahead is not enough asking already existing
companies for best practices can help reduce wrong decision making in advance. Just by using already
existing information can help the business progress more stable and develop the key competences of
the business in faster rates.
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References:
Websites:
1.
2.
3.
4.
5.
6.
Paulownia BG [2014]: http://paulownia.bg/ [Accessed on April 25th]
Paulownia Ltd. [2014]: http://paulowniabg.blogspot.com/ [Accessed on April 25th]
PaulowniaEuropa [2014]: http://www.paulowniaeuropa.ro/ [Accessed on May 2nd ]
Paulownia Investment Projects [2014]: http://www.forestryprojects.biz/ [Accessed on 2nd ]
Paulownia Development [2014]: http://paulowniadevelopment.ro/ [Accessed on May 5th]
Karlsson, M. and Bjerke, B. [2013]: Social Entrepreneurship To Act as if and Make a Difference:
Linnaeus University, Sweden pg.33-35
Books and Articles:
7. FAO. [2013] Climate change guidelines for forest managers. FAO Forestry Paper No. 172. Rome,
Food and Agriculture Organization of the United Nations. Pg 63, pg. 19
8. European Communities [2003]: SUSTAINABLE FORESTRY AND THE EUROPEAN UNION :
Luxembourg: Office for Official Publicationsof the European Communities pg35-39
9. Hughes, B. and Cotterell, M [1999]: Software Project Management 2nd edition : University of
Brighton pg.2 ,pg. 8
10. Masera, O. and Nabuurs, G.J. [2007]: Forestry In climate change : Mitigation. Contribution of
Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate
Change [B. Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A. Meyer (eds)], Cambridge University
Press, Cambridge, United Kingdom and New York, NY, USA.pg. 573-577
11. Megalos, M and Bardon, R. [2008]: Understanding Forestry Terms A Glossary for Private
Landowners: NC State University pg. 1-12
12. Cossalter, C. and C. Pye-Smith [2003]: Fast-wood Forestry: myths and realities. Center for
International Forestry Research, Bogor, Indonesia, pg.59
13. Ericcson, K. and L.J. Nilsson [2006]: Assessment of the potential biomass supply in Europe using
a resource-focused approach. Biomass andBioenergy, pg. 1-15
14. Fischer,G. and L. Schrattenholzer [2001]: Global bioenergy potentials through 2050.Biomass and
Bioenergy, pg.151-159
15. Co-funded by the EUROPEAN UNION European Social Fund Article 6 Innovative measures [2004]
:A MARKET DRIVEN APPROACH IN THE FURNITURE INDUSTRY: pg.4-20
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ENTREPRENEURSHIP: MARKING & FEEDBACK SHEET (2013-14)
Name: IVAYLO MILANOV
Student number: 12006
ASSESSMENT CRITERIA
Max.
marks
Clarity and justification of the business 20
idea
Understanding about the process 20
business ideas are analysed, developed
and marketed
Credibility of financial projections
20
Overall usefulness, appropriateness and
relevance of the Business Plan
10
Technical layout , structure and clarity
of writing of the Business Plan
10
Source referencing
(15 minimum; Harvard referencing)
Business plan presentation
A
70+
B
C
69-60 59-50
D
49-40
E
39-35
F
34-0
Feedback
(see also comments in the assignment)
40%=32
marks
20
Source referencing
(15 minimum; Harvard referencing)
OVERALL FEEDBACK (see also comments in the assignment):
1st marked by:
40%=8
marks
Signed:
Dated:
GRADE
Signed:
Dated:
GRADE
Second Markers’ comments (see also comments in the assignment):
2nd marked by:
Consolidated mark and comments:
FINAL
MARK
External Examiner comments (if relevant):
14

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