National Furniture

Business Plan

National Furniture

Business Plan

Introduction
The purpose of this plan is to acquire financing for National Furniture, which will be used for modernization and growth. National Furniture manufactures furniture for sale on a wholesale and retail basis, and has recently added an interior design consulting unit. National Furniture requires financing for new machinery, additional advertising, and sales training pursuant to its planned modernization and growth efforts.

Mission Statement
National Furnitures mission is to make elegant, durable furniture affordable to the middle and upper-middle class customers in the tri-state area. This continues to be its mission. Recognizing the need for professional advice regarding, the use of these furnishings in living spaces, National Furniture created its interior design division in order to fully enable it to execute its mission.

Key Considerations
National Furnitures unique features are numerous. The Company is the largest and most well known furniture concern in the tri-state area. It is known for producing extremely durable, and elegant, yet reasonably priced furnishings. It also has a tight distribution chain maintaining close ties within the company's production, wholesale, and retail divisions. The addition of expert interior design personnel who specialize in the adaptation of these products to living and working spaces has created a vertically integrated enterprise, the area's only full-service interior furnishing and design provider.

Marketing Objectives
Although gross sales continue to increase, National Furnitures marketing objective is to increase its bran recognition in response to new competitors, and to promote its relatively new interior design consulting services. National Furniture creates a monthly report based on sales data from which to track and evaluate the rate of business growth. Quarterly sales reports are compiled at the end of every three-month period which shows trends regarding furniture sales and design service sales in both the short-term and longer-term. These reports are followed by executive meetings whereby discussions regarding ways to improve sales as well as other business areas lead to strategic decisions being made. Year-end reports in both areas and for the overall business are generated in January and results are compared against the companys goals for the year. National Furniture has set its marketing objective at increasing overall sales by 18%, and at increasing consulting service sales by 30%. National Furniture intends to meet these targeted objectives by retraining its sales force to increase their knowledge of

National Furniture

Business Plan

interior design in order to sell those services better, and by increasing its advertising expenditures from 10% to 13% of gross sales.

Expected Accomplishments
National Furniture expects to draw 36% of the market share for furniture and about 12% of the market share for interior design in the tri-state area in its first year of expansion. Thereafter, National Furniture expects to slowly increase its market share for furniture to 39% over five years, as its sales and advertising efforts are expanded. National Furniture expects to maintain its 12% market share for interior design in years two and three, moving to 13% in years three, four and five. The gross market for both is expected to increase in the tri-state area.

Required Capital
In order for National Furniture to successfully complete its plans for expansion, an investment of 1,250,000/- will be required. The owner will contribute 250,000/- and is seeking 1,000,000/- from a lender. The business requires a 5 year loan with a 12% rate of interest that will be repaid in monthly installments.

National Furniture

Business Plan

National Furniture

Business Plan

Purpose Statement
The market for furnishings and associated design services in the tri-state area has been consistently solid for as long as National Furniture has been in business, and is expected to see substantial expansion over the next few years. Because incomes in the tri-state area are far less than they are in major metropolitan areas, consumers often have a lower budget for home furnishings and design. However, interior design of homes and offices in the tri-state area is a high priority for these consumers, so comparison shopping creates intense pressure on vendors. Vendors have responded by providing greater choices to the consumer, but these choices usually either meet the budget of the consumer at the expense of quality and beauty, or are simply overpriced. Consumers also have little luck locating a company that specializes in furniture and provides expert consulting services to assist in designing a livable, working environment, which is customized to the client's home or office, based on their products. Finally, the interior design firms are not completely familiar with the products the client wishes to purchase and therefore are not as effective at designing space as they should be. National Furniture meets the needs of consumers in the tri-state area, for rugged yet elegant furniture, at a price most middle-class residents can afford. Recently, the rising demand for interior design consultants led National Furniture to begin providing consulting services to consumers who prefer to purchase the National Furniture line and then build customized living/working spaces around those products.

Description of the Business

National Furniture manufactures basic, durable home and office furnishings. Principal among these is a line of hardwood desks, dressers, bed frames, dining room tables, chairs, credenzas, coffee tables, and home entertainment centers. In addition, National Furniture purchases lamps, mattresses, and a few other auxiliary products from other manufacturers for sale in its retail showroom locations. The typical wholesale customers are retail department store chains. The company's typical retail and service customers include upper-middle class residents of the tri-state area who seek to maximize the purchasing power of the interior decorating budget. These customers are attracted to National Furniture because it has a reputation for quality products, and many are second generation clients.

Management & Operations

National Furniture

Business Plan

As President of National Furniture, Mustafizur Rahman oversees all its operations, including its manufacturing facility, its wholesale warehouse, its two retail stores, and the consulting division he started last year. National Furniture is divided into four divisions, Warehouse, Manufacturing, Retail, and Consulting. The warehouse facility includes six employees who manage incoming inventory and make deliveries. One of those six persons is a manager who has responsibility for successful inventory management and reporting. The manufacturing facility is the largest division, with 12 full-time personnel operating the machinery which makes the furniture. One of these twelve persons is the manufacturing manager. The retail facilities are two small retail outlet stores, one of which has four employees, the other has six. Each facility has one manager. The consulting division has three interior design specialists. At present, these persons report directly to Mustafizur Rahman, who manages this division? The administrative office is comprised of one receptionist, Bimal Paul, VP of Accounting and his assistant; Mizanur Rahman, VP of Operations and Human Resources and his Assistant; and Mustafizur Rahman, and his assistant Mahmud Faisal.

Regulations & Licensing

National Furniture is committed to maintaining the proper permits and licenses. National Furniture has always believed that in order to minimize their liabilities, they must adhere to any and all permit and licensing requirements. The following were obtained in order for National Furniture to commence business: - Fleet Vehicle License, January 12, 2006 - Manufacturer's Permit, February 6, 2006 - Permit to Conduct Business, October 8, 2006 - Resale license, January 15, 2006 - Retail Sales license, October 31, 2006

Objectives
National Furniture intends to aggressively court new customers by re-emphasizing both its reputation for quality, and its new interior consulting division.

National Furniture

Business Plan

National Furniture

Business Plan

National Furniture

Business Plan

Target Market
The target market of National Furniture is comprised primarily of homeowners and small offices in the tri-state area. The market for furniture products and design services is, according to a database of tristate area businesses. However, many newspaper articles have related stories of consumers purchasing furniture and interior design services from out-of-area vendors at an increasing rate due to the lack of availability of expert service and the lack of awareness of local vendors. National Furniture is the most well known among local vendors, and continues to enjoy reasonable name recognition in the tri-state area. National Furniture wants to compile the following table (Target Markets), based on its own internal surveys:

Target Markets

% of SEGMENT Targeted Population* Homeowners Small Businesses Educational and Non-Profit Institutions Single Persons Other Students TOTAL 55% 15% 2% 65% -30% Curr. Year Dec 2006 35% 29% 16% 9% 6% 5% 100% Projection Dec 2007 37% 32% 14% 10% 4% 3% 100%

% of Sales Projection Dec 2008 40% 36% 10% 7% 4% 3% 100% Projection Dec 2009 41% 37% 9% 7% 3% 3% 100% Projection Dec 2010 41% 38% 8% 6% 4% 3% 100% Projection Dec 2011 43% 39% 7% 5% 3% 3% 100%

National Furniture

Business Plan

Target Markets

Competition
On the manufacturing and wholesale level, there is no significant competition to National Furniture in this area. One company, Modern Furnishings, Inc. produces lowend furniture such as futons, student desks and bookshelves, and single and double bed frames. Modern Furnishings market however, is much more limited -- they cater to students and young working singles. Nevertheless, National Furniture does, to some extent, compete with Modern Furnishings for display space at local wholesalers. To that extent, National Furniture keeps apprised of Modern Furnishings' wholesale network.

10

National Furniture

Business Plan

11

National Furniture

Business Plan

Objectives
National Furnitures marketing objective is to generate increase an 18% in furniture sales and an increase of 30% in design consulting sales in the next year. National Furniture intends to use an aggressive new advertising campaign, coupled with a retrained sales force, to extend its lead in the tri-state area furniture and design market. National Furniture intends to use massive advertising in the area to reiterate its reputation for quality, attractive furniture at a reasonable price, and to promote its expertise in consulting by emphasizing that its consultants have firsthand product knowledge. As well, National Furniture will retrain its retail sales force to be more concerned with the functionality of its products in the homes and offices of its customers.

Selling Tactics
National Furniture employs salespersons for its retail sales facilities. These individuals are trained as professionals in the furniture market. They are taught the specific niche that National Furniture brands fill in the market, and learn how to carefully identify the needs of customers, and to recommend appropriate products. The management of National Furniture remains in constant contact with its sales force because they are continually in contact with customers. The customer feedback received from the sales force has provided valuable insight into new products and services. The retail personnel are also taught how to follow-up on leads that they receive. As inquiries come in from prospective clients (whether homeowners or business professionals), the retail personnel send direct letters to these persons offering a consultation and written, customized assessment of their furnishing needs. High-end clients have proven especially responsive to this strategy. However, the rise in popularity of interior design consultants has made the job of the retail sales personnel more difficult than merely selecting furniture based on a customer's request. Increasingly, customers come to National Furniture without a specific request in the hope that the personnel will not only recommend a type of furniture based on their description, but will actually be able to describe options in furnishing strategies to them. Currently, the retail personnel are not trained to perform this task. National Furniture has hired three full-time interior design consultants to do this work, but these persons are often out, either doing their own selling, or servicing a client. Thus, National Furniture has committed to retraining each of its retail personnel in advanced interior design and decor planning, and now plans to advertise the expertise of its retail personnel. Since advertising has traditionally been very effective, and since interior design services are in such demand in the area, it is expected that these strategies will

12

National Furniture

Business Plan

work together to produce a substantial number of new leads, both for the interior design consultants, and for the retail furniture sales force. In order to effectively monitor and respond to changes in customer needs and wants, National Furniture has initiated a customer feedback mechanism. With every sale of furniture or interior design assistance National Furniture includes a business reply postcard which asks the customer to provide them with information pertaining to their satisfaction with the products or services and with the company itself, as well as the customers plans regarding furniture or design needs in the future. Similarly, these evaluation cards are made available in the showrooms at National Furniture. The company periodically evaluates the responses in order to more effectively serve its customers and strategically plan the future direction of the business based, in part, on the feedback the customers provide. This feedback, in part, led to the creation of the interior design service concept in response to customer demand. The following table (Sales Targets) displays historical sales data for National Furniture, as well as its current and projected sales:

Sales Targets
Products/Services This Year Dec 2006 Projection Dec 2007 Projection Dec 2008 Projection Dec 2009 Projection Dec 2010 Projection Dec 2011 Projection Dec 2012

Interior Design Services Cash Sales Sales on Account Home Furnishings Cash Sales Sales on Account Business Furnishings Cash Sales Sales on Account 3,665,386 284,600 3,436,654 368,410 5,445,850 420,500 6,621,765 480,600 9,230,610 754,600 10,928,765 921,500 13,181,020 1,020,500 3,381,566 245,560 5,070,818 487,600 5,096,160 545,840 5,859,520 555,800 6,554,730 610,500 7,981,051 665,200 8,448,580 701,000 261,002 47,560 407,596 53,412 620,840 54,810 727,100 55,400 848,202 57,450 986,460 69,850 1,208,000 74,560

Total Cash Sales Total Sales on Account TOTAL SALES

7,307,954 577,720 7,885,674

8,915,068 909,422 9,824,490

11,162,850 1,021,150 12,184,000

13,208,385 1,091,800 14,300,185

16,633,542 1,422,550 18,056,092

19,896,276 1,656,550 21,552,826

22,837,600 1,796,060 24,633,660

Growth Rate TOTAL MARKET

--47,598,857

25% 48,079,653

24% 53,421,837

17% 57,060,701

26% 60,522,140

19% 61,847,430

14% 64,201,526

Amount in Taka

13

National Furniture

Business Plan

Sales Targets

Pricing
National Furniture has as its continuing goal to be price competitive with any comparable product in almost any market. Since its inception, National Furniture has made a conscious effort to minimize its own internal costs, and to pass that cost savings on to the consumer. Many times prices have increased at little more than the rate of inflation, keeping its products competitive. National Furniture has an advantage in that it is the only company of its kind manufacturing in the tri-state area, thus it has much lower transportation and inventory costs than its competitors. National Furniture products represent a value given their reputation for quality, and this attribute, more than anything else, has kept sales robust.

14

National Furniture

Business Plan

Publicity and Public Relations

National Furniture has built a solid reputation in the tri-state area as a company that produces quality products at a reasonable price. In addition, it has also built a reputation as a caring employer that works hard to promote positive influences in the community. National Furniture has a team of community service worker-employees who volunteer one weekend each month in service to the elderly members of the tri-state area community. Three teams of between seven and ten persons each spend several hours on a Saturday afternoon cleaning up the homes and lawns of elderly persons who do not have their own care. The employees do everything, from washing dishes and cleaning rest rooms, to washing windows and mowing grass. The positive results from this program have been immense. These efforts have been highly publicized by the local media. Pictures of the National Furniture employees in their team shirts have been run in local papers, and carried on the tri-state area evening news. Other companies have begun to follow National Furniture, and the impact on the community has been obvious. As a result, National Furniture has received much favorable attention. National Furniture also gives away a substantial amount of free furniture each year to persons who have suffered tragedies in their lives, such as deaths of relatives or natural disasters. Many persons have written National Furniture to commend them on their efforts, and the local newspaper ran an editorial praising National Furniture for its leadership and community contributions.

15

National Furniture

Business Plan

16

National Furniture

Business Plan

Product Decisions
National Furniture has developed a product mix which capitalizes on its reputation and focuses on its core competencies. For seventeen years, National Furniture has been in the furniture business as a leader in well-designed, classic, durable, and affordable hardwood furniture. It has considered other furniture materials such as plastic, steel, and glass, but rejected the possibility of diversifying this way. Some of the reasons include: > The expense necessary in initiating new production facilities, > The increased demands this would place on its sales personnel, > The market in the tri-state area not being firm for alternative furniture designs, > National Furniture designers lack proficiency in creating these types of designs, > Formidable competition in the alternative furniture materials market, and > The much smaller margins than exist for wood products. National Furniture designs distinctive furniture products. Recently, the use of Computer Assisted Drafting has allowed small refinements for efficiency as well as the development of a few new products, but the basic look of National Furniture remains the same. National Furniture has the advantage of being the only real wood furniture manufacturer for its market in that area. It is also small enough to avoid capturing the attention of national manufacturers. Its product designs have never been copied, and it is not anticipated that they will be, unless National Furniture tries to expand and market its products beyond the tri-state area. National Furniture has been careful to avoid creating too many product designs in order to eliminate cannibalization of its own products -- a real danger since it has committed itself to a single, limited category of furniture style. National Furniture has essentially created two product lines, one based on cherry with a rich stain for a look of elegance, the other based on oak with a light stain for a classic look. The two looks have almost the same design, but are distinctive enough in appearance that they do not compete with each other. Rather, they offer the client a choice between styles which helps to sustain sales.

Production
17

National Furniture

Business Plan

National Furniture relies primarily on raw materials such as lumber, nails and glue to make its furniture products, although some merchandise is bought on a wholesale basis to be affixed to the final product (for example: drawer knobs, hinges, etc.). Both the raw materials and the wholesale products are classified as purchases for the purpose of financial statements. The manufacturing facility is actually a giant warehouse, divided by partitions into five large areas, with a small office for the manufacturing manager, a kitchen, and restroom facilities for the employees. One of the areas is a receiving and storage area for raw materials and auxiliary items to be used in producing the furniture. A second area is used for cutting and sanding the wood products. A third area is used in assembly line fashion to build the final furniture product. A fourth area is dedicated to staining/painting the final product. A fifth area serves as the stock house for inventory as it awaits pickup and delivery. National Furniture relies on skilled craftsmen for production of its furniture products, and has done so since its inception. These craftsmen are assisted by precision machinery in both the drafting and the design of the final product. Drafting at National Furniture is done at the most advanced levels. Furniture is no longer designed by hand, but is electronically envisioned through CAD (computer assisted drafting) even before being built as a prototype. The company uses desktop 486 technologies for this purpose. However, National Furniture is not as technologically advanced in its production facilities. The company uses old manual jigsaw technology to create its more intricate designs. Assembly lines which allow mass production of the final products from individual pieces and sourced components rely on outdated, costly motors and have relatively few automated processes. Staining and painting are done using machines that are old and frequently malfunction. Consequently, the production process is extremely labor intensive and inefficient, costing National Furniture large amounts of money in repair bills and lost sales opportunities. Recent innovations hold many promising technologies, and new electronic equipment has been developed which will allow an increased pace of production. Repair costs are estimated to immediately decrease by 75%, and the increased manufacturing capacity will result in increased sales. The new technologies are relatively easy to learn, and are definitely easier to operate, than the outdated processes currently used. Retraining labor and locating skilled labor to operate the machines in the future will pose no challenge. Thus the modernization program is a beneficial use of capital.

Quality Control

18

National Furniture

Business Plan

National Furniture is firmly committed to preserving its reputation as a manufacturer of fine, quality furniture, and has implemented significant quality control measures as a result. At the manufacturing level, all raw materials are inspected for defects upon delivery. Material judged by the manufacturing warehouse manager to be less than 95% pristine based on an extensive and rigid checklist is returned. Spot checks are performed at random intervals during the production process by the manager. Each piece of furniture is inspected by a different member of the warehouse, and each member of the warehouse team is completely trained in inspection techniques before being allowed to begin work. At the retail stores, each manager is trained to review employee performance through random monitoring and customer follow-up techniques. An extensive checklist is developed for evaluation purposes, and managers are expected to review every employee's checklist each week. Finally, National Furniture employs independent consultants to run quality control samples at both the manufacturing/wholesale and at the retail level for each employee. These are surprise visits and the evaluations include even the Vice Presidents of the company. National Furniture has hired a team of consultants as well, to conduct random inspections of the machinery for precision and uniformity. As a result of these measures, the standards for quality control are among the finest in the industry.

19

National Furniture

Business Plan

20

National Furniture

Business Plan

Service Description
The recently established interior design consulting division is already showing great promise. The market in the tri-state area is booming, and the demand for consultants who specialize in specific product lines is immense. The three full-time consultants are all graduates of out-of-area interior design schools. Two have been employed full-time as consultants with boutiques in the tri-state area, one is an entry-level person who has recently graduated, and who has worked as a freelance consultant in the interim. These consultants provide clients with detailed knowledge of the various lines of furniture offered by National Furniture. More importantly, however, the consultants provide the expertise to assure that the furniture schemes are designed perfectly for the user's requirements and desires before any purchasing decisions have been made. As well as furniture products, the consultants from National Furniture are experts in the use of space, color, and perspective. The interior design consultants will do hypothetical room layouts in blueprint form to satisfy the customer's desire for choices. These consultants have performed several dozen jobs for both offices and homes in the tristate area, and maintain a cache of impressive references for the prospective client's consideration. The consulting services will extend to the preparation of a design and layout for the home or office. They also include assistance in selecting, locating, negotiating, and ordering product, and the arrangement of the product in the designated space. They do not include assistance in wallpaper or works of art; however the consultants will design layouts and select furniture to match these.

Related Products
The National Furniture consulting division provides its clients access to National Furniture products. The consultants can and do obtain other products for clients as well, but these are almost always non-competing type products, offered when the clients needs call for a completely different product type. The consultants are typically hired for their knowledge of National Furniture products, however, so in most cases, the sale of furniture is a fair accomplishment.

21

National Furniture

Business Plan

22

National Furniture

Business Plan

Operations Analysis
National Furniture prides itself on the quality of its products; therefore, effective manufacturing processes are critical to the company's success. For more information about the inputs into the production process as well as quality control of that process, please see the appropriate chapters in the OPERATIONS section. Production scheduling is a function of allocating limited manufacturing resources correctly, to fill both real orders, and anticipated demand, within the constrains of inventory warehouse space. The quantity of items produced and the production schedule are delivered weekly to the manufacturing manager by Amy Spreadsheet, who uses a complex inventory counting and tracking program which interacts with the National Furniture order processing system. Essentially, Amy Spreadsheet has effectively balanced the interests of inventory controls, customer demand, and manufacturing constraints through the use of this system. National Furniture is currently filling its orders in a timely fashion, and keeping its wholesale customers and its retail outlets reasonably supplied. However, based on internal calculations, National Furniture is operating at 94% of production capacity in its current technological configuration, but only 74% of its warehousing capabilities. Modernization of the National Furniture manufacturing process is expected to boost production capacity, and to provide greater capabilities to supply wholesalers and retailers, in order to meet increasing demand in the tri-state area.

Location & Facilities

The administrative office, manufacturing facility, and warehouse are located on Highway 6 about 9 miles east of downtown. This location was strategically planned several years ago. It is far enough outside the city limits to avoid city ordinances for noise and traffic due to operations; however, the facility is positioned along a major highway, only 3 miles from the interstate which links the tri-state area. This location has provided National Furniture with excellent supply routes for its retail stores, as well as delivery routes to its wholesale customers. The two retail stores are located in North Suburbia and Eastern Outskirts, both across from popular malls on the edge of town. National Furniture has used these locations for its retail outlets for four and seven years respectively, and their locations have proven to be a significant contributing factor in the strong sales of National Furniture. Last year, National Furniture located its interior design consultants in a small office space in the downtown area for closer proximity to corporate clients. However, at least one of the consultants is still meeting with clients either in a residential area, or at one of the retail store facilities.

Technology/R&D
23

National Furniture

Business Plan

National Furniture relies on technological inputs for its manufacturing process, but that technology is nearing obsolescence. The company has been using the same machines to develop new product designs and to create the furniture manufacturing templates for almost a decade. Costs have soared at National Furniture as the equipment breaks down more and more frequently, and the decreased production capabilities during downtime have substantially reduced the ability to grow. Therefore, National Furniture proposes to purchase new, state-of-the-art technology which will cut National Furniture repair and maintenance bill by about 75% in the first year alone. In addition to the massive cost saving which can be realized in yearly operating expenditures, the company will be capable of producing more advanced product designs and replicating them more quickly. This will enable National Furniture to support the planned expanded sales effort. The purchase of new technology is vital for long-term viability as a furniture manufacturer.

Labor
National Furniture has found an excellent labor pool in the tri-state area. The average worker at the Company has at least 2 years of college education, and no worker failed to graduate from high school. For its manufacturing facility, National Furniture requires workers with artisan-level craftsmanship, demonstrated through solid work experience. National Furniture hires extraordinarily skilled individuals for assembling and finishing the furniture pieces it creates. Each worker is individually tested for aptitude with new machines before being hired, and each must demonstrate their ability to operate at least one key machine in the National Furniture facility before being hired. National Furniture also has found a fertile base for sales person recruits at the local university. Well known as one of the cities best companies to work for, each year National Furniture receives dozens of unsolicited resumes for its sales person positions. Thus, National Furniture is able to be extremely selective in recruiting individuals for these positions.

24

National Furniture

Business Plan

25

National Furniture

Business Plan

Description of Risks
The management team at National Furniture has critically analyzed the company and the market, and has identified two major areas of risk for the company: > Diversion from core competency. National Furniture is in the process of expansion, and part of this expansion entails the aggressive promotion of its newly formed consulting services division, which is already showing signs of substantial potential and growth. National Furniture has been in the business of making and selling fine furniture products for the past seventeen years, and there is the danger that this new and booming service division will grow quickly thereby distracting the company from its mission statement of producing fine quality furniture. > Implications of fast growth. Other than adding three persons to its consulting division, National Furniture has not grown substantially in number of employees, total gross sales, or production capacities in almost ten years. The current expansion plans call for rapid growth in both the consulting and furniture sales. These expansion goals, coupled with the goals for modernizing the production process, will lead to an increased pace of activity. This increase will have profound implications for National Furniture employment possibilities, its computer systems, and its management structure. There is a danger that National Furniture will increase sales orders and accounts faster than the company can adapt to this new environment.

26

National Furniture

Business Plan

27

National Furniture

Business Plan

Assumptions
National Furniture has used the following assumptions in the preparation of its financial statements. All calculation methods adhere to Generally Accepted Accounting Principles. > The cost method of inventory valuation is used on a last-in, first-out basis. National Furniture turns over its inventory on a monthly basis and projects that this method of inventory management is the most efficient means of operation and is consistent with the business logistics system. > The cash method of accounting is used. > A straight line depreciation formula is used. > A 12% annualized rate of interest is assumed for accounts payable and receivable unless otherwise noted.

Sources and Uses of Capital

In order for National Furniture to successfully complete its plans for expansion, an investment of 1,250,000/- ill is required. The owner will contribute 250,000/- of his own money and require 1,000,000/- financing from a lender. The business requires a 1,000,000/- loan that will be repaid in monthly installments at 12% interest. The table below (Sources and Uses of Capital) represents how the funds will be utilized in a one year period. National Furniture will primarily use the money in these areas: to purchase new manufacturing equipment, to complete sales retraining, and to bolster working capital while the company rebounds.

Sources and Uses of Capital

Description

Amount in taka

SOURCES Business Loan Owner Investment TOTAL SOURCES USES Sales Training Program Capital Equipment Purchases Capital Equipment Installation Working Capital Infusion TOTAL USES 175,000 625,489 87,194 362,317 1,250,000 1,000,000 250,000 1,250,000

28

National Furniture

Business Plan

Break Even Analysis

National Furniture has calculated its break even point -- the point at which its sales will cover its costs. The table below (Break Even Analysis) displays the data used in these calculations, as well as the calculations themselves. The Average Variable Cost ratio calculation expresses the ratio of product cost to gross sales.

Break Even Analysis

Description Average Sales/Month Average Variable Cost Ratio/Month Average Fixed Cost/Month Average Monthly Sales Break Even point

Dec 2006 657,140/0.51 306,824/621,593/-

Dec 2007 818,708/0.55 311,310/688,541/-

Dec 2008 1,015,333/0.50 478,315/961,299/-

Dec 2009 1,191,682/0.50 531,523/1,067,801/-

Dec 2010 1,504,674/0.50 667,774/1,340,326/-

Dec 2011 1,796,069/0.50 772,637/1,548,999/-

Dec 2012 2,052,805/0.51 847,397/1,740,690/-

29

National Furniture

Business Plan

30

National Furniture

Business Plan

Justification for Loan/Investment/Etc

National Furniture has chosen to apply for a bank loan to provide additional capital. The company seeks a 1,000,000 taka loan to be repaid in monthly installments over 5 years at 12% interest. The loan will be collateralized using inventory, property, plant, and equipment. This capital will be used to satisfy the company's turnaround requirements as set forth in the Sources and Uses of Capital section of this chapter of the business plan. The projected cash flow statement clearly shows the ability to pay even in a worst-case scenario situation. After above discussion we can say that if we can proper utilize our plan then it can provide the customers satisfaction.

31