Shellycakes - “always a Sweet Treat”

ShellyCakes “Always a Sweet Treat” Wedding cake Michelle made for her own wedding. May 2008 Michelle L. Schutten 5 Holly Lane Butte, MT 59701 406.214.9202 shellycake@gmail.com The components of this business plan have been submitted on a confidential basis. It may not be reproduced, stored, or copied in any form. By accepting delivery of this plan the recipient agrees to return this copy of the plan. Do not copy, fax, reproduce or distribute without permission. Copy __ ShellyCakes 2 Table of Contents 1. Executive Summary 1.1 Business .......................................................................................... 2 1.2 Business Opportunity ...................................................................... 2 1.3 Competitive Strategy ....................................................................... 2 1.4 Economics of the Business .............................................................. 2 1.5 Founder ........................................................................................... 2 2. Business 2.1 Mission Statement .......................................................................... 4 2.2 Description of the Business ............................................................ 4 2.3 Form of Incorporation .................................................................... 5 2.4 Products and Services .................................................................... 5 2.5 Industry Analysis ........................................................................... 6 2.6 Market Analysis ............................................................................. 6 2.7 Customer Analysis.......................................................................... 6 2.8 Competitor Analysis ....................................................................... 8 2.9 Marketing Strategy ......................................................................... 9 2.9.1 Product/Service Strategy ................................................................ 9 2.9.2 Pricing Strategy............................................................................... 10 2.9.3 Suppliers and Distribution Strategies ............................................. 11 2.9.4 Advertising and Promotion Strategy .............................................. 11 2.10 Management ................................................................................... 12 2.11 Key Personnel ................................................................................ 13 2.12 Location of Business ...................................................................... 13 2.13 Application and Expected Capital .................................................. 14 3. Financials 3.1 Sources and Uses of Funds ............................................................. 16 3.2 Capital Assets .................................................................................. 16 3.3 Break Even Analysis ....................................................................... 16 3.4 Financial Assumptions .................................................................... 17 3.5 Sales Forecast .................................................................................. 19 3.6 Balance Sheet .................................................................................. 23 3.7 Pro Forma Income Statements ........................................................ 25 3.8 Pro Forma Cash Flow Statements ................................................... 27 3.9 Loan Amortization Table ................................................................. 29 310 Gross Margin Calculation ............................................................... 29 4. Appendix 4.1 Generic Strategy .............................................................................. 31 4.2 Value System .................................................................................. 31 4.3 Value Chain Analysis ...................................................................... 32 4.4 Product Descriptions ....................................................................... 32 4.5 Class Descriptions ........................................................................... 33 4.6 Founder's Resume ........................................................................... 34 4.7 Bibliography .................................................................................... 35 ShellyCakes 3 ShellyCakes 1. Executive Summary 1.1 Business ShellyCakes is a confectionery company in Butte, Montana, that produces and sells high-end baked goods to retail and wholesale customers. We sell pre-made as well as made-to-order confections using local, Montana ingredients. The business also offers cake decorating classes from Wilton, the leading food crafting company in the industry. 1.2 Business Opportunity In Butte and the greater Butte region, currently no high-end bakeries or locations that offer confectionary classes exist. This provides Butte with a unique experience and opportunity to add ShellyCakes to the market place. ShellyCakes will serve retail and decorating classes market of 33,000 potential customers and a wholesale market of a 15 restaurants, cafes, etc. 1.3 Competitive Strategy ShellyCakes will be providing the Butte community with high-end baked products made from local supplies. ShellyCakes’ customer value proposition is to provide individual and business customers in Butte with baking goods based on fine quality, supreme taste, and unique and original design, as well as decorating instructions. As a differentiated product and service provider, ShellyCakes will be positioned at a higher price point. 1.4 Economics of the Business ShellyCakes founder will self-fund $7,500 in seed capital. An additional $30,000 investment will be sought from family and friends. A loan of $25,000 will be obtained from a local Butte bank. The projected revenue by the end of the third year of operation is $45,927. The loan will be paid off in full by Year 5. In Year 4, ShellyCakes may seek additional loans to expand from its original location into new markets. 1.5 Founder Butte native, Michelle Schutten, is the founder of ShellyCakes. Michelle has extensive experience in the bakery industry having worked counter management and the pastry division at Bernice's Bakery in Missoula. She is also a Wilton Trained Cake Decorating Instructor and has taught over 125 students ranging from 5 to 95 years in age. She holds a Bachelor of Science degree in Finance from the University of Montana and is currently working toward her Master Degree in Curriculum and Instruction. Michelle prides herself on her supreme customer service and greeting everyone with a smile. With such immense experience and Butte connection, ShellyCakes is sure to gain traction in the community. ShellyCakes 4 2. The Business Gingerbread Mansion made for a fundraiser for the Ronald McDonald House. Displayed at Southgate Mall in Missoula, Montana. November – December 2009 ShellyCakes 5 2.1 Mission Statement Our aim is to provide bring unique confectionary products and services to Butte and the greater community by retailing and wholesaling tasty treats and hosting treat design classes. ShellyCakes is a confectionary company dedicated to providing high-quality desserts to a variety of customers. We concentrate on the high-end market of products as we maintain the focused differentiator strategic position in the food and education industries. Our products are priced higher and predicated on quality of inputs, exceptional flavor and taste, unique design and customer service. We maintain a friendly, creative, and fair working environment that welcomes diversity, hard work, and new ideas. We intend to generate profit to provide a fair return for our investors and to expand the business into other surrounding communities. "Thank you so much for taking the time to share your passion with us. You are an incredible instructor." Juliette and Girl Scouts of Montana and Wyoming 2.2 General Company Description ShellyCakes is a confectionery company in Butte, Montana, that sells high-end baked goods to retail and wholesale customers. The company also offers cake decorating classes from Wilton, the leading food crafting company in the industry. ShellyCakes is founded by Michelle Schutten, an experienced baker, cake decorator, teacher, and business woman. Furthermore, Michelle is a Butte native and understands the target customers from her experiences. The company’s competitiveness rests on the founder’s experience, business skills, relationships, and enthusiasm. Retail: The retail portion of the business services walk-in customers Tuesday through Saturday from 10am until 6pm. The products offered at the retail location include cakes, cupcakes, cookies, pies, and beverages that either pre-made or made-to-order. In addition to providing high-quality products, our retail location will also serve as the venue for decorating classes. Wholesale: Our wholesale customers consist of cafes and coffee shops; restaurants and hotels; and the local Front Street Market. We are preferred channel providing cakes, cupcakes, cookies, and pies of their choice. Seasonally, we cater to country clubs, wedding planners, caterers, and other channels to take advantage of seasonal demands for confections. ShellyCakes 6 Classes: We offer more than just a cake decorating class– ShellyCakes classes represent an ―experience‖. Students are provided with practice time with the instructor, hands-on experience, basic understanding of the basics in baking and decorating, and design know-how. As a trained instructor, Michelle teaches Discover Cake Decorating, Flowers and Boarders, Fondant and Tiered Cakes, and Fondant and Gum Paste courses. Other decorating and baking courses and kids classes will be offered seasonally. 2.3 Form of Incorporation ShellyCakes is a Limited Liability Company (LLC) in order to blend characteristics of a corporation and sole proprietorship and take advantage of flow-through income taxation. 2.4 Products and Services Retail: ShellyCakes sells a wide range of high-quality cakes, cupcakes, pies, cookies and treats. Each item is made from scratch using all natural ingredients sourced from largely local suppliers. These supplies involve no preservatives to provide for high-end and ―de-vine‖ flavor and taste. It is important that our items not only taste delicious, but also look appealing and attractive to the eye. Therefore, we add the extra little touch to every product, whether it be a sparkling sugar daisy on a chocolate cupcake or a buttery harvest leaf on a Thanksgiving pumpkin pie. These extra touches are added to enhance the elegant experience for our customers. Customers may purchase pre-made or made-to-order products. ShellyCakes specializes in fine desserts coupled with exceptional customer service in a comforting atmosphere. Our location is designed in a way that customers are able to enjoy a setting that is as pleasant as the product they are consuming. Customers may also delight in our product by taking it to-go or have it delivered for a nominal fee. For a complete listing of products, please refer to Appendix 4.4. Wholesale: The products that our wholesale customers order are ofvery high quality. Just as with the retail portion of the business, the products in the wholesale ismade with quality ingredients and properly prepared. While a few of products will be the same at the retail and wholesale locations, certain items will be specifically made for particular wholesalers depending on customer orders. ShellyCakes manages delivery to wholesale customers. ShellyCakes 7 Classes: The students that take Wilton Method Cake Decorating Courses at ShellyCakes are provided with engaging, exciting, and authentic experiences. Michelle, a trained Wilton Instructor, teaches students the students the very basics of how to frost a cake in Discover Cake Decorating to making edible, yet delicate carnations in Fondant and Gum Paste. During the first few years of operation, Wilton Method Classes are the only classes taught. As the business grows, unique, specialized classes are offered covering baking techniques and more advanced sugar and pastry classes. For a complete description of each course offered, please refer to Appendix 4.5. "You are a breath of fresh air! I enjoyed your excitement and eagerness to experience the refreshed curriculum. If all Wilton Method Instructors were delightful as you are, Wilton would have a wait list on all classes! Thanks being you!" Fran Tripp, Certified Trainer, Wilton Brands, Inc. 2.5 Industry Analysis The Food Network and other television networks have developed eye catching programs such as Ace of Cakes, The Ultimate Cake Off, and Wedding Cake Competition, to name a few. Cake Boss, a program on TLC, has an average of 2.4 million viewers per episode and is the number one food show on cable for channels P18-34 and W18-34. The word is out; Americans love cake and cake shows. To take advantage of this trend, ShellyCakes will offer both products and services geared towards the high-end confectionary ―experience‖. ShellyCakes is the outlet for people in Butte and surrounding areas that have become hooked to these television shows. 2.6 Market Analysis ShellyCakes focuses sales in Butte with a population estimated by the U.S. Census Bureau to be 32,803 in 2008. During the first four years of operation, the company plans to sell to immediate additional markets in Anaconda and Whitehall, Montana, increasing the market size to approximately 57,000. In doing so, the company will partner with local businesses in those communities to sell ShellyCakes product and to teach local cake decorating classes. 2.7 Customer Analysis Retail: The market segmentation for the retail is divided into two psychological groups: Celebrators and Soccer Moms. The groups represent people sharing similar behavioral patterns and reasons for supporting ShellyCakes. These groups purchase either pre-made or made-to-order products. ShellyCakes 8 Celebrators are people that have reasons to do just that, celebrate! Birthdays, anniversaries, graduation, Valentine's Day, and Christmas are just a few of the many holidays or special occasions that families and loved ones choose to celebrate with ShellyCakes. This market encompasses a variety of people including the young, middle aged, and old, and both men and women. Soccer Moms encompasses not just moms, but all family members. ShellyCakes serves as a place where families feel both welcome and comfortable. Kids come to enjoy with after school milk and cookies while Mom treats herself to a more elegant dessert. Or "Moms" can meet up with friends to enjoy a baked good and enjoy relaxation in the midst of a busy day. Either way, these Moms wish to expose their children to the homemade treats they had growing up. Wholesale: Our wholesale customers will be successful businesses in the food industry. We will focus our attention on the following customers and then expand to a broader list as the company grows. ShellyCakes will be the preferred channel of confections to our wholesale customers. Cafes and Coffee Shops Restaurants and Hotels Market Broadway Café Acoma Front Street Market Columbia Garden Espresso Derby Hummingbird Café Fred's Mesquite Jailhouse Coffee Land of Magic Park Street Java Café Lydia's Venus Rising War Bonnet Inn Wetona's Coffee House Copper King Mansion In addition, ShellyCakes focuses on seasonal wholesale customers. The seasons include summer weddings, holidays, and other such seasonal celebrations. The seasonal customers include photographers, caterers, wedding planners, etc. Classes: Since 1975, more than 4,000,000 people have taken Wilton courses. During the past 5 years, Wilton has gathered extensive market research defining who the customers are and developing a refreshed curriculum to meet the wants and needs of the customer base. According to Wilton market research, "Our overall market is women (usually moms) with at least one child under six in the family. Grand moms and aunts are an important addition when when there's a child under six in the family. Typically our core customer is a mom, who is 22-44 years old, suburban, college educated, works outside the home, has 2 kids (one under 10 and one under 3). There also is an older consumer who is 'returning' to food crafting. She wants the same things as the moms, but her affection and attention is directed toward grandchildren, nieces, nephews, and children of close friends." ShellyCakes 9 2.8 Competitor Analysis Retail and Wholesale: Nationwide supermarket chains dominate the baked goods market in Butte. These grocery stores include Safeway (two locations), Albertson's and Walmart. Locally owned and operated Eastgate IGA is also represented in this competition category. The quality of baked goods in these retail stores is poor. The products are often mass produced at an outside location and simply baked in the actual store. The ingredients are processed, thus lowering the quality and taste of the product in order to sell the item for a low cost. Town Talk Bakery is a locally owned bakery in Butte that specializes in donuts. Cakes and other treats are also sold at this location, but are not made with high quality ingredients. The cake choices are very limited (chocolate or vanilla) and the icing is made with shortening. Again, low quality for a low cost. Great Harvest Bread Company and Perkins serve as a competition because of the cookies and other small treats that are sold in their bakeries. These largely undifferentiated confections are only a small portion of their businesses and therefore would not act as a large threat. The Uptown Café would also be our competitor in the bakery arena. The primary focus of the restaurant is high quality and expensive meals. On the side, The Uptown Café occasionally produces and sells wedding cakes and other desserts. ShellyCakes eventually intends to be a supplier to Uptown Café. ShellyCakes is set apart from the competition in four main ways. ∙ In an era when food is becoming chemistry, ShellyCakes will focus on raw, natural, and sometimes organic and local ingredients to create its product. Thus, our products taste better and are better for you. ∙ Each of our products contains extra detail to set it apart from the competition. We ensure that our products appeal to the eye as well as to the stomach. ∙ The sky is the limit when developing a pastry design. We will cater to the wants and needs of our customers in every way possible. When customers want detailed or shaped cakes, we will match the picture or the design that they provide. (See example of Millennium Falcon cake on Executive Summary cover page.) ∙ Customer service is our number one priority. We will ensure that each customer is treated with kindness, respect, and a warm welcome on each visit to ShellyCakes. Please refer to Appendix 4.1 for the Generic Strategy. ShellyCakes 10 Classes: There are no other cake decorating, baking, or food classes offered in Silver Bow County. Therefore, our competition in this arena of ShellyCakes would be indirect though the hobby market. Such indirect competition includes sewing classes offered a the local quilting shops and also community education classes offered though the Butte School District. Other activities such as theater, music, and the outdoors could potentially be competition. Wilton Method Cake Decorating Classes are offered at a variety of retail stores. Butte does not contain any of these stores (Michaels, Hobby Lobby, etc.). Butte, however, does contain a JoAnn's Fabric and Craft Store, but it is not large enough to be considered a superstore and therefore does not offer classes of any type. Candi LoPresti, Wilton Marketing Director of JoAnn's, does not foresee expansion of the store. "Thank you, Michelle, for your patience and enthusiasm. You have a smile that comes from within. If there are successes, it is because of your ability to communicate with such enthusiasm and patience. Thank you so much for the wonderful experience. You were such a blessing." Lorraine M, Student 2.9 Marketing Strategy 2.9.1 Product/Service Strategy The Butte Silver Bow Community is notorious for supporting local businesses. Therefore, ShellyCakes focuses on using Montana ingredients whenever possible to encourage this localization. Employees are trained in a customer focused manner and to be very knowledgeable of our entire selection of goods and services. The bakery business is extremely seasonal. Various products are sold in greater volumes depending on the season or nearing holiday. For example, the pie sales are rather low throughout the year except during the holiday seasons of Thanksgiving and Christmas. Weddings are also exemplify the seasonality of the business as most weddings occur during the summer months. In order to off set this extreme seasonality, ShellyCakes offers a wide variety of products and focuses not only on seasonal celebrations, but also events that happen year round such as birthdays and anniversaries. In addition, the cake decorating classes will be offered year round and are not as affected by the time of year. ShellyCakes 11 Above graph does not include wedding revenue. Please refer to Section 3.5 for the projected sales. 2.9.2 Pricing Strategy Due to the high quality of ingredients, made from scratch products, and carefully and at times customized decorated goods, the pricing at ShellyCakes will be higher than that of the typical grocery store bakery. The table below illustrates the initial mark-up of the bakery products based on the cost of goods sold. Depending on the detail of special orders, the margin may increase for that specific item. ShellyCakes 12 Item Margin Cookies 3x Cakes 4x Cupcakes 4x Pies 4x Wedding Cakes 5x Beverages 5x The classes are priced at $45 for eight hours of instruction. This price aligns with the class price that JoAnn's retail store charges in the neighboring community, Missoula, Montana. Please refer to Section 3.4 for complete pricing details. "My daughter said that your cupcakes are the best she has had in her life." Amber, customer 2.9.3 Suppliers and Distribution Strategies In order to support Montana businesses, it is important that we purchase ingredients grown in Montana whenever possible. We solely use Wheat Montana for our flour as well as Montana dairies for our dairy products. Other ingredients are purchased and delivered from Butte Produce, a local food distributer. The products are distributed in various ways. The retail products may be picked up at the retail location by the customer or delivered for a nominal fee. The wholesale products will be delivered to the wholesale locations with the fee included in the product pricing. Lastly, customers will come to the retail location for the classes. 2.9.4 Advertising and Promotion Strategies Word of mouth and public perception are immensely important in both aspects of the business. First of all, customers must understand that our products are made with quality ingredients and thus taste better than many of our competitors. The word of mouth will be created when someone experiences for example, a cake at a party. The cake will be enjoyed by many and thus the word of mouth seed for the bakery aspect of the portion will be created. Word of mouth for the classes will be spread by people that had previously taken a class. According to Wilton's market study, 97% of class participants say they'd recommend the classes to a friend which provides a strong motivation to sign up. The former students will spread word of mouth in two ways: expressing the enjoyment of the class and encouraging others to take the class, and also developing a trust and relationship with ShellyCakes and therefore recommending the business to others. ShellyCakes 13 The Montana Standard, southwest Montana's daily newspaper, typically offers new local businesses free, front-page publicity in order to encourage readers to buy locally. This free advertisement will provide ShellyCakes with a jump-start in business. In addition, several times a month ShellyCakes will place a ad in the paper. These ads will be strategically placed in areas such as the engagement and wedding page during the wedding season. A well laid out and user friendly web page is important for the growth ShellyCakes. The site will include detailed descriptions of the products, photos of goods, a description of the company and its philosophy, and contact information to raise awareness of ShellyCakes. In addition, the website will include information on the upcoming classes offered with detailed descriptions of each class and photos of cakes that previous students have made. Because Butte is notorious for supporting local businesses, ShellyCakes will advertise in cooperation with other businesses. In doing so, we will recommend our partnering businesses to customers and vice verse. Specifically, we will partner with wedding planners, photographers, and caters in the bridal industry where the profit margins are high. Our wholesale customers will be promoting and advertising our product brand in order to develop further business for themselves. The advertisement will occur in their store through their menu, display case, ShellyCakes logo, etc. Also, when our wholesale customers advertise publicly, it is to their advantage and ours to mention that they sell ShellyCakes products. Please refer to Appendix 4.2 for the Value System. "The cake was beautiful on Sunday, thank you. You did a wonderful job creating those cute little dolls and teddies on the cake, my friends were so impressed with your talent. Not to mention the cake was delicious. I actually saved some to freeze and eat at the baby's first birthday. You helped make the shower so special." Maria, customer 2.10 Management Michelle Schutten is the owner of ShellyCakes. She is highly educated with a Bachelor's degree in Finance from the University of Montana, with an concentration in Entrepreneurship. She is currently working toward her Master's degree in Curriculum and Instruction. Michelle has experience working for the well known, locally Missoula-owned Bernice's Bakery. While working there, she was exposed to various aspects of the business such as baking and counter management. She acquired skills at Bernice's that are transferable to the start-up of ShellyCakes. Michelle is also a trained Wilton Cake Decorating Instructor and has instructed over 125 students varying from 5 to 95 years in age. She is currently an independent contractor of Wilton working for JoAnn Fabric and Craft in Missoula, Montana. ShellyCakes 14 Michelle's hard skills of bakery and business knowledge, as well as her soft skills of stellar customer service and communication, will be of great asset to ShellyCakes. In order to gain further expertise in the bakery industry, ShellyCakes will form an advisory board of industry professionals and community members, to assist in the start-up of ShellyCakes. The advisory board will be developed though Michelle's extensive connection of successful Butte professionals. The board will provide ShellyCakes with advice, guidance, and general business knowledge. In addition, ShellyCakes will seek out advice from others willing to share. Please refer to Appendix 4.6 for Michelle's complete resume. 2.11 Key Personnel During the first two months of operation, Michelle will be the only employee of ShellyCakes. Beginning November of the first year, an additional employee will be added in order to meet the needs to the busy holiday season. A third employee will join the team just before the wedding cake season in June of the second year. Each of the employees will be paid on an hourly basis. Please refer to Section 3.4 for detailed labor costs. "Thanks again for the cupcakes – they disappeared last night into our tummies. Yummy!" Mike, customer 2.12 Location of the Business We are provided with a very unique opportunity regarding the business site. The location, 2000 Farragut Avenue in downtown Butte, Montana, was previously a local donut shop and bakery until the recent retirement of the owner. The building, therefore, has a reputation of being a local bakery, which will assist in generating revenue in the starting months of business. The lot size of the location is 100 by 120 feet, with the 2,700 square foot building. It is conveniently located downtown at the intersection of Cobban and Farragut, two moderately busy streets. ShellyCakes 15 In addition to the reputation of the the bakery building, the site is also furnished with the large second-hand equipment needed the operation of ShellyCakes. Therefore, it is unnecessary to purchase the large and expensive machinery. The following equipment is included in the lease of the property. Type Items Heavy-Duty Machinery Large mixers (2) Small mixers (2), Automatic dough roller, and Dough sectional cutter Built-In Pizza style oven, Refrigeration compartments, Freezer, Flour storage containers, Fryer, Range, and Display cases Other Equipment Cooling racks (rolling), Commercial coffee maker, Muffin tins, and Baking sheets Specialty Cake pans (various shapes and sizes), Turn tables, Cookie cutters, Pie tins, and Cake decorating tools "I know you must be a great instructor and that the students must love you. Your enthusiasm is catching!" Katrina Dodd, Assistant Class Marketing Manager, Wilton Brands, Inc. 2.13 Application and Expected Effect of Capital The founder of ShellyCakes will contribute $7,500 in seed capital. This amount will assist in the purchase of the used delivery van. An additional $30,000 investment will be sought from family and friends. The primary use of this capital injection will be to renovate the building, repair used machinery, and purchase additional uses for the building. A 5 year loan of $25,000 will be obtained from a local Butte bank in order to begin operations of the business. The loan will be paid back in full by Year X. In Year Y, ShellyCakes may seek out additional loans in efforts to expand the business to new locations. ShellyCakes 16 3. Financial Cookie Bouquet Class Display ~ March 2010 Star Wars’ Millennium Falcon Cake ~ May 2009 “Michelle made me an amazing fondant sculpted cake. It was the finest tasting and by far greatest looking cake I have ever had. Best cake ever.” Elizabeth, Customer ShellyCakes 17 3.1 Sources and Uses of Funds: Sources: Personal Investment $7,500 Family and Friends Investment $30,000 Butte Local Development Corp Loan $25,000 Total Sources $62,500 Uses: Renovations $8,000 POS system $2,600 Signage $2,050 Tables and Chairs $1,000 Lease Down Payment $9,900 Delivery Van $10,000 Equipment repairs $1,750 Professional and Legal $1,000 Cash for operations $26,200 Total Uses $62,500 3.2 Capital Assets Signage* $2,050 POS system** $2,600 Tables and Chairs*** $1,000 Delivery Van*** $10,000 Total $15,650 * from www.interiortech.com ** from www.posnation.com *** best estimate based on research 3.3 Break Even Analysis Break Even Sales = Fixed Costs – Gross Margin Excluding beverages, weddings, and classes. Averaged monthly fixed costs: $6,000 Average retail and wholesale prices of each unit: $17.51 Average COGS: $4.88 Break Even Unit = 475 ShellyCakes 18 3.4Financial Assumptions Sales: Income generated from retail and classes is paid the month delivered. 50% of wholesale revenues are received the month prior and 50% are collected on delivery. 25% of wedding revenues are received the month prior and 75% are collected on delivery. Please refer to forecasted sales, section 3.5. Cost of Goods Sold: Based on markup of forecasted sales Markup on retail products: Cakes 4x Cupcakes 4x Cookies 3x Pies 4x Beverages: 5x Wedding Cakes 5x Please refer to forecasted sales, section 3.5. Labor Costs: The following table represents labor costs of September and October of the first year. Title Number of Employees Wage Taxes Hours Wage Cost Tax Cost Monthly Cost Owner/Manager 1 $12.50 $0.94 160 $2,000 $150 $2,150 The following table represents labor expenses from November the first year until May the second year. Title Number of Employees Wage Taxes Hours Wage Cost Tax Cost Monthly Cost Owner/Manager 1 $12.50 $0.94 160 $2,000 $150 $2,150 Delivery/baker 1 $10.00 $0.75 160 $1,600 $120 $1,720 Totals $3,600 $270 $3,870 The following table represents labor expenses with the additional seasonal baker starting in June of year two. Title Number of Employees Wage Taxes Hours Wage Cost Tax Cost Monthly Cost Owner/Manager 1 $12.50 $0.94 160 $2,000 $150 $2,150 Delivery/baker 1 $10.00 $0.75 160 $1,600 $120 $1,720 Baker 1 $10.00 $0.75 120 $1,200 $90 $1,290 Totals $4,800 $360 $5,160 ShellyCakes 19 Taxes based on 7.5% of wage. No benefits will be offered to our employees at this time. Depreciation Schedule: Used van Book Value at Beginning of year Depreciation Expense Accumulated Depreciation Book Value at End of Year $10000 (original cost) $1,600 $1,600 $8,400 $8,000 $1,600 $3,200 $6,800 $6,500 $1,600 $4,800 $5,200 $5,000 $1,600 $6,400 $3,600 $3,500 $1,600 $8,000 $2000 (salvage value) Equipment and Furniture will not be depreciated. Advertising Expense: Seasonal Professional: Start-up legal and professional costs are outlined in the sources and uses, section 3.1. Bimonthly fee for outsourcing bookkeeper is $20.00 per hour. Annual food preparers license (license F6) paid annually in September. Bimonthly Bookkeeping Fee $40 Food Preparers License $115 Insurance: General Liability covering $1,000,000. Auto liability covering $1,000,000. Monthly Yearly General Liability for one employee $120.61 $1,447.30 Auto $69.67 $836.00 Total $190.28 $2,283.30 Workers’ compensation insurance based on bakery code rate of $4.88/$100. Insurance for employees only, not owner. Rates provided by Danny Blowers, Farmers Insurance Agent, Missoula, MT. ShellyCakes 20 Store Expenses: Type Monthly Cost Register Tape $5 Cake Boxes $15 Cake Boards $10 Office Supplies $15 Bakery Supplies $25 Misc. $15 Total $85 Lease: $1,650 per month. Includes sewer and garbage. Utilities: Rates based on average for building provided by realtor. During the Fall, Winter and Spring, the ovens will heat the building and therefore the utilities are less; During the summer months, the utilities are increased due to air conditioning costs. Garbage and sewer included in lease. Miscellaneous: To account for small items that may have been missed in the above assumptions including gas for the delivery vehicle. Misc. $40 Interest: We will be obtaining a small business loan from Butte Community Bank. The $25,000 loan will be at 6.25% interest payable over five years. The monthly payment is $497.94. 3.5 Sales Forecast Sales Forecast Retail, Weddings, and Classes: Year 1 Sept Oct Nov Dec Jan Feb Mar Apr May Jun July Aug Year 1 Cakes 8 20 12 35 8 32 20 20 20 28 20 20 243 Cupcakes 24 60 48 60 70 70 60 60 66 78 48 54 698 Cookies 80 120 100 100 100 120 120 120 120 160 120 200 1460 Pies 4 6 50 35 2 2 2 2 2 4 5 5 119 Beverages 77 163 257 324 93 212 150 150 153 210 155 174 2118 Weddings 2 3 2 4 1 4 5 6 9 12 16 16 80 Classes 8 16 16 14 10 18 20 22 18 14 14 14 184 ShellyCakes 21 Average Product Pricing retail wholesale COGS 6 in $25.00 $20.00 $6.25 8 in $30.00 $24.00 $7.50 10 in $40.00 $32.00 $10.00 cupcakes $2.50 $2.00 $0.63 cookies $1.25 $1.00 $0.42 pies $20.00 $16.00 $5.00 beverages $1.25 n/a $0.25 wedding $450.00 n/a $90.00 classes $45.00 n/a $2.00 Beverages sales forecast is 20% of the sum of other retail sales. Increase retail sales by 40% in second year Weddings: The average price for a wedding cake is $450 in Butte. Sales are highly seasonal. September sales in second year increase to 9 cakes; October 5 cakes 2 nd year (excluding September and October) increase sales by 40% Classes: Seasonality based on Michelle’s experience in the cake decorating class industry. 2 nd year increase class enrollment by 40% Cafés and Coffee Shops: Base Café and Coffee Shop Sales Item Quantity Revenue COGS 8 in. Cake 1 $24.00 $7.50 Cupcakes 25 $50.00 $15.63 Cookies 30 $30.00 $12.50 Weekly Total $104.00 $35.63 Monthly Total $416.00 $142.50 Add a wholesale café or coffee shop during the following months: September, December, March, and April. 2 nd year add 1 more client in October. Increase sales of existing clients by 40% ShellyCakes 22 Restaurants and Hotels: Add wholesale restaurant the following months: October, January, April, and June 2 nd year add 1 more client in November and increase sales of existing clients by 40%. Markets: Add wholesale market in September. Increase sales by 5% each month for the first year 2 nd year increase sales by 2.5% per month. The following financial statements, which have not been audited or reviewed by an independent CPA, provide detailed financial projects for the first three years of operations for ShellyCakes. These projections are based on best estimates of future financial performance.