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        "text": "A SAMPLE BUSINESS PLAN FOR\nSMALL FOOD BUSINESSES\n\nRodney B. Holcomb\nAssociate Professor, Dept. of Agricultural Economics\nBrowning Endowed Professor of Food Science, Food & Agricultural Products Center\nPhilip Kenkel\nProfessor, Dept. of Agricultural Economics\nBill Fitzwater Endowed Chair for Cooperative Studies\nLinda Blan-Byford\n(Former) Business Planning and Marketing Associate\nFood & Agricultural Products Center\nOklahoma State University\nJanuary 2006\n\n\n\nWhy Develop a Business Plan?\nIn the book The Entrepreneur’s Manual, Richard M. White, Jr. states that\nbusiness plans are “road maps” for business creation: “You identify your origin, select a\ndestination, and plot the shortest distance between the two points.”\nTrue, a business plan is essentially a blueprint for a business. However, it also\nserves many other purposes:\n A business plan is a detailed blueprint for the activities needed to establish a business\n(i.e. the details of a product or service, the market for that product or service, and the\nmanagement of the business providing that product or service).\n A business plan is also the ‘yardstick’ by which a business owner measures success in\nmeeting stated goals and objectives.\n Also, a business plan is a tool for obtaining a loan from a lending agency, or for\nattracting venture capital.\nWhat Does a Business Plan Look Like?\nThere is no standard format for a business plan, but there are many common\ncomponents of a business plan:\n Executive Summary (providing a general overview of the plan’s main points)\n Table of Contents\n (Brief) Background and History\n Business Goals and Objectives\n Description of Products\/Services\n Market Description\/Assessment\n Competition Assessment\n Marketing Strategies\n Manufacturing Plans\n Pro Forma Financial Analysis\n Contingency Plans\nMany business plans will also include appendixes with additional information\nrelated to the business, its operations, its owners\/managers, marketing\/promotional plans,\netc.\nOf course, the best way to illustrate a business plan is to provide one. The\nfollowing plan for a completely fictional business is used for a monthly entrepreneur\nworkshop at Oklahoma State University’s Food & Agricultural Products Center, entitled\n“Food Business Basics: A Guide to Starting Your Own Food Business.” This mock\nbusiness plan focuses on a whipped topping business, but the format is appropriate for\nany small food business.\n\n\n\nBusiness Plan\n\nFancy’s Foods, LLC.\n2409 Oak Hollow Drive\nAntlers, OK 74523\n(580) 298-2234\n\nKeith Bean\nMarianne Bean\n\nDecember 1, 1998\n\n\n\nExecutive Summary\nMarianne and Keith Bean have been involved with the food industry for several\nyears. They opened their first restaurant in Antlers, Oklahoma in 1981, and their second\nin Hugo in 1988. Although praised for the quality of many of the items on their menu,\nthey have attained a special notoriety for their desserts. After years of requests for their\nflavored whipped cream toppings, they have decided to pursue marketing these products\nseparately from the restaurants.\nMarianne and Keith Bean have developed several recipes for flavored whipped\ncream topping. They include chocolate, raspberry, cinnamon almond, and strawberry.\nThese flavored dessert toppings have been used in the setting of their two restaurants over\nthe past 18 years, and have been produced in large quantities. The estimated shelf life of\nthe product is 21 days at refrigeration temperatures and up to six months when frozen.\nThe Beans intend to market this product in its frozen state in 8 and 12-ounce plastic tubs.\nThey also intend to have the products available in six ounce pressurized cans. Special\nattention has been given to developing an attractive label that will stress the\ngourmet\/specialty nature of the products.\nDistribution of Fancy’s Foods Whipped Dream product will begin in the local\nsoutheastern Oklahoma area. The Beans have an established name and reputation in this\narea, and product introduction should encounter little resistance.\nFinancial analyses show that the company will have both a positive cash flow and\nprofit in the first year. The expected return on equity in the first year is 10.88%\n\n\n\nTable of Contents\nExecutive Summary ........................................................................... 2\nBackground and History .................................................................... 4\nDescription of Products ..................................................................... 4\nMarket Description ............................................................................ 4\nCompetition........................................................................................ 5\nMarketing Strategies .......................................................................... 5\nManufacturing Plans .......................................................................... 6\nFinancial Projections.......................................................................... 6\nIncome Statement ..................................................................... 7\nCash Flow Analysis .................................................................. 11\nBalance Sheet ............................................................................ 12\nFinancial Ratios ........................................................................ 13\nContingency Plans ............................................................................. 14\nAppendices ......................................................................................... 15\nLetters of Endorsement ............................................................. 15\nResumes of Management .......................................................... 15\nProduct Labels .......................................................................... 15\n\n\n\nBackground and History\nMarianne and Keith Bean have been involved with the food industry for several\nyears. They opened their first restaurant in Antlers, Oklahoma in 1981, and their second\nin Hugo in 1988. Although praised for the quality of many of the items on their menu,\nthey have attained a special notoriety for their desserts. After years of requests for their\nflavored whipped cream toppings, they have decided to pursue marketing these products\nseparately from the restaurants.\n\nDescription of Products\nMarianne and Keith Bean have developed several recipes for flavored whipped\ncream topping. They include chocolate, raspberry, cinnamon almond, and strawberry.\nThese flavored dessert toppings have been used in the setting of their two restaurants over\nthe past 18 years, and have been produced in large quantities. The estimated shelf life of\nthe product is 21 days at refrigeration temperatures and up to six months when frozen.\nThe Beans intend to market this product in its frozen state in 8 and 12-ounce\nplastic tubs. They also intend to have the products available in six ounce pressurized\ncans.\n\nMarket Description\nThe flavored whipped toppings that Fancy’s Foods will market will fall into two\ndistinct categories: Dairy products and gourmet\/specialty foods. This business plan will\nlook at these two markets separately.\nDairy Products: While the overall consumption of dairy products in the United\nStates declined from 1972 to 1994, the market has seen a slight increase in the past four\nyears (Census of Agricultural Products, 1998, USDA). Dr. John Moore of the University\nof Florida expects the consumption of dairy product in the United States to continue a\nmodest increase of 1.5-2% per year, which is significant in this $268 billion annual\nmarket. This is attributed in part to more sophisticated processing techniques which have\nincreased the variety of dairy products available, as well as the increased awareness of\nthe benefits of a calcium rich diet (Moore et al, 1998).\nGourmet\/Specialty Products: Kalorama Information LLC, a market research\nfirm based in New York, indicates that the gourmet\/specialty foods market will continue\na fast paced growth well into the next decade. This $39-billion domestic industry has\ndoubled since 1992, and is expected to continue double-digit growth through 2002.\nWhile demographic information indicates that this sector of the industry is strongest in\nmetropolitan areas, there are also growth opportunities in smaller communities.\nPackaging and point of purchase marketing efforts are especially important in this\nmarket, and special attention will be given to these aspects of Whipped Dream.\n\n\n\nCompetition\nThere are several brands of whipped topping available in mainstream retail\noutlets. In the grocery stores in the Antlers and Hugo area, all of the ready-to-eat varieties\nare produced by large players, specifically Kraft and Sara Lee. There are also dry mixes\navailable, but these are not direct competition for Whipped Dream. According to sales\nfigures at grocery outlets in Antlers and Hugo, approximately 65% of the national brand\nprepared whipped topping is sold in frozen tub form, while the remaining 35% is in\npressurized can form.\nThe strengths of these products are their market shares and distribution channels.\nThey are available in virtually any retail grocery outlet, and have gained strong market\nacceptance. They are also distributed with other refrigerated and frozen dairy products.\nFinally, they are priced at $1.29-1.89 per 8-ounce tub or 6-ounce pressurized can, an\nadvantage when compared to the suggested retail price of Whipped Dream.\nThe weakness of these products is in the lack of variety. None of these companies\nproduce or market a flavored topping. Several of the products are also classified as\n‘whipped topping’, but are actually not dairy based.\n\nMarketing Strategies\nDistribution of Fancy’s Foods Whipped Dream product will begin in the local\nsoutheastern Oklahoma area. The Beans have an established name and reputation in this\narea, and product introduction should encounter little resistance. The managers of\nPruett’s IGA and Gardiner’s Grocery in Antlers, as well as Pruett’s in Hugo, have\nindicated that they are willing to carry the products. Their letters of intent and\nendorsement are included in the Appendix section. It is also important to note that\nGardiner’s Grocery puts an emphasis on specialty food products in addition to standard\ngrocery items.\nAfter Whipped Dream’s debut in Antlers, Hugo, and surrounding towns, Fancy’s\nFoods intends to participate in the “Made in Oklahoma” Demonstration Program\nadministered by the Oklahoma Department of Agriculture and Pratt’s Foods in Oklahoma\nCity. This program will enable the Beans to introduce Whipped Dream into the\nOklahoma City metropolitan area under more favorable market conditions. Fancy’s\nFoods also intends to enter the grocery and specialty markets in the Tulsa area in 2000.\nThe Beans will rely heavily on in-store displays and demonstrations in southeastern\nOklahoma stores, as well as those in Tulsa and Oklahoma City. They will demonstrate\nthe flavored topping in conjunction with fresh fruit during warmer months, and as a\ntopping on gourmet coffee and hot chocolate in the cooler months.\nSpecial attention has been given to developing an attractive label that will stress\nthe gourmet\/specialty nature of the products. A copy of the label is attached in the\n\n\n\nappendices. Linda Byford, a business planning and marketing specialist at the Oklahoma\nFood and Agricultural Products Research and Technology Center at Oklahoma State\nUniversity assisted with developing the label, and conducted a focus group study to\nevaluate the image projected by the label as well as the packaging.\n\nManufacturing Plans\nBecause Fancy’s Foods owns and operates two restaurants, they have facilities\navailable to them for a certain amount of the production. Robert Battles, the Pushmataha\nCounty inspector for the Oklahoma Health Department, indicates that The Beans can use\nthese facilities to manufacture food available for retail sale provided that the production\noccurs while the restaurant is not open to the public.\nFancy’s Foods has a 50-gallon high speed mixer, a pressurized tank in which the\nproduct can be gassed with nitrous oxide, and a 10-foot by 10-foot walk-in freezer,\nenabling them to both produce and store frozen tubs of Whipped Dream. This process is\nalready established on a commercial scale. They are in fact already making Whipped\nDream for use in their restaurant, and storing it in the freezer.\nKeith and Marianne feel that the specialty nature of the product will lend itself\nwell to the pressurized can, and this was confirmed by the focus group conducted at\nOklahoma State University. To pursue that opportunity, Fancy’s Foods has contracted\nproduction of the pressurized 6-ounce cans with Farm Fresh, an Oklahoma dairy\nprocessing firm. A non-competition\/non-disclosure agreement is in place, and a copy of\nthis document is included in the appendices.\n\nFinancial Projections\nThe following pages include multi year projections for income, cash flow, balance\nstatement, as well as estimated financial ratios. These projections are for the Whipped\nDream division of Fancy’s Foods LLC only. Historical financial information on Fancy’s\nFoods restaurants is available upon request.\n\n\n\nFancy's Foods LLC\nPro Forma Income Statement\nJanuary 1999 - December 1999\nNet Sales\nLess: Cost of Goods Sold\nGross Income\nOperating Expenses\nLabor\nUtilities\nInsurance\nSales Promotion\nDelivery and Transportation\nMiscellaneous\nTotal Expenses\nNet Income Before Taxes\nLess: Income Taxes\nNet Income After Taxes\n\n$240,450.00\n$182,000.00\n$58,450.00\n\n$12,000.00\n$3,000.00\n$2,400.00\n$12,000.00\n$6,000.00\n$1,500.00\n$36,900.00\n$21,550.00\n$6,465.00\n$15,085.00\n\nAssumptions:\n1 Net sales based on price of $2.29 per\nunit,\n24,000 units sold in Antlers\n2,000 units per month\n36,000 units sold in Hugo\n3,000 units per month\n45,000 units sold in Oklahoma City\n9,000 units per month for 5\nmonths\nSales estimates based on 5% market share for prepared whipped topping in each\nmarket.\n2 Cost of goods sold includes ingredients, packaging materials, labels, and copacking expenses for canned product.\n\n3 No salary will be drawn by the owners\/managers in the first year. All profits will be\nre-invested for new market entry and increased production.\n\n\n\nFancy's Foods LLC\nPro Forma Income Statement\nJanuary 2000 - December 2000\nNet Sales\nLess: Cost of Goods Sold\nGross Income\nOperating Expenses\nLabor\nUtilities\nInsurance\nSales Promotion\nDelivery and Transportation\nMiscellaneous\nTotal Expenses\nNet Income Before Taxes\nLess: Income Taxes\nNet Income After Taxes\n\n$425,940.00\n$318,060.00\n$107,880.00\n\n$18,000.00\n$5,000.00\n$2,400.00\n$18,000.00\n$12,000.00\n$1,500.00\n$56,900.00\n$50,980.00\n$15,294.00\n$35,686.00\n\nAssumptions:\n1 Net sales based on price of $2.29 per\nunit,\n26,400 units sold in Antlers\n2,200 units per month\n39,600 units sold in Hugo\n3,300 units per month\n120,000 units sold in Oklahoma City 10,000 units per month\nSales estimates based on 10%sales increase from previous year.\n2 Cost of goods sold includes ingredients, packaging materials, labels, and copacking expenses for canned product.\n\n3 No salary will be drawn by the owners\/managers in the second year. All profits will\nbe re-invested for new market entry and increased production.\n\n\n\nFancy's Foods LLC\nPro Forma Income Statement\nJanuary 2001 - December 2001\nNet Sales\nLess: Cost of Goods Sold\nGross Income\nOperating Expenses\nSalary\nLabor\nUtilities\nInsurance\nSales Promotion\nDelivery and Transportation\nMiscellaneous\nTotal Expenses\nNet Income Before Taxes\nLess: Income Taxes\nNet Income After Taxes\n\nAssumptions:\n1 Net sales based on price of $2.29 per\nunit,\n29,040 units sold in Antlers\n43,560 units sold in Hugo\n132,000 units sold in Oklahoma City\n54,000 units sold in Tulsa\n\n$592,194.00\n$442,206.00\n$149,988.00\n\n$20,000.00\n$30,000.00\n$6,500.00\n$3,600.00\n$25,000.00\n$16,500.00\n$1,500.00\n$83,100.00\n$66,888.00\n$20,066.40\n$46,821.60\n\n2,420 units per month\n3,630 units per month\n11,000 units per month\n9,000 units per month for 6\nmonths\n\nSales estimates based on 10%sales increase from previous year.\n2 Cost of goods sold includes ingredients, packaging materials, labels, and copacking expenses for canned product.\n\n3 Salary will be drawn by the owners\/managers in the third year.\n\n\n\n\n\nFancy's Foods LLC\nPro Forma Cash Flow Statement\nJanuary 1999 - December 1999\nJanuary\n\nFebruary\n\nMarch\n\nApril\n\nMay\n\nJune\n\nJuly\n\nAugust\n\nSeptember\n\nOctober\n\n$11,450\n\n$11,450\n\n$11,450\n\n$11,450\n\n$11,450\n\n$11,450\n\n$11,450\n\n$32,060\n\n$32,060\n\n$32,060\n\n$32,060\n\n$32,060\n\n$240,450\n\n$8,550\n\n$8,550\n\n$8,550\n\n$8,550\n\n$8,550\n\n$8,550\n\n$8,550\n\n$23,940\n\n$23,940\n\n$23,940\n\n$23,940\n\n$23,940\n\n$182,000\n\n$0\n\n$0\n\n$0\n\n$0\n\n$0\n\n$0\n\n$0\n\n$2,400\n\n$2,400\n\n$2,400\n\n$2,400\n\n$2,400\n\n$12,000\n\nUtilities\n\n$100\n\n$100\n\n$100\n\n$100\n\n$100\n\n$100\n\n$100\n\n$460\n\n$460\n\n$460\n\n$460\n\n$460\n\n$3,000\n\nInsurance\n\n$200\n\n$200\n\n$200\n\n$200\n\n$200\n\n$200\n\n$200\n\n$200\n\n$200\n\n$200\n\n$200\n\n$200\n\n$2,400\n\nSales Promotion\n\n$500\n\n$500\n\n$500\n\n$500\n\n$500\n\n$500\n\n$500\n\n$1,700\n\n$1,700\n\n$1,700\n\n$1,700\n\n$1,700\n\n$12,000\n\nDelivery and Transportation\n\n$200\n\n$200\n\n$200\n\n$200\n\n$200\n\n$200\n\n$200\n\n$920\n\n$920\n\n$920\n\n$920\n\n$920\n\n$6,000\n\nMiscellaneous\n\n$50\n\n$50\n\n$50\n\n$50\n\n$50\n\n$50\n\n$50\n\n$225\n\n$225\n\n$225\n\n$225\n\n$225\n\n$1,500\n\n$1,850\n\n$1,850\n\n$1,850\n\n$1,850\n\n$1,850\n\n$1,850\n\n$1,850\n\n$2,215\n\n$2,215\n\n$2,215\n\n$2,215\n\n$2,215\n\n$21,550\n\nRevenues\n\nNovember December\n\nTOTAL\n\nExpenses\nCost of Goods Sold\nLabor\n\nTotal Cash Flow\n\n\n\nFancy's Foods LLC\nPro Forma Balance Sheet\nDecember 31, 1999\nCurrent Assets\nCash\nAccounts Receivable\nInventory\nPre-Paid Expenses\nTotal Current Assets\nFixed Assets\nBuilding\nEquipment\nGross Fixed Assets\nLess Accumulated Depreciation\nNet Fixed Assets\n\n$7,054.00\n$60,484.00\n$80,042.00\n$1,046.00\n$148,626.00\n\n$100,500.00\n$40,950.00\n$141,450.00\n$16,900.00\n$124,550.00\n\nTotal Assets\n\nLIABILITIES AND OWNERS EQUITY\nLiabilities\nCurrent Liabiliities\nAccounts Payable\nAccrued Payables\nTotal Current Liabilities\nLong Term Liabilities\nMortgage Payable\nTotal Liabilities\n\n$273,176.00\n\n$51,343.00\n$3,060.00\n$54,408.00\n\n$20,708.00\n$75,116.00\n\nOwner's Equity\n\n$198,060.00\n\nTotal Liabilities and Owner's Equity\n\n$273,176.00\n\n[Note: A typical business plan would have 3-5 years of pro forma balance sheets, not just\none year as shown here. The pro forma balance sheets for following years will be\nimpacted by how profits are handled (retained in the business or paid out to the\nowner(s)), how assets are depreciated over time, the reinvestment of cash, the pay-down\nof debts, etc. The first year pro forma balance sheet shown here is used to calculate\nfinancial ratios.]\n\n\n\nFancy's Foods LLC\nFinancial Ratios\nDecember 31, 1999\nReturn on Equity\n\n=\n\nNet Profit before Taxes\nNet Equity\n\n=\n\n$21,550.00\n$198,060.00\n\n=\n\n10.88%\n\nCurrent Ratio\n\n=\n\nCurrent Assets\nCurrent Liabilities\n\n=\n\n$148,626.00\n$54,408.00\n\n=\n\n2.73\n\nQuick Ratio\n\n=\n\nCurr. Assets - Inventory\nCurrent Liabilities\n\n=\n\n$68,584.00\n$54,408.00\n\n=\n\n1.26\n\nDebt to Equity\n\n=\n\nTotal Liabilities\nNet Equity\n\n=\n\n$75,116.00\n$198,060.00\n\n=\n\n0.38\n\n\n\nContingency Plans\nWhile careful planning was involved in setting the strategic goals for Whipped\nDream, it may be that these goals are not met. The Beans have decided to set a zone of\nacceptability for meeting sales and financial objectives. For both sales and financial\nobjectives, a 10% negative deviation from expected sales and projected returns on assets\nwill be accepted. However, if sales objectives and returns on investment are less than\n90% of projections, certain actions will be taken. These actions include:\n1. For unacceptable sales levels during the first year: Fancy’s Foods will combat\nthis problem by doubling in-store promotions of Whipped Dream in Antlers and\nHugo. The Beans will personally arrange and carry out these promotions on\nweekends at peak shopping times. If sales do not increase within one month of the\nin-store promotions, Fancy’s Foods will advertise in the weekly shopping circulars of\nthe stores for one month.\n2. For unacceptable sales levels in Oklahoma City and Tulsa: After 6 months of\nmarketing products in these two metropolitan areas, sales will be evaluated. If not\nmeeting acceptable sales levels, Fancy’s Foods will consider contracting with local\nmarketing specialists in Oklahoma City and Tulsa to carry out the in-store promotions\nand push the products to the stores. This contractual relationship will be based upon\nsales commissions (to be determined by the specialists and Fancy’s Foods), thereby\nproviding incentive for the specialists to generate sales of Whipped Dream.\n3. For unacceptable business liquidity: In the event that the business lacks liquidity,\nFancy’s Foods will examine their accounts receivable procedures to ensure that\npayment periods are just and that payments are being received in a timely manner.\nAlso, cash flow projections will be reviewed to determine if unforeseen cash\nlayouts\/expenses are undermining the financial health of the enterprise.\n4. For unacceptable returns on equity: If returns on assets and owners’ equity fall\nbelow acceptable levels, Fancy’s Foods will first examine and compare the per-unit\ncosts of production and marketing with sales prices. If the margins are too thin, a\nprice increase for products sold in specialty\/gourmet shops will be considered.\nHowever, because established non-flavored substitutes already exist at lower prices,\nthe lost sales resulting from a price increase may make this option unsuitable for\nproducts sold in general food stores. Fancy’s Foods will therefore assess\nopportunities for minimizing production costs and examine different\nmarketing\/distribution alternatives.\n\n\n\nAPPENDIX\n\n[This is where the appendix would start if there was one. Appropriate material for\nappendixes include owner(s) resume, a processing flowchart, a management hierarchy\ndiagram (if the business has multiple employees, sales staff, etc.), letters of intent to\npurchase from buyers, advertisement materials, copies of training completion certificates,\netc.]\n\n\n\n",
        "summary": "A SAMPLE BUSINESS PLAN FOR\nSMALL FOOD BUSINESSES\n\nRodney B. Holcomb\nAssociate Professor, Dept. of Agricultural Economics\nBrowning Endowed Professor of Food Science, Food & Agricultural Products Center\nPhilip Kenkel\nProfessor, Dept. of Agricultural Economics\nBill Fitzwater Endowed Chair for Cooperative Studies\nLinda Blan-Byford\n(Former) Business Planning and Marketing Associate\nFood & Agricultural Products Center\nOklahoma State University\nJanuary 2006\n\n\fWhy Develop a Business Plan?\nIn the book The Entrepreneur’s Manual, Richard M. White, Jr. states that\nbusiness plans are “road maps” for business creation: “You identify your origin, select a\ndestination, and plot the shortest distance between the two points.”\nTrue, a business plan is essentially a blueprint for a business. However, it also\nserves many other purposes:\n A business plan is a detailed blueprint for the activities needed to establish a business\n(i.e. the details of a product or service, the market for that product or service, and the\nmanagement of the business providing that product or service).\n A business plan is also the ‘yardstick’ by which a business owner measures success in\nmeeting stated goals and objectives.\n Also, a business plan is a tool for obtaining a loan from a lending agency, or for\nattracting venture capital.\nWhat Does a Business Plan Look Like?\nThere is no standard format for a business plan, but there are many common\ncomponents of a business plan:\n Executive Summary (pr...",
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