Living Foods Companys Business Plan

Executive Summary

The proposed business is Living Foods, which will produce and sell microwaveable healthy grilled-food items in the UK. The business owner is Mr. XYZ who has worked for more than seven years in different food companies. He has mastered the art of cooking and has developed amazing recipes which have been tried and tested by many consumers at various food festivals and conferences. The proposed company will be a sole proprietorship, and it will be set up in Newbury, Berkshire. The business will operate a complete cooking and production unit and sell its products via online and retail channels. The competition in the market is intense and mainly based on the pricing of products. The company will bring innovation to the food sector by introducing new products. It is anticipated that the business will generate growing sales in the months after its inception. It will generate a small profit in the first year of operations, which is expected to increase significantly in the second and third year.

The Concept

The proposed business will be a ready-made healthy food company that will sell microwaveable ready meals including healthy grilled meats and vegetables. The suggested business name is Living Foods, and it will be located in Newbury, UK. A light industrial unit that has almost 3,700 sq. ft. of space will be rented out to carry out the business operations. The reasons for selecting Newbury for this business are its proximity to London which is the largest sub-market in the UK and easy access to distribution channels. The management has identified the following keys to the success of the proposed business.

Highly nutritious, delicious, and healthy food products.
Giving priority to customers healthy eating and lifestyle.
Generating strong financials and growth.

The mission of Living Foods is to become a leading microwaveable healthy food brand in the UK.

Methodology

The business will be a sole proprietorship to be owned and managed by a single individual. The benefit of this form of business is that it is easy to set up and the owner has full control and can withdraw all profits without sharing. However, it has drawbacks as the entire responsibility of the business is on the owner, and it could be difficult to obtain additional financing if required (Miller 2016). This form of business is selected as the owner wants to maintain full control of decisions and outcomes. The owner has a clear plan to launch this business and achieve the best results. He will use personal equity to raise finance for the proposed business. Furthermore, a bank loan will be sought from a local bank in the UK.

Objectives

The objectives of the proposed business are given in the following.

To become a reputable healthy food brand in the UK market.
To produce, package, and deliver healthy food by adopting environmentally sustainable practices.
To secure a retail space in different stores including Tesco, ASDA, and Sainsburys.

Market

The primary target market is the United Kingdom (UK) which is a major economy in Europe, and it produces 60% of its food requirements. The country held a referendum to exit the European Union in 2016. It has adversely affected the value of the British Pound and has increased the cost of business operations. Moreover, consumer prices have also risen (Central Intelligence Agency 2018). The company will target young individuals who are in the age group of 18-34 years. These customers are health cautious and have a high disposable income. Moreover, they are educated and understand the importance of a healthy lifestyle (Dunne and Naden 2015). Although the production facility will be set up in Newbury, the company will distribute its healthy frozen products throughout the UK.

Target Location of Production FacilityN — Figure 1. Target Location of Production Facility (Google Maps 2018).

Competition

There are eight significant competitors including Tesco, Sainsburys, Morrisons, and Ocado, etc. All of these companies have a separate product line of prepared healthy foods in their stores. These companies compete on prices and provide a wide range of healthy food items. However, it is noted that these companies lack a focus on innovation in the food sector. The new business will target a particular segment in the market by focusing on grilled low-carb healthy products that are expected to generate high demand from consumers.

It is indicated that the competition in the UK market is intense and the key to success is selling high-quality food as per the expectations of health cautious customers. The new business will produce and sell healthy and delicious recipes that the owner has developed over the years and tried while working in different food companies in Manchester and Berlin. The owner is confident that the new business will be successful as consumers want to try out new flavors and healthy options.

Products

The objective of the proposed business is to bring flavors from different parts of the world and produce delicious and healthy food for health cautious consumers. The new business will produce healthy grilled meats and vegetables which will be packaged in microwaveable boxes. The owner personally developed all recipes. The packaging will provide details of all ingredients along with the total calories per item.

Marketing Strategy and Activities

The marketing strategy will encompass decisions related to the 4Ps of the marketing mix, which is described in the following.

Price: The new business will follow the competitive pricing strategy which implies that a low-profit margin will be earned.

Product: The company will produce microwaveable grilled healthy-food items for health cautious customers.

Promotion: The company will offer various promotional deals such as a discount on multipack purchases or new products. The business will be promoted through social media including Facebook and Pinterest. Furthermore, the company will carry out marketing through printed media such as various food magazines including New Food Magazine and Food and Drink News Magazine. The company will also use SMS and e-mail marketing tools. Moreover, the owner will also participate in different food-related events to promote the new business.

Place: The business will operate in Newbury and sell its products throughout the UK.

Sales and Operations

The company will sell its products to different small and large retail stores. The owner will manage the new business. However, its operations will be managed by the Production Manager and Quality Controller who will be hired after the approval of a bank loan. The inventory manager will be responsible for managing and controlling inventory. The quality controller will manage kitchen operations and ensure food quality and consistency. The owner will perform managerial responsibilities including compliance with UK Food Safety Regulations, accounting, and tax management. The production manager will implement safety standards and provide training to machine operators. The company will also hire loaders and a cleaner to support production and other operations. It will also develop an e-commerce website and deliver its products directly to consumers. The owner will contract with a food delivery company NFT (nft.co.uk) to provide logistics services.

Sales Forecast

The owner has used the following assumptions for preparing a sales forecast.

The company will use a competitive pricing strategy.
The companys sales will significantly increase after it secures a purchase order from the first major retailer. However, they are expected to increase in the first 12 months gradually.
The owner expects to sign a contract with a major retailer by the end of the first year of operations.
The company will achieve a 30% increase in sales in 2020 and 2021.
There are two sales channels identified for the first year of operations including online websites (40%) and small retailers (60%).
The expected inflation rate in 2020 and 2021 will be 1.95% (Statista 2018), which will increase the cost of sales.

Table 2 provides the sales forecast including sales and direct cost of sales.

<2019>		Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun	Total
		£	£	£	£	£	£	£	£	£	£	£	£	£
Sales
Online Website	40%	12,000	11,400	11,100	10,500	10,200	10,800	11,400	11,550	11,100	10,800	10,500	11,100	132,450
Small Retailers	60%	28,000	26,600	25,900	24,500	23,800	25,200	26,600	26,950	25,900	25,200	24,500	25,900	309,050
Total Sales		30,000	30,900	31,827	32,782	33,765	34,778	36,517	38,343	40,260	42,273	44,387	45,667	441,500

Direct Cost of Sales
Online Website	40%	4,800	4,560	4,440	4,200	4,080	4,320	4,560	4,620	4,440	4,320	4,200	4,440	52,980
Small Retailers	40%	11,200	10,640	10,360	9,800	9,520	10,080	10,640	10,780	10,360	10,080	9,800	10,360	123,620
Subtotal Direct Cost of Sales		16,000	15,200	14,800	14,000	13,600	14,400	15,200	15,400	14,800	14,400	14,000	14,800	176,600

Table 1. Sales Forecast.

Financial Projections

Start-Up Summary

The new business will be located in Newbury, Berkshire, and the yearly rent of the selected commercial property is estimated to be £42,000 per annum. The property is suitable for the production unit. However, it requires a significant investment in leasehold improvements. The start-up will require business registration, licensing, and approvals from the food regulatory authority. The premise will be rented on an annual basis.

Moreover, the Production Manager and Quality Controller will be hired In January 2019 to start working on the project with the owner. The companys production and sales will start on July 1, 2019. Table 3 provides details of the initial funding requirements.

Start-up Summary	Amount
	£
Start-up Expenses

Production Manager Salary (6 Months)	9,000
Quality Controller Salary (6 Months)	9,250
Business Registration and Licensing	6,500
Trial and Testing	10,000
Rent	21,000

Start-up Assets to Fund
Signage	1,500
Equipment	65,000
Furniture	1,500
Inventory Management System	1,200
Customer Management System	850
Computers	1,500
Funding Requirement	127,300

Additional Cash Reserve	25,000
One-Year Payroll Expense	161,100
Total Funding Requirement	313,400

Equity (60%)	188,040
Debt (40%)	125,360

Table 2. Start-Up Costs and Expenses.

A bank loan will be sought for a 5-year term, and the interest rate is estimated to be 3.94% per annum. The company will pay off the principal amount after five years.

Personnel Plan

The owner will not withdraw funds from the business but instead receive a salary of £22,000 per annum in the first year. The company will also hire ten individuals for different roles including Quality Controller, Production Manager, Machine Operator, Marketing Manager, Inventory Manager, and Cleaner. The personnel plan including details of salaries is given in Table 4. All salaries are expected to increase by 4% in the next two years.

	2019	2020	2021
	£	£	£
The owner (Salary)	22,000	22,880	23,795
Production Manager	18,000	18,720	19,469
Marketing Manager	17,500	18,200	18,928
Quality Controller	18,500	19,240	20,010
Inventory Manager	15,500	16,120	16,765
Machine Operators (3)	48,000	49,920	51,917
Loaders (2)	16,800	17,472	18,171
Cleaner	4,800	4,992	5,192
Total People	11	11	11
Total Payroll	161,100	167,544	174,246

Table 3. Personnel Plan.

Income Statement

The income statement for the first three years of operations is provided in Table 6. The equipment to be purchased has a useful economic life of 20 years, and its value will be depreciated by using the straight-line method. Other assets will be depreciated over their estimated useful life of 10 years.

	Year 1	Year 2	Year 3
	£	£	£
Sales	441,500	573,950	746,135
Cost of Sales	176,600	234,034	304,244
Gross Margin	264,900	339,916	441,891
Expenses
Depreciation	3,250	3,250	3,250
Rent	42,000	43,680	45,427
Payroll Expense	161,100	167,544	174,246
Marketing	15,000	15,750	16,538

Earnings Before Interest	43,550	109,692	202,430
Interest	4,939	4,939	4,939
Earnings After Interest	38,611	104,753	197,491
Tax	5,422	31,601	68,696
Net Profit	33,189	73,152	128,795

Table 4. Income Statement.

Cash Flow Statement

The cash flow statement for the first three years of operations is provided in Table 6.

	Year 1	Year 2	Year 3
	£	£	£
Beginning Cash	186,100	222,539	304,806
Cash Inflows
Collection from Sales	441,500	573,950	746,135
Spending
Cash Received	627,600	796,489	1,050,941
Cash Outflows
Cost of Sales	176,600	234,034	304,244
Rent	42,000	43,680	45,427
Payroll Expense	161,100	167,544	174,246
Marketing	15,000	15,750	16,538
Interest	4,939	4,939	4,939
Tax	5,422	31,601	68,696
Cash Spent	405,061	497,548	614,090
Net Cash Flow	36,439	76,402	132,045
Ending Cash Balance	222,539	304,806	467,907

Table 5. Cash Flow Statement.

Balance Sheet

Balance Sheet	Year 1	Year 2	Year 3
Assets
Cash	222,539	304,806	467,907
Equipment	61,750	58,500	55,250
Other Assets	5,895	5,240	4,585
Inventory	54,465	49,254	18,853
Total Assets	344,649	417,800	546,595
Liabilities and Equity
Liabilities
Long-term Debt	125,360	125,360	125,360
Total Liabilities	125,360	125,360	125,360
Capital	186,100	186,100	186,100
Retained Earnings	33,189	106,340	235,135
Total Equity	219,289	292,440	421,235
Total Equity and Liabilities	344,649	417,800	546,595

Table 6. Balance Sheet.

Strengths and Risks

The major strengths of the proposed business are listed in the following.

The owner has worked in the food industry for more than seven years.
The owner has developed unique food recipes from different parts of the world.
The demand for healthy food is increasing (Wells 2017).

The proposed business also faces certain risks which are highlighted in the following.

The competition is intense in the food market.
It is crucial to maintain the quality of food served and mismanagement of other factors such as customer service, food storage, fire safety, and hygiene can also affect the sustainability of operations.
Poor customer feedback can destroy the brand image.

Closing Summary

Living Foods is a healthy food manufacturing company which will be located in Newbury, UK. The company will produce delicious and healthy microwaveable grilled food items. The business will start its operations in July 2019. The company will operate as a sole proprietorship and target young consumers through its online and retail network. Based on the market analysis and demand for healthy food, it is projected that the new business will generate a small profit in the first year. The business will have sufficient cash flows to invest in the expansion of its operations in the UK after three years. There are few risks related to the business that are identified in this plan, which requires careful planning and controls.