Date: 11/23/2003
Student: Vlado Vukovic
Class: AMM 150 (Small Business)
Professor: Dr. Harrell
Step 16)
Writing a Cover Letter
Definition: The sixteen step of the business plan is called 'Writing a Cover Letter.' The sixteenth step is about writing a cover letter that summarizes the business plan and it stresses its purpose and its promise.
My Business: As a result of the fact that Idra, Inc. will need a Bank loan ($7,000) to help offset any initial difficulties with the business and as a result I am providing this cover letter where I am requesting a bank loan for Idra, Inc.
Exhibit 5
Idra, Inc.: Sample Cover Letter
_________________________________________________
..December 10, 2004
Ms. Margot Hill
United Federated Bank
Main Street, Ca 78998
Dear Ms. Hill
Attached is my business plan for Idra, Inc. After reviewing the attached business plan I am certain that you will agree that the possibility of success for this particular such a business is rather high and all the vital elements needed for the success of this business are at place (quality, dependability and hard work).
Regardless of the fact that the estimates for the first year profit are beyond impressive I will need to ask the bank to grant me a loan of $7,000 that I will need to help offset any initial difficulties with the business in its beginning stage.
The loan will provide, together with the $50,000 that I will provide will provide the necessary funds to start up the business. Projections for the end of the first year is that Idra, Inc. should earn a profit that are a tad short of 2,000,000 mark.
If any questions arise as a result of the attached business plan or loan applications, please feel free to contact me. Thank you for taking time to consider my applications and I will be thrilled to hear back from you.
.Sincerely
.Vlado Vukovic
.Idra Inc.
Enclosures: Loan Application
Business plan
Project: Business Plan (Idra, Inc.)
Preparation date for BP: Dec.1, 2004
Operations Start: Jan. 1, 2005
1)
Making the Commitment
Definition: The first step of a business plan is called 'Making the Commitment.' The first step is all about the individual's degree of commitment to open a business for themselves and desire to become an independent entrepreneur as opposed to being a worker that works for someone else.
My Business: At the start of 2003 I have meet an inventor and businessman from Croatia of a new revolutionary antismoking product called BioG Chip Card that drastically reduces the amount of nicotine and other poisons found in cigarettes and can help quit smoking all together. Shortly afterwards I met this brilliant man I have been involved in promoting the knowledge about this new sensational and unique antismoking product in both US and abroad by contacting big Tobacco companies, tobacco distributors and related import-export global companies. The interest is certainly there and I am more than determined to pursue this further and more than convinced that I will succeed in this venture although I do realize that there is loads of hard work ahead of me and that this venture just like another business ventures caries with at risks of failure as well as success.
2)
Analyzing Oneself
Definition: The second step of the business plan is called 'Analyzing Oneself.' The second step is about the entrepreneur conducting a self-analysis that consists of analyzing their strong and weak points in the interested field that will very likely be directly associated with that individual's level of related business education and related experience that is compounded by the intensity of will or desire to succeed in the business. This step is centered on the question "Why should I have my own business?".
My Business: I have worked before in sales field so I have experience of dealing and relating to customers and I do realize what painstaking job can this be especially at the start of any new business where one is introducing a new product to skeptical market. I have and I am still attending college and my major is business administration and this have and will certainly help me further in operating my own business venture. Finally the final ingredient I needed was finance and to obtain it I began savings and investment program that I need for the initial investment for the entrance.
3)
Choosing a Product or Service
Definition: The third step of the business plan is called 'Choosing a Product or Service.' The third step is about choosing a product or service that would best complement your experience and your desire thus making chances of you becoming an ever more efficient and successful entrepreneur even more likely. The subjects related to the products/services that this step would examine are customer needs, product/service uniqueness, level of product/service practicality concerning customer use and what improvements would be performed on the product/service in the future.
My Business:
The BioG Chip Card is a unique antismoking product that when used over a period of time can reduce the amount of nicotine and a number of other poisons contained within a single cigarette that a smoker is inhaling as well as the overall number of cigarettes smoked. It also reduces poisonous CO in the lungs while it decreases the smell of cigarettes, coughing and irritation in the throat.
4)
Researching Markets
Definition: The fourth step of the business plan is called 'Researching Markets'. The fourth step is about researching the market for your product or service in order to find answers to questions regarding the customers such as; Who / Where are they, Their average income, How much do they spend, where are they located and who are my competitors (among other related questions).
My Business:
The BioG Chip Card is a unique product and as such faces no direct competition in terms of facing the product with similar capabilities (although there are other, unrelated, anti-smoking products such as patches). Customers can range from the smokers themselves to the people who have loved ones who smoke and want to make them either quit or decrease the number of cigarettes smoked. The potential market is enormous since the average smoking population in any given country usually stands at around one third of adult population (such as US) while some other countries have over 40% of adult population classified as smokers (such as China and Turkey for example). We are talking about a multibillion-dollar industry.
5)
Forecasting Sales Revenues.
Definition: The fifth step of the business plan is called 'Forecasting Sales Revenues'. The fifth step is about forecasting or predicting future share of the market (considering there is some starting data to work with) over a three year period that is divided in three pieces; One year (monthly), Two year (quarterly) and Three Year (yearly). This step is also centered on a question "Why is my sales forecast realistic?"
My Business:
My sales revenue would come from tobacco companies, tobacco distributors and related import-export global companies. Going price for one card is $29.99 and card is effective up to half a year. Judging by the interest that I have received already from the parties I have been in contact with my forecast of sales revenues for the first three years of sales activity appears bellow (potential orders would range from 1,000 pieces to 10,000 pieces per order thus average being 5,000 with tendency for gradual increase).
Idra, Inc.
Three-year Forecast of Sales revenues
________________________________
First Year Forecast of sales revenues
-----
January................(5,000x29.99)$149,950
February..............150,000
March...................152,000
April......................154,000
May.......................155,000
June.....................158,000
July......................160,000
August..................163,000
September...........165,000
October................168,000
November.............170,000
December.............174,000
.........................------------------
Total......................$1,918,950
Second-year forecast of sales revenues
-------
First quarter..........$716,000
Second quarter
.744,000
Third quarter.
..773,000
Fourth quarter
.801,000
.......................------------------
Total...................$3,034,000
Third-year forecast of sales revenues
-----
...........................$5,006,000
6)
Choosing a Site
Definition: The sixth step of the business plan is called 'Choosing a Site.' The sixth step is about choosing a site for your business and it revolves around a question "Why is this site the best possible site as opposed to other sites?".
My Business: Considering the fact that I am not going to be in person-to-person sales venture where I would need loads of cold callers working on telephones or via Internet but in a highly professional sales venture where I would contact already selected list of other companies in related businesses and considering the fact that cards are very small and not really space consuming I will be doing this business from my apartment which will also save me money. Therefore location will be my home in Astoria is in Queens, New York, NY State.
7)
Developing a Production Plan
Definition: The seventh step of the business plan is called 'Developing a Production Plan.' The seventh step is about developing your production plan and answering questions that relate to location of the plant, production process, form and size of the equipment needed and finally control of waste/quality/inventory of my products.
My Business: Since Idra, Inc. is a distributor business there is no production facility or production plan.
8)
Developing a Marketing Plan
Definition: The eight step of the business plan is called 'Developing a Marketing Plan.' The eight step is about developing your marketing plan and answering questions that relate to ways of creating customers, pricing strategy, advertising and sales promotion, possibility of including personal selling and simply answering the ever present question "Why?"
My Business: Antismoking industry is a rather competitive industry but the fact remains is that I have a unique and licensed product that pretty much puts competition in a second plan since they have nothing even remotely similar or more effective to provide that would counter the negative effects of cigarette smoke. The price I have set for the product is a set price and it is nonnegotiable while I will not engage in any personal selling at least not in the first three years of operations while later on perhaps I might train some salesman to try personal selling on a local level. Advertising would primarily go through major distributing companies that would market this product as opposed to usual advertising channels that would only involve regular consumers (large players are my primary focus at this moment).
9)
Developing an Organizational Plan
Definition: The ninth step of the business plan is called 'Developing an Organizational Plan.' The ninth step is about developing your organizational plan and answering questions that relate to forms of talent and skills needed for improvement of my business. This step also consists of drawing a detailed organizational chart that would include work/authority distribution.
My Business: Since I am thinking of running Idra, Inc. as a Corporation (primarily looking at future expansion) I do intend to operate it as a Sole Proprietorship since for a foreseeable future I see myself as the only person involved. As the business progresses and as the orders become more frequent and more predictable I intend to rent out an office and employ couple of individuals who would start out as my beginning staff.
10)
Developing a Legal Plan
Definition: The tenth step of the business plan is called 'Developing a Legal Plan.' The tenth step is about developing a legal plan and answering questions that relate to what form of business would be best suitable from the choice of sole proprietorship/partnership/corporation and the reasons why one of them was chosen.
My Business: I would run Idra, Inc. as a corporation as a result of the fact of limitation on personal liability that the other two-forms of business ownership do not have. Before I would definitely decide on its legal status I would consult a lawyer that would be specialized in this field. I would select a lawyer primarily by the word of mouth since that would be the best indicator of lawyer's worthiness.
11)
Developing an Accounting Plan
Definition: The eleventh step of the business plan is called 'Developing an Accounting Plan.' The eleventh step is about developing an accounting plan and answering questions that relate to records and reports needed and how will they be used.
My Business: My accounting Plan would be envisioned in a form of computerized accounting system that would be customizable and somewhat self-guiding and to also avoid confusion or possible mistakes as well as keeping neat records of all my business activities.
12)
Developing an Insurance Plan
Definition: The twelfth step of the business plan is called 'Developing an Insurance Plan.' The twelfth step is about developing an insurance plan and answering question such as choosing the most economical insurance that would protect my business from unforeseen events.
My Business: Considering that I am just dealing with distribution of the product that is coming from Croatia the insurance portion would be taken care of by my Croatian partner who is also owner and inventor of the product.
13)
Developing a Computer Plan
Definition: The thirteen step of the business plan is called 'Developing a Computer Plan.' The thirteen step is about developing a computer plan and answering questions that relate to the ways that computer services can assist with planning and controlling your business.
My Business: As I have stated I will have computerized accounting system that would be customizable and somewhat self-guiding and to also avoid confusion or possible mistakes as well as keeping neat records of all my business activities. On top of that I already have a relatively new ultra powerful HP Pavilion PC with Pentium 4 Processor 2.53 GHz with 512 DDR SDRAM MB with multitude of computer programs inside it.
14)
Developing a Total Quality Management (TQM) Program
Definition: The fourteen step of the business plan is called 'Developing a Total Quality Management (TQM) Program.' The fourteen step is about developing a total quality management (TQM) program that ensures customer satisfaction and answers questions that relate to dedication to product excellence and ethical behavior.
My Business: As I stated before this is a unique product that is vastly more superior in quality that any even remotely similar product market has to offer. Total dedication to customer needs is my motto and my partner and I will consider any room for potential improvement of the product or relationship with customers as practically sacred. Being dependable and providing a highest quality possible for our product is practically mandatory as far as I am considered and this I believe constitutes a solid base for TQM Program.
15)
Developing Financial Plan
Definition: The fifteen step of the business plan is called 'Developing Financial Plan.' The fifteen step is about developing financial plan that is done by preparing statements such as three year cash budget, balance sheets, income statement and finally profit-graph or brake-even graph (attempts to predict when will profitability take hold). This step is also associated with determining the ways your business will be financed and where will the money be coming from.
My Business: I am more than aware the utmost importance of accurately conveying the financial informational aspect of my business therefore I have been as detail oriented as possible while the information in projections 1-4 that I have provided are based on realistic exceptions that have been based on already established parameters which are based on the work that has already started for some time now.
Exhibit 1
Idra, Inc.: Projected-beginning balance sheet
_____________________________________
.... Assets
.... Cash....................................$50,000
.... Supplies...............................$2,000
.... Office equipment..................$5,000
.... Total assets..............................................$57,000
.... Equities
.... Bank Loan............................$7,000
.... Owner's Equity....................$50,000
.... Total equities.............................................$57,000
As shown in Exhibit 1 (Projected beginning balance sheet), initial startup capital will come up from two sources. I will invest $50,000; I will need to borrow $7,000 to help offset any initial difficulties with the business (that are fairly common with upstarts) and in addition I will need to purchase office equipment worth $5,000 and supplies valued at $2,000. It is also important to note that Idra, Inc. will start operations with a cash balance of $50,000. This amount will be used to purchase cards at a reduced price that would later be sold at a premium. Total Assets on the Projected-beginning balance sheet are $57,000.
Exhibit 2
Idra, Inc.: Cash budget.
______________________________________________________________________________________
Sales
........
................Jan....Feb....Mar....Apr....May...Jun..... Jul..... Aug..... Sep..... Oct..... Nov..... Dec....Totals
Revenue Forecast. $150k.150k.152k.154k
.155k..158k...160k
163k
165k
168k
170k
174k
$1,918,950
Less Expense
--Rent.........
..$700
.700
700
700
700
.700
.700
.700
..700
700
.700
..700
..8400
--Utilities
..$200
200
.200
200
200
200
..200
.200
..200
200
.200
..200
.2400
--Telephone
..$300
300
300
300
.300
300
.300
..300
..300
300
.300
.300
.3600
--Supplies..
50
50
.50
50
..50
..50
50
50
..50
..50
50
50
.600
--Loan Repayment.1375..1375..1375
1375..1375..1375
1375
1375
1375
.1375..1375..1375..16,500
----------------------------------------------------------------------------------------------------------------------------------
Total Expenses
$2625...2625..2625..2625..2625..2625..2625..2625..2625..2625..2625..2625..2625..$31,500
Cash Surplus or
Shortage
147k
147k..149k..151k
152k...155k...157k
160k..162k
.165k
167k
171k
1883k
Beginning Cash
Balance
.$50k
.197k..344k..493k
644k...796k
951k..1108k.1268k..1430
.1595
1762
N/A
Ending Cash
Balance
.197k..344k..493k
644k...796k
951k..1108k...1268k..1430
.1595
1762
1933
N/A
As shown in Exhibit 2 (Cash budget), sales revenue vastly exceeds expenses in every month. These projections are based on primarily conservative estimations based on current level of interest the companies are expressing.
Exhibit 3
Idra, Inc.: Projected Income Statement for the first Year of Operations
________________________________________________________
Sales Revenues Less Expenses
.$1,918,950
. Rent
.8400
. Utilities
2400
. Telephone
3600
. Supplies
..600
Total Expenses
..30,000
Operating Profit
1,888,950
As shown in Exhibit 3 (Projected Income Statement for the first Year of Operations), Idra, Inc. will earn an operating profit of $1,903,950 in the first 12 months of operations with all the expenses paid.
Exhibit 4
Idra, Inc.: Projected balance sheet at the end of first year.
______________________________________________
...Assets
.....Cash...............................................................................................$1,933,000
.....Supplies..........................................................................................2,000
.....Office Equipment..........................................5,000..........................
.........Less: Accumulated Depreciation............1,000...........................4,000
.............Total Assets...........................................................................$1,939,000
Equities
Bank Loan.............................................................................................5,500
Beginning Owners Equity..............................50,000
Plus: Retained Earnings................................1,903,950
Total Owners Equity.............................................................................1,953,950
...........Total equities..............................................................................1,939,000
As shown in Exhibit 4 (Projected balance sheet at the end of first year), Idra, Inc. a significant changes showed on the exhibit is that huge increase in the cash amount and owners equity account and decrease in amount owed to the bank. Idra, Inc. is showing clear projections that we are looking at a rather large profit regardless of the fact that many new businesses show a loss at the end of their first business.
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