Cosmetic Herbal Sundries Business Plan
Gentle Touch Creations is a start-up business specializing in hand-made herbal products created by Joanne Lovejoy, the company founder. These products include herbal therapy packs, soaps, Saint-John’s-wort oil, balsam eye packs, salves, moisturizers, herbal bath bags, and bath powder. All Gentle Touch Creations are made from herbs that are either garden grown or gathered in local fields or wooded areas at their peak of maturity and highest concentration of active ingredients.
Herbal products have grown in popularity with consumers over the past decade, with the industry exceeding $4.3 billion in sales last year. Once only available in specialty shops, these products can now be found in local supermarkets. The demand has led to a cottage industry of supplying herbal products to companies who market them under their own brand names.
Gentle Touch Creations will sell its product line to herbal product companies that sell baskets with specific themes, such as balsam salve and eye packs.
Joanne Lovejoy, with seven years of experience in the herbal product industry, has worked as a Product Manager for both Jerry’s Herbal Products and Safe Soap. She has maintained her industry contacts and already signed contracts with Forest Meadows Products and WindWalker Products to supply herbal therapy packs, salves, balsam eye packs, and Saint-John’s-wort oil.
Gentle Touch Creations creates herbal products that heal, soothe, and cleanse customers.
Objectives:
– Achieve $120,000 in sales during the first year.
– Establish a customer base of 10 companies.
– Increase sales by 15% in the second year.
Gentle Touch Creations offers herbal products such as therapy packs, soaps, Saint-John’s-wort oil, balsam eye packs, salves, moisturizers, bath bags, and bath powder. These products are sold to herbal product companies specializing in themed baskets. The company operates as a Sole Proprietorship.
Company Ownership:
Gentle Touch Creations is owned by Joanne Lovejoy.
Start-up Summary:
Start-up expenses for Gentle Touch Creations focus on production and extraction equipment. Joanne Lovejoy invests $50,000 and secures a $50,000 SBA loan.
Start-up Requirements:
– Legal: $600
– Stationery etc.: $100
– Insurance: $300
– Rent: $600
– Expensed Equipment: $40,000
– Total Start-up Expenses: $41,600
Start-up Assets:
– Cash Required: $33,400
– Start-up Inventory: $5,000
– Other Current Assets: $5,000
– Long-term Assets: $15,000
– Total Assets: $58,400
Total Requirements: $100,000
Start-up Funding:
– Start-up Expenses to Fund: $41,600
– Start-up Assets to Fund: $58,400
– Total Funding Required: $100,000
Assets:
– Non-cash Assets from Start-up: $25,000
– Cash Requirements from Start-up: $33,400
– Additional Cash Raised: $0
– Cash Balance on Starting Date: $33,400
– Total Assets: $58,400
Liabilities and Capital:
– Liabilities
– Current Borrowing: $0
– Long-term Liabilities: $50,000
– Accounts Payable (Outstanding Bills): $0
– Other Current Liabilities (interest-free): $0
– Total Liabilities: $50,000
Capital:
– Planned Investment:
– Joanne Lovejoy: $50,000
– Other: $0
– Additional Investment Requirement: $0
– Total Planned Investment: $50,000
– Loss at Start-up (Start-up Expenses): ($41,600)
– Total Capital: $8,400
Total Capital and Liabilities: $58,400
Total Funding: $100,000
Company Locations and Facilities:
Gentle Touch Creations is located in a 2,000 square foot manufacturing space in the Sneed Industrial Park in northwest Tracy.
Products:
The product line of Gentle Touch Creations includes:
– Herbal Therapy Packs for back and neck pain, muscle aches, filled with wheat berries, flax seed, and 10 herbs. Made of natural cotton or patterned flannel, can be heated in the microwave oven or cooled in the freezer.
– Saint-John’s-wort oil in a roll-on applicator, used as an anti-inflammatory or for burns.
– Balsam eye packs in eye-pleasing patterns to relieve sinus discomfort and eyestrain.
– Salves with Comfrey for healing cuts, Goldenseal, Balsam, and other herbs for use on split skin caused by heat, cold, or water.
– Moisturizer for face and hands with various scented oils.
– Soaps created with herbs like powdered balsam and rose petals marbleized throughout each cake, gently scented.
– Herbal bath bags of lavender, peppermint, oatmeal, and herbs.
– Bath powder made from arrowroot, cornstarch, rose petals, and other herbs.
Market Analysis Summary:
Herbal products have grown in popularity, with over $4.3 billion in sales last year. They are now available in local supermarkets, which has created a cottage industry of supplying herbal products to companies who market them under their own brand name.
The industry can be divided into two segments:
– Herbal Health Products
– Herbal Beauty Products
Market Segmentation:
Gentle Touch Creations will focus on two target companies:
– Herbal Health Products: Small-to-medium-size companies on the East Coast and Midwest.
– Herbal Beauty Products: Small-to-medium-size companies on the East Coast.
Market Analysis
| Market Analysis | |||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |||
| Potential Customers | Growth | CAGR | |||||
| Herbal Heath Products | 1% | 20,000 | 20,200 | 20,402 | 20,606 | 20,812 | 1.00% |
| Herbal Beauty Products | 2% | 4,000 | 4,080 | 4,162 | 4,245 | 4,330 | 2.00% |
| Total | 1.17% | 24,000 | 24,280 | 24,564 | 24,851 | 25,142 | 1.17% |
4.2 Target Market Segment Strategy
Herbal health products dominate sales, but herbal beauty products have been growing in popularity each year.
There are 10,000 herbal health product companies competing for market share among consumers. Most of these companies are regionally focused, but 15% distribute their products nationally. This is compared to only 2,000 herbal beauty product companies. Most of these companies also only compete regionally, though a handful (4%) dominate the national market. Sales growth in herbal beauty products will attract new companies to the marketplace.
Gentle Touch Products will focus on small companies serving the East Coast regional market. Many of these smaller companies aggressively seek new products to add to their line. The cost of manufacturing all these items themselves is prohibitive, so they contract with third party vendors for supplies.
4.3 Service Business Analysis
The herbal market has grown into a multi-billion dollar industry, creating opportunities for small firms and farms to supply products to larger herbal companies that repackage and market the products under their own brand. Suppliers can range from one-person operations to small farms with 20 or more employees.
As larger and second-tier companies compete for greater market share, they are constantly looking for additional products that will improve their advantage. An herbal therapy pack, for example, can be an attractive addition to a product line.
4.3.1 Competition and Buying Patterns
Quality and timeliness are essential factors in being successful as a supplier to an herbal product company. This is especially true when the product is repackaged as part of a gift basket. A delay in delivery will impact the company’s ability to meet deadlines.
Word of mouth is one of the strongest marketing tools with herbal products. Local success often leads to larger companies procuring the product for their line.
Joanne Lovejoy has sold her herbal products at craft fairs in the region for the past five years. The popularity and customer satisfaction of these products were important selling points when WindWalker Products first approached Joanne about her herbal therapy packs.
Strategy and Implementation Summary
Gentle Touch Creations will focus on building a client base with herbal health product companies. Joanne Lovejoy will be responsible for marketing the company’s services to potential customers.
Currently, the company has acquired 2 contracts with the following companies:
- Forest Meadows Products
- WindWalker Products.
5.1 Competitive Edge
Gentle Touch Creations’ competitive advantage is the consistent quality of the herbs at the core of each product. The products have been locally tested for years, establishing the customer satisfaction demanded by Gentle Touch Creations.
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5.2 Sales Strategy
Joanne Lovejoy has seven years of experience in the herbal product industry. She has worked as a Product Manager for both Jerry’s Herbal Products and Safe Soap. She has maintained her industry contacts and has already signed contracts with Forest Meadows Products and WindWalker Products to supply herbal therapy packs, salves, balsam eye packs, and Saint-John’s-wort oil.
Joanne Lovejoy will build on these successes and market her product line to herbal product companies through face-to-face selling.
5.2.1 Sales Forecast
Gentle Touch Creations anticipates quick sales growth, with the first billing to be sent out in mid-May.
The following sales forecast table and chart are for three years. Monthly figures for the first year are in the appendix.
Sales Forecast
| Year 1 | Year 2 | Year 3 |
|——–|——–|——–|
| Sales | | |
| Herbal Products | $282,000 | $340,000 | $420,000 |
| Other | $0 | $0 | $0 |
| Total Sales | $282,000 | $340,000 | $420,000 |
Direct Cost of Sales
| Year 1 | Year 2 | Year 3 |
|——–|——–|——–|
| Direct Cost of Sales | | |
| Herbal Products | $141,000 | $170,000 | $200,000 |
| Other | $0 | $0 | $0 |
| Subtotal Direct Cost of Sales | $141,000 | $170,000 | $200,000 |
Joanne Lovejoy will market the company’s product line at regional craft fairs and coordinate fair participation with herbal company representatives. Additionally, she will regularly send free samples to potential clients to allow them to experience the quality of her products firsthand. Face-to-face sales will be the key focus of her marketing.
Joanne will also launch the Gentle Touch Creations website. The site will promote her products, list craft fair appearances, and initially offer a selection of her most popular products for direct web sales. She will work with 1st-at-the-Top.com Internet and E-commerce consultants for website design, hosting, and search engine placement.
5.4 Milestones
The table below outlines specific milestones, assigned responsibilities, dates, and budgets. Joanne is focusing on a few key milestones for this plan.
Now, let’s move on to the final section of the document.
Milestones:
| Milestones | |||||
| Milestone | Start Date | End Date | Budget | Manager | Department |
| Setup Production Facility | 3/1/2002 | 5/1/2002 | $40,000 | Joanne Lovejoy | Owner |
| Establish Inventory | 4/1/2002 | 5/5/2002 | $5,000 | Joanne Lovejoy | Owner |
| Confirm Craft Fair Dates | 5/1/2002 | 6/21/2002 | $1,000 | Joanne Lovejoy | Owner |
| Develop Website | 4/1/2002 | 7/1/2002 | $2,000 | 1st-at-the-Top.com | Web |
| Totals | $48,000 | ||||
Personnel Plan:
Joanne Lovejoy has seven years of experience in the herbal product industry. She has worked as a Product Manager for Jerry’s Herbal Products and Safe Soap, managing a staff and ensuring top performance.
Joanne has grown her business from a part-time craft activity to its current level over the past three years. Her current staff should suffice for the first two years of operation, with potential for additional hiring in the third year.
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| Joanne Lovejoy | $30,000 | $32,000 | $34,000 |
| 2 Production Staff | $40,800 | $44,000 | $48,000 |
| P/T Production Staff | $0 | $0 | $23,000 |
| Total People | 3 | 3 | 3 |
| Total Payroll | $70,800 | $76,000 | $105,000 |
The following sections cover the financial plan for Gentle Touch Products. The tables present annual figures, with monthly numbers for the first year included in the appendix.
7.1 Break-even Analysis
The monthly break-even point is approximately $17,000.
Break-even Analysis
Monthly Revenue Break-even: $17,188
Assumptions:
– Average Percent Variable Cost: 50%
– Estimated Monthly Fixed Cost: $8,594
7.2 Projected Profit and Loss
The table and charts below illustrate the projected profit and loss for three years.
Pro Forma Profit and Loss:
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| $282,000 | $340,000 | $420,000 | |
| $141,000 | $170,000 | $200,000 | |
| $0 | $0 | $0 | |
| $141,000 | $170,000 | $200,000 | |
| $141,000 | $170,000 | $220,000 | |
| 50.00% | 50.00% | 52.38% | |
| $70,800 | $76,000 | $105,000 | |
| $4,260 | $7,200 | $8,500 | |
| $4,800 | $4,800 | $4,800 | |
| $0 | $0 | $0 | |
| $4,800 | $5,300 | $6,000 | |
| $650 | $780 | $900 | |
| $7,200 | $7,800 | $8,500 | |
| $10,620 | $11,400 | $15,750 | |
| $0 | $0 | $0 | |
| $103,130 | $113,280 | $149,450 | |
| $37,870 | $56,720 | $70,550 | |
| $42,670 | $61,520 | $75,350 | |
| $5,158 | $4,340 | $3,050 | |
| $9,814 | $15,714 | $20,250 | |
| $22,899 | $36,666 | $47,250 | |
| 8.12% | 10.78% | 11.25% | |
Projected Cash Flow:
7.3 Projected Cash Flow
The table and chart below show projected cash flow for three years.
Pro Forma Cash Flow
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $70,500 | $85,000 | $105,000 |
| Cash from Receivables | $161,300 | $244,675 | $300,759 |
| Subtotal Cash from Operations | $231,800 | $329,675 | $405,759 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $12,000 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| Subtotal Cash Received | $243,800 | $329,675 | $405,759 |
7.4 Projected Balance Sheet
The following table highlights the projected balance sheet for three years.
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $21,436 | $27,993 | $53,522 |
| Accounts Receivable | $50,200 | $60,525 | $74,766 |
| Inventory | $19,800 | $23,872 | $28,085 |
| Other Current Assets | $5,000 | $5,000 | $5,000 |
| Total Current Assets | $96,436 | $117,390 | $161,373 |
| Long-term Assets | |||
| Long-term Assets | $15,000 | $15,000 | $15,000 |
| Accumulated Depreciation | $4,800 | $9,600 | $14,400 |
| Total Long-term Assets | $10,200 | $5,400 | $600 |
| Total Assets | $106,636 | $122,790 | $161,973 |
7.5 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5122, Drug, Proprietaries, and Sundries, are shown for comparison.
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 20.57% | 23.53% | 16.90% |
| Percent of Total Assets | ||||
| Accounts Receivable | 47.08% | 49.29% | 46.16% | 28.90% |
| Inventory | 18.57% | 19.44% | 17.34% | 31.30% |
| Other Current Assets | 4.69% | 4.07% | 3.09% | 28.80% |
| Total Current Assets | 90.43% | 95.60% | 99.63% | 89.00% |
| Long-term Assets | 9.57% | 4.40% | 0.37% | 11.00% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | ||||
| Accounts Payable | 24,738 | 18,625 | 21,959 | 49.00% |
| Current Borrowing | 9,000 | 3,000 | 0 | |
| Other Current Liabilities | 0 | 0 | 0 | |
| Subtotal Current Liabilities | 33,738 | 21,625 | 21,959 | |
| Long-term Liabilities | 41,600 | 33,200 | 24,800 | |
| Total Liabilities | 75,338 | 54,825 | 46,759 | |
| Paid-in Capital | 50,000 | 50,000 | 50,000 | |
| Retained Earnings | (41,600) | (18,701) | 17,965 | |
| Earnings | 22,899 | 36,666 | 47,250 | |
| Total Capital | 31,299 | 67,965 | 115,215 | |
| Total Liabilities and Capital | 106,636 | 122,790 | 161,973 | |
| Net Worth | 31,299 | 67,965 | 115,215 |
Appendix
Sales Forecast
| Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | |
| Herbal Products | $0 | $10,000 | $12,000 | $14,000 | $18,000 | $22,000 | $26,000 | $36,000 | $40,000 | $36,000 | $32,000 | $36,000 |
| Other | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Total Sales | $0 | $10,000 | $12,000 | $14,000 | $18,000 | $22,000 | $26,000 | $36,000 | $40,000 | $36,000 | $32,000 | $36,000 |
Personnel Plan
| Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | |
| Joanne Lovejoy | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 |
| 2 Production Staff | $3,400 | $3,400 | $3,400 | $3,400 | $3,400 | $3,400 | $3,400 | $3,400 | $3,400 | $3,400 | $3,400 | $3,400 |
| P/T Production Staff | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Total People | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 |
| Total Payroll | $5,900 | $5,900 | $5,900 | $5,900 | $5,900 | $5,900 | $5,900 | $5,900 | $5,900 | $5,900 | $5,900 | $5,900 |
General Assumptions:
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0 0
Pro Forma Profit and Loss:
Sales $0 $10,000 $12,000 $14,000 $18,000 $22,000 $26,000 $36,000 $40,000 $36,000 $32,000 $36,000 $36,000
Direct Cost of Sales $0 $5,000 $6,000 $7,000 $9,000 $11,000 $13,000 $18,000 $20,000 $18,000 $16,000 $18,000 $18,000
Other Production Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $0 $5,000 $6,000 $7,000 $9,000 $11,000 $13,000 $18,000 $20,000 $18,000 $16,000 $18,000 $18,000
Gross Margin $0 $5,000 $6,000 $7,000 $9,000 $11,000 $13,000 $18,000 $20,000 $18,000 $16,000 $18,000 $18,000
Gross Margin % 0.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%
Expenses
Payroll $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900
Sales and Marketing and Other Expenses $380 $380 $380 $380 $380 $380 $380 $380 $230 $230 $380 $380 $380
Depreciation $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400
Leased Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Utilities $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400
Insurance $650 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Rent $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600
Payroll Taxes 15% $885 $885 $885 $885 $885 $885 $885 $885 $885 $885 $885
Pro Forma Cash Flow:
Cash Received:
Cash Sales
Receivables
Subtotal Cash from Operations:
Cash Sales
Receivables
Additional Cash Received:
Sales Tax, VAT, HST/GST
Expenditures:
Cash Spending
Bill Payments
Subtotal Spent on Operations:
Cash Spending
Bill Payments
Additional Cash Spent:
Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing
Other Liabilities Principal Repayment
Long-term Liabilities Principal Repayment
Net Cash Flow:
($6,615)
($4,756)
($10,392)
($4,468)
($3,344)
$7,544
($3,619)
($949)
($6,140)
$1,123
$9,682
$9,969
Cash Balance:
$26,785
$22,029
$11,637
$7,169
$3,825
$11,369
$7,750
$6,802
$662
$1,785
$11,467
$21,436
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