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Section 1

Team 3
Fall 2014

Business Plan
Halo Illuminations, LLC
Business Idea: LED Backlit Fabricated Metal Signs

Signature

Email

Team Members:
Curt Dahmer
Natalie Krewin
Rob Macey
Paige Marple
Josh Narang
Josh Park
Sophie Prince

Table of Contents
I. Executive Summary
II. Elevator Pitch
III. Mission Statement
IV. Vision Statement
V. Business Overview
VI. Product Description
VII. Competitive Advantage
VIII. Triple Bottom Line
VIX. Industry Background
IX. Marketing Related Information
a. Target Markets
i. Diamond Work boots
ii. Business Boomers
b. Positioning
c. Competition
d. Forecasting
e. Breakeven Analysis
f. Pricing Strategy
g. Packaging
h. Branding Strategy
i. Distribution Strategy
j. Promotional Strategy
k. Quantitative Review of Marketing
X. Employee Recruitment & Training
XI. Operations and Processes
a. Operations Strategy
b. Outsourcing
c. Inventory
d. Capacity
e. Manufacturing Process
XII. Quality Assurance and Recovery Plan
XIII. Financial Statements
a. Sensitivity Analysis
b. Income Statement
c. Retained Earnings
d. Financial Ratios
e. Balance Sheet
f. Statement of Cash Flows
XIV. Financial Notes
XV. Conclusion
XVI. Addendum
XVII. References
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Executive Summary
Halo Illuminations
Josh Narang
1624 South Mojave Road, Las Vegas, NV, 89104
Phone: 703-789-0703
Fax: none
E-mail: narangvj@dukes.jmu.edu
Web Address: www.haloillumnations.com
respectively. Our stainless steel will come from
Metals Depot and our LEDs will come from GE.
We expect to sell 19,996 characters in Year 1, with
a split of 1,748 mirror finish large business
characters, 1,748 brushed finish large characters,
8,250 mirror finish small house characters and
8,250 brushed finish small characters.

Industry: Sign Manufacturing


Number of Employees: 13
Bank: Wells Fargo
Future Auditor: Ernst & Young

Company Background: Start-up.

Law Firm(s): Randolph Law Firm

Management: General Manager must have a


Masters Degree and minimum 5 years of
management experience.

Amount of Financing Sought: $2,220,000


Current Investors:
$500,000 (22.52%) Outside investors
$1,650,000(74.32%) Borrowed from Wells Fargo
$70,000(3.15%) Owners: Curt Dahmer, Josh
Park, Natalie Krewin, Paige Marple, Sophie
Prince, Josh Narang, and Rob Macey. $10,000
each.

Competitive Advantage: Our business uses a


differentiation strategy using quality inputs, such
as high grade stainless steel and reliable, durable
LED lights, while providing an aesthetic that
matches customer preferences. Customers work
with a highly skilled sales representative to design
a product that will create a distinguishable and
reputable image for their brand.

Use of Funds: Machinery, Raw Materials,


Marketing/Sales, Office Equipment, and Other
Small Business Operations
Business Description: Halo Illuminations is a
LLC located in Las Vegas, Nevada that
manufactures LED-lit stainless steel business signs
and LED-lit address number signs.

Markets: Our first target market is Business


Boomers, which are start-up businesses in
Southwest America interested in creating a highend image for themselves. Our second is
Diamond Workboots, which are building
developers in the same region that build higher
end neighborhoods and multi-level living
complexes. Our potential market size is 229,798
total customers and our growth rate is 4.4% for
the second year, and 1.6%, 1.8%, and 2.8% in
subsequent years.

Products/Services: We are selling large


characters with a brushed finish for $254 each,
large characters with a mirror finish for $305,
small letters with a brushed finish for $83, and
small letters with a mirror finish for $85. Unit
costs are $137.71, $171.03, $16.47, and $18.84

Distribution Channels: Products will be sold business-to-business through a team of 3, dedicated to direct
sales.
Competition: Our main local competition are the two companies Sign A Rama and Patricks Signs.
Financial Projections (Unaudited):
2015
2016
2017
2018
2019
Revenue:
$1,124,094
$2,347,108
$2,384,662
$2,427,586
$2,495,558
EBIT:
($493,298)
$214,849
$202,427
$105,872
$104,573

Elevator Pitch
Halo Illuminations offers a modern and visually attractive way to draw attention to house
address numbers and business signs. Our company manufactures LED illuminated stainless steel
letters and numbers that are assembled to the customers design specifications. These signs are made
of T316 stainless steel, which provides the highest level of quality and
corrosion resistance as opposed to the standard T304 alloy (304 VS 316
Stainless, 2014). These signs will provide home developers and businesses a
stylish advantage and modern appeal while easing the difficulty of searching
for a destination at night. The predicted amount of new businesses
developing in America is projected to increase at a rate of 4.6% annually for
the next five years (IBISWorld, 2014). Halo Illuminations takes pride in providing top-quality,
energy-efficient, and customizable products for our customers. Help us illuminate Southwestern
America with our signs.
Mission Statement
Halo Illuminations is devoted to creating elegant signs of the highest quality to give
businesses and housing developments a modern edge through the fabrication a supreme product.
Vision Statement
Our company serves customers in Southwestern America Texas, Nevada, California,
Arizona, Colorado, Utah, and New Mexico with stainless steel business signs and house numbers
of impeccable quality. We aim for creating an exceptional customer relations experience while
earning a steady profit. In the first five years of operations, Halo Illuminations plans to focus on
increasing market share in the Southwest. Continuous improvements in individualized customization
and quality will broaden our market demographics into additional areas across America by year ten.
Business Overview
Halo Illuminations is based in Las Vegas, Nevada, which serves as a central location to all
seven states we are initially targeting. Our goal is gain $500,000 from outside investors while also
investing $70,000 of our own money. We will borrow $1.65 million to cover the initial large costs of
the manufacturing equipment, facilities, and general operating and selling costs. We are committed
to providing high-end stainless steel business signs and house numbers attached with energyefficient LED lights. The larger business signs (20 tall) and smaller house numbers (5 tall) will be
offered in various finishes and fonts to match customer specifications. Our projected demand is
3,496 large letter units sold to businesses and 16,500 small number units to housing developers.

We are registered as a LLC (Limited Liability Corporation) in order to gain investors, tax
benefits, and ease of growth. Halo Illuminations is a Business to Business (B2B) manufacturing
company that sells directly to housing developers and growing businesses. Our initial organizational
structure utilizes a total of thirteen employees, three of which are sales representatives who work
directly with customers as opposed to relying on the internet for sales and communications. This
decision ensures a high degree of service and customer satisfaction. For our first five years, we
intend to centralize our focus in Southwestern America including California, Colorado, Texas,
Arizona, Nevada, Utah, and New Mexico, but will expand into other regions after year 5.
Product Description
Halo Illuminations manufactures energy-efficient stainless steel LED business
signs and house address numbers in either brushed or mirror steel finishes. Business
signs are an average height of 20, width of 18, and depth of 4.5. House numbers
will be a height of 5, a width of 4.5, and a length of 1.5. Depending on the finish,
each large letter unit will cost from $254 $305, and each small number unit will from
$83 $85. Our focus is on building an image that properly reflects our customers desired brand.
Customers have the ability to create their desired image through the utilization of variety of steel
finishes, fonts, and LED colored backlights. The LEDs come in four colors white, red, blue, and
yellow and add a visual appeal to our product while simultaneously making them visible at night.
Competitive Advantage

Figure 1: SWOT Analysis Diagram

Our
companys
competitive
edge is created
through our
high degree of
service and
customer
collaboration
to fabricate a

high-quality, visually attractive product with premium inputs. Our customers have the opportunity
to design the font of their sign, color of the LED backlights, and finish on the stainless steel. They
work with a highly skilled sales representative to design a product that will create a distinguishable

and reputable image for their brand. Figure 1: SWOT Analysis Diagram highlights how we will use
these competitive strengths and opportunities to overcome internal weaknesses and external threats.
Triple Bottom Line Analysis
Social responsibility is a key value of Halo Illuminations, and we strive to apply it to all
aspects of the business, particularly employees and customers. We provide our employees with
generous benefits that equip them with gratuity and advantages that we believe will enable them to
be productive employees and healthy members of society. In addition to these things, our companys
products improve the accessibility of buildings by providing illuminated signage during daytime and
nighttime hours, thus allowing greater visibility.
We aim to be environmentally conscious and mindful of the waste that is generated through
our production process. The metal used to make our products, stainless steel, is 100% recyclable and
has a long-term life (bssa, 2007. Also, using LED light reduces energy costs by using 75% less
energy than incandescent lighting, which minimizes our companys carbon footprint.
By investing in our product, businesses and growing developments will increase their
profitability by creating a modern and sustainable image. Additionally, by creating and emphasizing a
quality product, the clientele we attract will enable us to create a profitable margin for our company.
Industry Background
The sign industry has a promising future with growing percentages throughout the next five
years. It is predicted to grow at an average rate of 3.0% annually in revenues (IBISWorld, 2014). The
competition level and barriers to entry are each rated as low, constituting an inviting market for
starting a business in the sign industry (IBISWorld, 2014). Halo Illuminations has a competitive
advantage by using LED technology, which is predicted to be a leading competitive advantage in the
market in the next five years (IBISWorld, 2014). LED lights are estimated to be 90% more efficient
compared to traditional lighting by using less power (ledluxor, 2013). Although the past five years
had a growth rate of only 0.6% due to the recession, the future is looking bright (IBISWorld, 2014).
Target Markets
Diamond Work Boots: This market includes high-end developers that build expensive,
luxurious, multi-family buildings and single detached family houses. According to
multifamilyexecutive.com, thirteen of the top twenty-five multi-family developers for 2014 are
incorporated in the south west area we intend on targeting. All twenty-five of these companies have
construction sites in Southwestern United States as well. A potential segmentation base is a
triangular geographic area consisting of Dallas, Houston, and Austin, Texas due to the high

population and relative wealth.


These more expensive buildings being built by developers correspond with our high quality
product. There have been an increasing amount of multi-level building permits in the Southwest.
Texas has had the most rapid increase of any state. From 2012-2014, Texas has increased its multifamily building permits from 45,704 to 66,970 (BizMiner), which is the most of any state in the
United States within this time span.
Business Boomers: Our second target market consists of up-and-coming new businesses
looking to establish themselves. These are businesses that are still looking to capture a significant
market share and establish a quality consumer base in their area of choice. In todays market, a
companys image is a vital asset towards growth and future success. Appearance is an order qualifier,
and our signs will provide the desired first impression businesses are aiming to achieve. With a total
of 218,570 new businesses in Southwestern United States (Reference USA), this potential market
provides a promising opportunity for our business.
Positioning
Halo Illuminations is seeking a less-competitive, smaller niche market by focusing on
differentiation. Our products are produced according to individuals personal preference of design.
Halo Illuminations process allows the customer to customize their signs and create a unique identity
for their building development or new business.
The business signs are uniquely designed for each individual start up business in need of a
business sign that reflects their brand image most closely. Our key differentiating attributes include a
modern appeal and efficient LED technology with minimal environmental impact. We purchase
durable, T316 stainless steel and create a flawless appearance for our customers. The letters and
number signs we produce are resistant to snow, rain, and wind.
Searching for an unknown address in limited lighting is challenging both for civilian drivers as
well as emergency responders. Halo Illuminations solves the problem by attaching the LED lighting to
the back of our stainless steel fabricated lettering and numbers. In a world where technology and
innovation are constantly evolving, our product fits right in with this trend.
Competition
Our competitors products place them in different areas on the perceptual map (Figure 2:
Product Perceptual Maps) according to the quality of their products and degree of customization. As
shown in Figure 2, we are the leading company in providing a high-quality product, while also
maintain a degree of customization. These graphs illustrate a gap in the market where customers are

willing to pay top price for a quality-built product while still being able to personalize their design
specifications.
Forecasting
Figure 3: Market Potential
According
to ReferenceUSA,
the amount of new businesses in Southwestern America (Arizona, California, Colorado, Nevada, New
Mexico, Texas, and Utah) between 2012 and 2013 are 218,570, which is our total market potential for
the Business Boomers market segment. The market potential for Diamond Work Boots includes
11,228 building developers. Collectively, our total market potential totals 29,798 customers, which is
shown in Figure 3: Market Potential. Our total forecasted market is 259, which is found by multiplying
our market share of 0.2% by our total potential market of 229,798 customers. We approximated that
half of our customers will want a brushed finish and the other half a mirror finish; since we do not
have a way to accurately predict customers order preferences for our first year, our 50% estimate will
test the amount of demand. Based on our unit sales price and forecasted unit sales for all four of our
products (stainless steel letters and numbers in brushed and mirror finish), our total forecasted first
year sales revenue ($2,363,132) is explained in Figure 4: First Year Forecast. However, the first year
revenue is expected to be half of the amount of the industrys average revenue; therefore our first
years revenue is $1,181,566. Our projected industry growth percentages for the next four years are
4.4%, 1.6%, 1.8%, and 2.8% (IBISWorld, 2014), which allow us to calculate forecasted sales revenue
upcoming years (Figure 5: Five Year Forecasted Sales Revenue). Although Halo Illuminations only has 0.2%
of the potential market, our forecasted sales revenue ensures a successful business with increasing
growth in the future.
Our first years monthly sales forecast is found by dividing the number of new housing
developments per month by the total housing developments per year in the Southwest (census.gov),
expressed as a percentage. We then multiplied each months percentage by our total year 1 revenues to
find the monthly forecast. To determine the monthly forecast for startup companies, we applied a
similar process, and then averaged the two forecasts together to find an overall monthly estimate.
Figure 6: Forecasted Monthly Sales outlines these final sales calculations.
Breakeven Analysis
Figure 7: Breakeven Analysis shows our companys break-even analysis for each variety of our

product. We assessed our breakeven totals in terms of units sold and sales dollars for our first year
of revenues.
Pricing Strategy
Halo Illuminations plans on focusing on a premium pricing strategy due to our product line. Our
product line includes large business letter signs and small address number signs and are offered in a
mirrored finish or brushed. In total our product line offers four different product base options with
prices ranging from $83.00 to $305.00. Figure 8: Unit Prices provides further details on the pricing for
each of our items. Many factors contributed to our product prices such as our selection of raw materials,
precise equipment, and skilled labor.
In addition to the different product sizes and finishes, we also offer a selection of red, blue, white, and
yellow LED lights. Substitutes that could potentially interest our customers include billboards, digital signs, nonback lit signs, and ordinary address number signs. Although this is a lengthy list, our products will be chosen from
our selected target market customers not only because of our high quality inputs, but also because of our unique
emphasis on collaboration with the customer to create the design.
Packaging
We package our stainless steel letters and numbers in average packages of eight and seven hundred
and fifty respectively. We based these numbers off of our forecasted sales. Our letters and numbers will
receive individual care by being wrapped per unit with bubble wrap then placed into wooden crates to
ensure stability during transit. By shipping these units in larger quantities we become more efficient with our
prices and delivery. Figure 9: Dimensions of Packages demonstrates the size of our wooden crates that we will
need to ship our business letters and address numbers.

Branding Strategy

Figure 9: Dimensions of Packages


Width

Length

Height

Business Letters (Packages 8)

19.0

21.0

16.0

Address Numbers (Packages of 750)

30.0

48.0

30.0

Halo Illuminations has the promotional objective to generate brand image. Our goal is to become
the first brand name to come to the minds of building developers and beginning business owners. Our
slogan, Radiate Excellence will help our customers to recognize our brand. We plan to achieve our
promotional objective and raise awareness through multiple advertising methods. Further exposure to our
product will create a worthy reputation of high functionality and performance with durability and consistent
consumer satisfaction. We aim to elicit a consumer response from developers and business owners of
exceeding their expectations with every order. Finally, our ultimate goal is for our consumers to instinctively
relate us with the success and joy of their projects and to use us in the future and tell others about our

product. Halo Illuminations brand promise to our customers is providing them with signs that illuminate
their business name or address number with emphasis on a prestigious, individual design, and consistent
high quality in every order.
Distribution Strategy
Halo Illuminations is a push channel strategy because we have sales representatives who inform
startup businesses and building developers about our product. Our representatives create a direct connection
between customers and our company by communicating directly with customers through a variety of selling
materials. This direct channel is very beneficial in minimalizing conflict of customer dissatisfaction or errors.
The quality assurance section provides further detail regarding the benefits of immediate and direct feedback.
Promotional Strategy
Promotional tools that will be utilized are as follows: Advertising (magazine ads in Small
Business Opportunities and Fast Company Magazine), personal selling (sales representatives),
public relations (Facebook, Twitter, company website), and direct marketing (catalogs/AdWords).
Our sales representatives will be our main form of promotion. Through face-to-face
meetings, our sales representatives will travel to the varying businesses and cliental (housing
developers and new businesses) providing professional insight, information, and product promotion
to those businesses who are unaware of Halo Illuminations. We plan on sending two of our three
sales representatives to the triangular, geographic region of Houston, Dallas, and Austin, Texas
because of its high market potential (high volume of new housing developments being built). Sales
representatives will be equipped with a catalog showing all the available features and their
corresponding prices. Sales representatives will also be traveling to various trade shows specific to
our products industry to promote Halo Illuminations.
We chose to have a company-managed sales force because they will have a better
understanding of the product and the production process. They can be used both onsite at our
factory location as well as with surrounding and distant clients and high market potential areas. This
makes managing these employees easier because they will be on the same platform as the rest of the
employees having had the same exact training and being in-tune with the company strategy and
customs. Their compensation will be salary based. With being paid $55,000 a year this should
provide plenty of motivation to promote our business. Details on expansion and raises are detailed
in the (Figure 13: Employee Wages and Benefits).
Next, we will spread awareness of our company through Google AdWords consisting of
LED signs, metal signs, sign manufacturer, Las Vegas signs, and stainless steel signs. We

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hope to gain 5% local market share each year from these Google AdWords. Finally, magazine ads
will be utilized in Small Business Opportunities (full page four color ad circulating 3 out of the 12
months) and Fast Company Magazine (1/3 page ad four color in 10 different issues) helping to
target Business Boomers.
The second objective is sparking interest for our brand through our companys value in
being environmentally friendly. Halo Illuminations uses a highly recyclable metal (Stainless Steel 316
Alloy). The International Stainless Steel Federation States that 90% of the end-of-life stainless steel
is recyclable into new stainless steel without loss of quality. Minimalizing our environmental
footprint is a highly sought out trait by many different businesses today. The materials we use is the
most efficient for the product we manufacture and such points will be made vivid through social
media (Twitter and Facebook) and on our Website.
Our final objective in our promotional strategy is execute an exceptional trial purchase to
establish a standard of quality that will encourage repeat buyers and entice new customers. All the
above strategies unify towards durable, environmentally-friendly products. With the combination of
an unlimited warranty for all products and top-notch training for our sales representatives, customer
satisfaction is guaranteed. The catalogs and examples of previous projects the sales representatives
have at their disposal will give credibility to our capability, ensuring customers we will meet
specifications and exceed their expectations.
Quantitative Review of Marketing
Our marketing mix makes up 7.16% of our overall expenses for year 1. This small percentage shows
that since we are a direct model, we are able to focus are promotional energy very specifically to our
target markets. The sales representatives are the direct intermediaries allowing Halo Illuminations to
utilize a very important and powerful marketing
tool with ease while keeping costs low. This is the
key to ensuring true profitability within our
company where today, marketing departments
are now accounting for up to 60% of total
revenue for a business. We estimate our
marketing mix to be right around this figure for
the same reasoning that are direct model has the
capability to be extremely effective with the small
amount of tools utilized.

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Figure 11:
Organizational
Chart

Employment Recruitment and Training


According to Figure 11: Organizational Chart, Halo Illuminations will be employing 13 full time
employees at the end of year 2. Our main source of finding appropriate applicants will be job links
such as Monster.com, LinkedIn, and CareerBuilding.com. Figure 12: Job Description and Qualifications
lists the job obligations we expect each employee to perform, and the qualifications required to be
considered a candidate to complete these obligations.

Figure 12: Job Description and Qualifications

Figure 13: Employee Wages and Benefits details the salaries, payroll deductions, and included
benefits package provided to each
employee. Standard benefits
include a family-coverage health
insurance plan costing
approximately $11,500 towards
which employees are expected to
contribute 3% of their salary,
$250 additional paid life
insurance, 3 weeks paid leave
(including 10 days of holidays, vacation, and sick/personal

Figure 13: Employee Wages and Benefits

leave), $500 education reimbursement, and a Simple IRA retirement plan (United States Department

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of Labor). Employees will also receive a 5% pay increase each year. We believe these benefits will
effectively motivate employees to reach and develop company goals.
Formal, extensive orientation and training programs will be mandatory for all new hires and
overseen by management executives. Sales representatives and purchasing agents will be required to
learn all phases of production and distribution of the product in addition to on-the-job interactive
training. Workers directly involved in the manufacturing process will receive detailed instruction and
on-the-job training regarding all procedures, functions, and programming associated with operating
the equipment. Paid training sessions will be completed in the first two weeks of employment.
Employees will also receive a company handbook detailing manufacturing processes, health and
safety procedures, machinery operations, employee conduct, and company policies.
As sales increase each year of operation, an additional sales representative will be hired in
year 4 to accommodate for increased customers and demand. In later years as we continue to
expand, we will need to hire more representatives, production workers, and purchase more
machinery to handle the required levels of production. Our labor costs continuously increase each
year due to inflation, cost-of-living, and our 5% yearly wage increase. This equates to a 4% increase
in labor costs on average each year, except in year four when we add an additional sales
representative, which creates a 13% increase in labor costs.
Operations Strategy
Halo Illuminations is based in Nevada: its status as a tax-haven state and its central location
to all seven states we are initially catering to. The latter reason allows us a greater response time in
regards to customer orders, thus creating higher satisfaction. This also enables us to create a closer
relationship with our customers and deliver a consistent standard of quality customer service.
Our business uses a differentiation strategy using quality inputs, such as high grade stainless
steel and reliable, durable LED lights, while providing an aesthetic that matches customer
preferences. We utilize only American-produced inputs to make our products, emphasizing support
for our economy and strength of exports. All manufacturing is done in-house, ensuring that quality
control can be consistent and that any issues in operations can be contained on site. Our process
consistently maintains failure and quality inspection points throughout production, ensuring that
each step in the process delivers the standard of quality our company takes pride in.
The cohesive production structure we have created allows us to handle varying degrees of
production at varying rates and speeds. To accommodate for these variations, we have chosen to
invest in multiple units of all manufacturing equipment. Machine operators and welders work

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together as a unit to create an efficient flow of production while ensuring each product receives the
attention and detail required to reach the quality goals of the project. We selected our facility based
on our desire to have all aspects of our business in one location. This includes our production floor,
warehouse storage, and offices. The goal of this setup is to keep the movement of our system and
production procedures as smooth and consistent as possible with increased levels of communication
to reduce any discrepancies or internal failures.
Outsourcing
In order to operate more effectively, we will outsource accounting, transportation and
shipping of products and materials, and janitorial services for general maintenance and upkeep of
our manufacturing facility. Maintenance and repairs for equipment, both routine and non-routine,
will also be outsourced as needed. Our expertise is aimed towards manufacturing and delivering
consistent products and service. By outsourcing these things, our company can reduce failures by
focusing our efforts and resources towards maintaining these quality and service standards.
Our accountant will establish a bookkeeping system, record payroll, and provide end of year
tax filing services, financial statements, and budget reports. We will budget $7500 towards this
expense with a 2% increase each year. Outsourcing product transportation and shipping will keep
our expenses lower by eliminating the cost of buying our own shipping truck. Expenses for
outsourcing janitorial services are expected to be approximately $23,846.
Inventory
Or final product requires two inputs: stainless steel and LED light fixtures. For our LEDs,
who seleted General Electrics Tetra MAX LEDs, which have a long 50,000-hour life and features
OptiLens, a patented GE technology that maximizes LED performance by capturing otherwise
wasted light and redirecting it towards the illuminated surface as well as requiring 46% fewer
modules per letter/number while maintaining light uniformity (Tetra PowerMAX). General Electric
can ship from the same city as our business, which provides us the advantage of a short lead time
and quick delivery, and allows us greater flexibility to adjust order quantities as needed.
Metals Depot, a Kentucky steel distributor, will supply our selected alloy of stainless steel,
type 316 alloy, which provides the highest level of quality and corrosion resistance as opposed to the
standard type 304 alloy. While T304 stainless steel is versatile and serves most applications, it will
tarnish over time. T316 stainless steel contains an added 2% molybdenum component that provides
a much higher degree of resistance to corrosion and harsh elements (AJ Manufacturing). We order
our initial first year order quantity of steel sheets in bulk (2000 total sheets) to ensure we have the

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startup inventory and safety stock we need to handle our initial demand forecast and any variance.
We plan to reorder during the first quarter in year 4 with an approximate safety stock of 20% of our
original order quantity. Our new order quantity will be 1000 sheets of stainless steel, which allows us
to take advantage of an EOQ with discounts order model in addition to receiving free shipping.
Capacity
In order to accommodate for varying levels of production depending on order quantities and
the number of ongoing projects, we have chosen to invest in multiple units of each type of
production machinery. This also allows us to alternate machines and have backups to reduce wear
and tear, and run maintenance tests, repairs, and software updates when necessary while still
continuing production. Having multiple machines also enables us to operate at full capacity in
situations of large quantity orders. Figure 14: Equipment Capacities shows the necessary production
equipment, the design and/or effective capacities if applicable, and the costs for each machine.
Figure 14: Equipment Capacities

The effective capacity of our water-jet cutters takes into account approximately 8.3% of
downtime due to the
requirement of the steel
Figure 15: Metal Sheet Capacities sheets to be loaded one at a time into the machine. Our Accu-bend
metal bending machines bend the returns of our steel faces, and operate at a rate of 12 inches of
metal per second. We have four welding tools to weld together the letter/number faces with their
respective returns, and four burnishing tools which buff
units smooth so that virtually no grain is visible. The

Figure 16: Water-Jet Required Maintenance.

approximate yield of letter/number faces cut from each


type of stainless steel sheet using our water-jet cutters is
detailed in Figure 15: Metal Sheet Capacities.
The water-jet cutting machines will require
periodic scheduled maintenance for various parts to
ensure the machines can operate efficiently without any failures. The useful life, repair time, and cost

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per part for each component is shown in Figure 16: Water-Jet Required Maintenance.
Manufacturing Process
Our business focuses on utilizing a make-to-order strategy that works closely with the
customer to ensure a high quality assurance. Halo Illuminations desires to provide our customer
with satisfaction and confidence in our product. To achieve this, our sales representatives
collaborate closely with the customer before the manufacturing of the order begins to inform,
educate, and design the ideal image for their business or development. Once the specifications of the
project have been decided upon, customers will pay a 50% down payment and production will begin
immediately once this payment is received. Figure 18: Process Flowchart details the specific steps,
procedures, and failure and quality checkpoints required to complete the manufacturing process up
to the point of final payment, packaging, and shipment of the order.

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Figure 18: Process Flowchart

The attention to detail our manufacturing process requires is an essential element of our
business and operations strategy. We only use inputs of the highest quality, and each unit is
assembled and inspected individually by skilled production workers. Our production pace is slow;
however, our products are made with care, thus creating the high quality that we strive for and
guarantee. We minimize failures by having multiple quality inspection points throughout the
production process and allowing the customer to inspect/confirm the quality of the order
themselves before final payment is made to guarantee satisfaction.
Quality Assurance and Recovery Plan
As a business founded in principles of quality, consistency, and service, Halo Illuminations
strives to apply this vision to all aspects of our business. We accomplish this through providing
consistent collaboration with the customer, utilizing high-quality inputs and materials, implementing
quality checkpoints, and receiving customer approval of the final product result before shipment.
We take proactive quality measures to reduce internal failures and maintain consistent
production quality. Firstly, sales representatives provide customers with an exceptional sales
experience by collaborating with them directly using samples, diagrams, and extensive design
programs to create a unique product concept. Each individual product is inspected three times
during production, and final products are tested to ensure that they work properly and match
customer specifications. Our production manager is present in the facility through the entire process
and will make sure that inspections are being conducted as required. Failure points are also reduced
through preventative measures such as programming design specifications using an order template,
and receiving approval from supervision at critical points before the next process step is begun.
To decrease external failures and maintain a high level of customer satisfaction, Halo
Illuminations reactive quality assurance guarantees an unlimited warranty to all customers. In the
event that failure does occur or a customer is dissatisfied with their order, we allow the customer to
ship back the faulty products free of charge and will reproduce the specific product, correcting any
flaws or issues presented by the customer. Also, after a customers final product is shipped, we
follow up by contacting them directly to receive their opinions and feedback on the purchased
order. Open-ended comment review are also available on our

Figure 19: Sensitivity Analysis

website.
Finances
To start up Halo Illuminations, LLC, we will borrow an SBA loan of $1,650,000 from Wells
Fargo, $70,000 from business owners and $500,000 from outside investors. Our investors will see

17

net income increase dramatically from Year 1 to Year 3, however due to the fact that our revenues
are not increasing as fast as expenses are, we have a decrease in net income from Year 3 to Year 4
and again in Year 5. Our revenues are higher than the industry average because our products require
higher product cost and thus demand a higher unit-selling price. Due to the fact that our initial costs
to start up are extremely high, our NPV after 5 years is $-472,890, our IRR is -28% and MIRR is 11%. We calculated the NPV, IRR, MIRR and payback period for the best-case scenario, a 10%
increase in revenue and worst-case scenario, a 10% decrease in revenue.

18

Financial Notes
1.
2.
3.

Halo Illuminations is a limited liability company, thus the company will be taxed at the owners tax level.
Long-Term Debt: A loan for $1,630,000 for a 16 year loan and 6% interest rate.
Sales Revenues and Cost of Goods Sold: Halo Illuminations offers four different products for consumers. Sales price per Small Mirror Polish
Character is $81. Cost of Goods Sold are the direct labor which is $5.69 per hour worked and direct materials which is $18.84 per unit produced.
Sales price per Small Brushed Polish Character is $79. Cost of Goods Sold are the direct labor, $5.74 per hour worked and direct materials which
is $16.47 per unit produced. The sales price per business mirror polished character is $289. COGS include a direct labor cost of $7.10 per hour
worked and a direct materials cost of $171.03 per unit produced. The sales price of a business brushed character is $242 and the COGS includes
direct labor cost of $7.14 per hour worked and direct material cost of $137.71 per unit produced. In the first year we expect to sell 19,996 units
with a split of 1,748 mirror polished business characters, 1748 brush polished business characters, 8250 mirror polished house characters and
8250 brush polished house characters (BizMiner, 2014). In the next five year the letter sign industry will grow at annual industry growth rates of
4.4% from 2015 to 2016, 1.6% from 2016-2017, 1.8% from 2017-2018 and 2.8% from 2018-2019 (IBISWorld, 2014).

19

4.

5.

6.

7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.

Selling General & Administrative Expenses: Rent for


our office portion of the property is $21,757 annually
(Loopnet, 2014). Our computers bought in the first year
cost $1740 along with the desks which costs $300, office
supplies cost $200 every year and our start up LLC fees
are $425.
Salaries Wages & Benefits: See the Employee Wages
and Benefits table. In addition to this employee wages are
increasing 5% every year (Bureau of Labor Statistics,
2014).
Depreciation: Straight line depreciation, Depreciation
for equipment, Waterjet cutting machines costs $140,000,
salvage value of $28,000 and an average useful life of 10
years, (140,000-28,000)/10= $11,200 per machine (2
machines) (Williams, 2014). Bending machine costs
$39,800, average salvage value of $2,000, useful life of 12
years, (39,800-2000)/12= $3150 per machine (2
machines) (Computerized Cutters, 2011). Welders cost
$358, salvage value of $50 and useful life of 5, (35850)/5= $61.60 per year (4 machines) (Villa, 2014).
Burnishing machine cost $710, salvage value of $50 and a
useful life of 6 years, (710-50)/6= $110 per machine, (4
machines) (Metabo, 2013). Computers cost, $250, Salvage
value $30 and useful life of 5 years, (250-30)/5= $44 per
machine (2 machines) (Dell Customer Service, 2014).
Gloves and masks cost $137, with a salvage value of $10
and useful life of 7 years, (137-10)/7 = $18.1 (4 of each).
Air compressors cost $800 with a salvage value of $75,
with a useful life of 8 years, (800-75)/8=$90.6 there are
two of these. Office equipment depreciates at a rate of
835 per year.
Rent Expense: 40,896 SF at $0.39/SF/Month, annual
expense = $160,332, ($0.39/SF/Month*40,896 SF*12
months) (Loopnet, 2014).
Office Supplies Expense: Includes miscellaneous items
such as paper, pens, printer ink, etc. It will increase 2%
each year because of inflation and growth of company.
Utilities Expense: 2% is an average utilities expense for companies (IBISWorld, 2014). Increase by 2% each year b/c of expansion/inflation.
Interest Expense: The bank loan we have is $1,630,000 with an interest expense of 6% ($1,630,000*0.06) = $98,700. Pay off $101, 875of the
loan each year. Year 2 ($1,528,125*.06) = $91,800. Same for years 3-5.
Taxes: See corporate income tax rate schedule and apply the taxes to Earnings Before Taxes (EBT).
Dividends: 50% Net income is paid out to shareholders in order to keep our cash levels lower.
Accounts Receivable: On average it takes 5 days to collect on account, therefore the revenue from the last 5 days at the end of the year will not
be collected until the following year.
Inventory: Using the FIFO method to keep record of inventory in stock
Production Equipment: Includes 2 Water Jet cutting machines($280,000), 2 air compressors($1,600), 2 bending machines($79,600), 4
burnishing tools($2,840), 4 welders($1,432), 8 tables($3,416), 8 pairs of gloves($768), 8 masks($328), and 3 manufacturing computers($750).
Wages & Salaries Payable: Pay employees every two weeks, with this we have 2 accrued weeks in December, leaving $32,368 left to owe
(2/52)*841,566= $32,368
Accounts Payable: Purchase $1,755,522 of materials on account, pay for 11/12 months, have a remaining balance of $146,294, paid off yearly
Taxes Payable: Taxes Owed
Current Maturities of Long Term Debt: Principal payment of the loan, $1,600,000 over 16 years = $100,000 per year.
Investors Contribution Stock: $500,000 is contributed by investors
Owners Contribution Stock: $70,000 is contributed in total by owners, $10,0000 per owner
Insurance Expense: According to BizMiner (2013), the non-health insurance expense was 0.8% of the revenues, and each year the average
inflation rate grows by 2%. Year 1: $9571, (.8%*$1,181,566) = $9571, Year 2: $19,984, (1.7%*$2,467,110), Year 3: $20,303, (1.7%*$2,506,584) =
$20,303, Year 4: $20,669, (1.7%*$2,551,702) = $20,669, Year 5: $21,248, (1.7%*$2,623,150) = $21,248.
Audit Service Expense: According to BizMiner (June 2014) the average audit cost in Las Vegas, Nevada is 0.6% of revenues, Year 1: $7500,
(0.6%*$1,181566) = $7500, Year 2: $7,650, (0.6%*$2,467,110) = $7,650, Year 3: $7,803, (0.7%*$2,506,584) = $7,803, Year 4: $7,959,
(0.7%*$2,551,702) = $7,959, Year 5: $8,118, (0.7%*$2,623,150) = $8,118.
Internet & Phone Expense: Got quote from Megalink representative, increasing by 2% each year because of inflation.
General Note: Our net income drops in years 4 and 5 because our expenses our growing faster than our revenues at that point. This will
change in the coming years however, because we will gain more market share and our revenues will increase at a rate faster than our expenses.
Marketing Expense: Reference table 10. The sales representatives salaries are not included because they are already included in salaries expense
Credit Card Expense: Take 2% of accounts receivable from each year. For year 1, 740,113*.02=14,803. Same process each year.

Conclusion
Halo Illuminations intends to be a formidable entrant into the sign industry in the Southwest. Our signs
are made of high quality ordering exclusively from American suppliers including T315 stainless steel.

20

Regardless of what product customers choose, our products will always exceed average signs. We follow
a premium pricing strategy and utilize recyclable or environmentally friendly inputs in order to deliver on
our commitment to our triple bottom line. We at Halo Illuminations ask that you help us light up Las
Vegas and the rest of the American Southwest with the finest LED signs and letters, and to always
remember to live by our slogan: Radiate excellence.
Figure 2: Perceptual Maps

Figure 10: Expenses of Marketing Actions


Figure 6: Forecasted Sales Revenue

Figure 5: Five Year Sales Forecast

Figure 7: Breakeven
Analysis

Figure 8: Unit Prices

21

Figure 6: Forecasted
Monthly Sales

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