Fragrance Store Business Plan: Company Summary

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Fragrance Store Business Plan

4412 words (18 pages) Essay in Business Strategy
21/06/18 Business Strategy Reference this
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Business Name: FRAGRANCES
Company Summary
Fragrances is a new natural and herbal cosmetics company proposing to set up a signature
herbal cosmetics store in Central London. The store will deal in herbal cosmetics including
perfumes.
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The company has been setup by a team of three members who have years of experience in
understanding and managing cosmetics business, channel marketing and high-level sales. The
promoters will initially fund the business themselves as they believe strongly in their product
idea. Market research among over 1000 women in various age groups shows that there is a
demand for such products.
Sales projections for Fragrances are estimated be over £1 million for the first year, with a decent
net profit.
The promoters feel that, by creating awareness of their products, many women will prefer to
purchase their products for their own use, as will friends and family members.
Objectives
Create a niche market in herbal cosmetics industry
Generate retail sales of over £1,000,000 in year one.
Maintain a gross margin of over 65%.
Mission
To give an unlimited opportunity to women of all ages to become beautiful naturally
Keys to Success
Fragrances will:
Offer a unique line of herbal cosmetics that will take into account the differences in
requirements of diverse age groups. Herbal cosmetic products are currently in demand
today and are also available but there are no differences in cosmetics available for different
age groups.
Satisfy the demand of women who do not want to use cosmetics containing harmful
chemicals
Execute a targeted marketing campaign to generate awareness of the their products
Fragrances will be a UK-based herbal cosmetics company offering its customers a series of
unique herbal cosmetics including skincare products, hair care products and perfumes. There will
a wide variety in these cosmetics and will take the differences in requirements of diverse age
groups. The store will have two product experts who will help the customers choose the right
products according to their ages and requirements. The company will reach out to customers
through their own signature store as well as its website.
In the future, the company will also explore the possibility of expanding to the entire UK by setting
up a chain of such stores.
Company Ownership
Cosmetics industry in the UK is a growth industry dominated by a few key players. Fragrances
needs to pool funding to be able to make its presence felt in the industry. It will be set up as a
private limited company as the three promoters will pool in their funds and will form the core
management team. As a private company it will be able to achieve its initial standing which
would not have been possible as a sole proprietorship or partnership firm.
Start-up Summary
Start-up costs for Fragrances include legal costs, computer supplies, new product marketing,
website design and regulatory costs for cosmetics[1]. Start-up assets are mostly dedicated to
start-up stock.
Start-up Expenses
£
Legal 1,000
Computer Supplies 1,250
Marketing 15,000
Web design 2,500
Regulatory 4,000
General Administration (including rent and salaries) 137,000
Total Start-up Expenses £160,750
Start-up Assets
Cash £10,000
Start-up stock £60,000
Other current assets 0
Fixed assets (Including fixtures) £20000
Total assets £90,000
Total Requirements for Expenses and assets 250,750
To start with, Fragrances will introduce its herbal range in skincare products perfumes.
Skincare products
These will include day creams, night creams, exfoliating creams, anti-wrinkle or anti-ageing
creams. Within these there will be creams for specific age-groups and skin types.
Perfumes
Fragrances will start-off with a limited range of perfumes for the working women. In stage two,
more variety will be introduced.
Source: National Statistics, accessed from http://www.statistics.gov.uk/cci/nugget.asp?id=6
Market Segmentation
The three main segments of the market who would buy herbal cosmetics are working executives,
college and university students and ageing women. There will also be those who would shop for
women, perhaps a husband, friend or a family member. Though the store will be in Central
London it will cater to the needs of entire UK. Women living outside London will buy the
cosmetics online through the company website. The absence of a store in small towns will not
impact the sale as the product will be extremely effective and safe. The confidence will be based
on additional expenditure on creating awareness about the products.
As per the mid census estimates, the total women population in all age groups in UK is
30,730,300 (Source: NSO Statistics). In addition, statistics indicate that on an average 93% of total
women in all age groups buy cosmetics. The potential market may be set at 28,579,179 (93% of
total women). Based on the primary and secondary segments, the projected sales forecast is
conservatively set at less then 1% of the total potential market (285,790), as highlighted in the
following table and chart.
Potential Customers Growth 2008 2009 2010 CAGR
Working women 0% 142,895 142,895 142,895 0%
Young girls 0% 107,171 107,171 107,171 0%
Ageing women 0% 26,793 26,793 26,793 0%
Others 0% 8,931 8,931 8,931 0%
Total 0% 285,790 285,790 285,790 0%
Product Elasticity:
The product is a necessity and is not highly price elastic. Consumers are ready to pay a higher
product if they become aware of the unique benefits from the product.
Industry Analysis
The UK cosmetics industry accounts for £5 billion sales. (Source: Euromonitor – Consumer
Europe 2002/3 – 18th Edition Pub. Euromonitor International Plc)) 93% of British women use
cosmetics in some shape or form making us one of the highest users in Europe. (Source: Key
Note Report – Cosmetics & Fragrances – A Market Sector Overview 10th Edition, Ed. By Eleanor
Hughes) Convenience and benefits continue to be a key trend for British cosmetics consumers.
Easy application and usage, as well as effectiveness, are the main requirements. Some of these
products have a higher price positioning, but consumers appear willing to pay higher unit prices if
products can offer genuine benefits in terms of saving time.
Fragrances will be a small segment of the cosmetics industry. The market is dominated by major
players. Significant shifts in overall value share in this sector have primarily been achieved
through major mergers and acquisitions such as L’Oréal’s purchase of The Body Shop.
Competition Analysis
Natural and herbal cosmetic products is a growing sector with the presence of a few big players
such as L’Oréal’, Bodyshop, Boots and Johnson and Johnson. It is becoming stronger in the UK
and UK is now competing with other European countries for product launches. There has been a
170 per cent increase on launches from the comparable period in 2006. According to a recent
Mintel report, the UK has seen the largest increase in herbal beauty products of any European
country even in the first quarter of 2007. The country accounted for a mere five per cent of the
1600 organic cosmetics launched worldwide in 2006, which has now risen to 19 per cent of the
1053 products that have already been launched globally in 2007.
In recent years there has been an explosion of activity as consumers have become more aware
of the health benefits of using natural ingredients. Supermarkets have now begun to pick up on
this trend, with leading chains such as Asda, Tesco and Waitrose all developing own brands to
capitalise on the growing consumer demand for organic and ethical products.
Our marketing strategy is to create product awareness among women using cosmetics by
strategically placing Internet ads, using direct mailers and generating PR.
Competitive Edge
The present herbal cosmetic retailers carry a mainstream line of cosmetics that are appealing to
the masses. Due to their mass distribution model, it would not be prudent for them to carry small
amounts of specialty items for specific age groups. By positioning in the market as a specialty
store, Fragrances is confident that word of mouth will help to create product awareness across
UK.
Fragrances unique selling proposition is that its products will be exclusive and customised for
women in accordance with their age groups, skin types etc. Currently, no major cosmetic retailer
and online stores offer such customised herbal cosmetics.
The primary weakness of Fragrance will be to generate awareness about the cosmetics and
highlight how these are different from the other products available in the market. To generate
sales, there is a need to first create awareness about the existence of the product and make it
easy for potential customers to locate the speciality store. However, it will not be difficult to
establish its presence in the cosmetics industry.
Marketing Strategy
Fragrances marketing strategy is crucial to its success. The company will need to create
awareness of its products through:
Strategically-placed ads in women’s magazines and women related websites

Direct mail and e-mail advertising to working women
New product PR in publications for women
Sales Strategy
Sales are dependent upon creating awareness and generating excitement about the herbal
cosmetics. The company will strategically place pop-up and banner ads on web-sites relevant to
both women, use direct mail and e-mail lists and seek public relations coverage in relevant media
sources.
Fragrances will fulfil orders through its speciality store. It will also offer returning customers an
option to place their orders on the company’s official website, or fax in orders to the company.
E-orders: Customer can purchase online 24-hours a day, seven days a week.
Fax orders: Customers can fax in an order 24-hours a day, seven days a week.
Sales Forecast
The sales forecast for First Year 2008 takes into account slower sales at the beginning as the
company creates awareness of its product and website. Initially the company will be selling
limited range of skincare products and perfumes. As the company grows, it will explore the
demand for other types of customised products.
The following table illustrates unit sales of 109,500 units for the first year. This would require the
company to sell to less than 1% of its target market.
FY 2008 FY 2009 FY 2010
Unit Sales
Units Sold 109,500 115,000 121,000
Average unit price £ 10 £10 £10
Sales Revenue £ 1,095,000 £1,150,000 £1,210,000
Direct Unit Costs £3 £3 £3
Direct Cost of Sales £ 328500 £345000 363000
Initially the company will be managed by its promoters. They will oversee product development,
the online store, speciality store and marketing efforts. Outsourcing will be used on some initial
tasks, specifically the website design and maintenance.
Personnel Plan
As the company’s launch date approaches, two product experts will be hired to help with the
speciality store sales. As the company grows, more personnel will be added as needed.
Personnel Plan
FY 2008 (in £) FY 2009 (in £) FY 2010 (in £)
Management team for 3 Members £45,000 £45,000 £45,000
2 Employees £20,000 £21,000 £22,050
Total People 5 5 5
Total Payroll £65,000 £66,000 £67,050
Fragrances project the gross margin to be healthy percent (70%). Sales projections for 2008 are
at over £1 million. Refer appendix for a projected profit & loss account, projected cash-flow
statement and projected balance sheet for the period 2008-2010.
Start-up Funding
The promoters of the company will use personal funds to finance the start of this business. The
primary start-up costs are as follows:
Start-up Expenses
£
Start up Funding
Start up Expenses to fund 160,750
Start up Assets to fund 90,000
Total Funding Required 250,750
Assets
Non-cash assets from start-up 80,000
Cash 10,000
Additional cash Raised 0
Cash Balance on Starting Date 10,000
Total Assets 90,000
Liabilities and Capital
Liabilities
Current Borrowing 0
Fixed liabilities 0
Accounts payable 0
Other current liabilities 0
Total Liabilities 0
Capital
Planned Investment
Shareholders equity 250,750
Investor 0
Additional Investment Requirement 0
Total Planned Investment 250,750
Loss at Start-up (160,750)
Total Capital 90,000
Total Liabilities and Capital 90,000
Break-even Analysis
The following Break-even Analysis shows what is needed in monthly sales to break even.
Break-even Analysis (Year 2008)
Monthly units break-even 1,914
Monthly Revenue Break-even £19,140

Assumptions:
Average per-unit revenue £10
Average per-unit variable cost £3
Estimated monthly fixed cost £13396
This Confidentiality Agreement (the “Agreement”) is by and between (hereinafter “Disclosing

Party”) and the undersigned recipient of information. (hereinafter “Recipient”)
Recipient and its Representatives shall not disclose any of the Confidential information in any
manner whatsoever, except as provided under Permitted Disclosures. Recipient hereby agrees to
indemnify Disclosing Party against any and all losses, damages, claims, expenses and legal fees
incurred or suffered by Disclosing Party as a result of breach of this Agreement by Recipient or
its Representatives
Appendix A
Projected Profit & Loss
2008 (£) 2009 (£) 2010 (£)
Sales 1,095,000 1,150,000 1,210,000
Direct cost of goods 328,500 345,000 363,000
Other costs – – –
Cost of goods sold 328,500 345,000 363,000
Gross Margin 766,500 805,000 847,000
Gross Margin % 70% 70% 70%
Total Operating Expenses 396,025 375,667 352,917
Profit Before Interest and Taxes 370,475 429,333 494,083
EBITDA 370,475 429,333 494,083
Interest Expense – – –
Taxes 148,190 171,733 197,633
Net Profit 222,285 257,600 296,450
Projected Cash Flow
2008 (£) 2009 (£) 2010 (£)
Cash Received
Cash from Operations
Cash sales 1,095,000 1,150,000 1,210,000
Subtotal cash from operations 1,095,000 1,150,000 1,210,000
Additional cash received
VAT received 0 0 0
New current borrowing 0 0 0
New other liabilities 0 0 0
Sale of other current assets 0 0 0
Sale of fixed assets 0 0 0
New Investment received 0 0 0
Subtotal cash received 1,095,000 1,150,000 1,210,000
Expenditure
Cash spending 58,000 86,000 95,000
Bills payment 652,232 691,342 727,276
Total spent on operations 710,232 777,342 822,276
VAT paid 0 0 0
Repayment of current borrowing 0 0 0
Purchase of other current assets 0 0 0
Purchase of fixed assets 0 0 0
Dividends 0 0 0
Subtotal Cash Spent 710,232 777,342 822,276
Net Cash Flow 384,768 372,658 387,724
Cash Balance 394,768 767,426 1,155,150
Projected Balance Sheet
2008 2009 2010
Assets
Current assets
Cash 394,768 767,426 1,155,150
Stock 60,000 60,000 60,000
Other Current Assets 0 0 0
Total Current Assets 454,768 827,426 1,215,150
Fixed Assets
Fixed assets Accumulated 20,000 20,000 20,000
Depreciation 0 0 0
Total Assets 474,768 847,426 1,235,150
2008 2009 2010
Liabilities and Capital
Current Liabilities
Accounts payable 53,900 57,085 60,020
Current borrowing 0 0 0
Other current liabilities 108,583 220,456 308,795
Long term liabilities 0
Total liabilities 162,483 277,541 368,815
Capital including profits 312,285 569,885 866,335
Total liabilities and Capital 474,768 847,426 1,235,150
Bibliography
1. Barrow Colin, Barrow Paul, Brown Robert, The Business Plan Workbook, (2001) Kogan Page
Ltd
2. Blackwell Edward, How to Prepare a Business Plan, (2004) Kogan Page Ltd
3. Branson, Richard, The Best-Laid Business Plans: How to Write Them, How to Pitch Them
(Virgin Business Guides), (2005) Virgin Books; New Ed edition
4. Covello Joseph, Hazelgren Brian, The Complete Book of Business Plans (Jan 1993),
Sourcebooks
5. Eleanor Hughes, Key Note Report – Cosmetics & Fragrances – A Market Sector Overview
10th Edition
6. Euromonitor – Consumer Europe 2002/3 – 18th Edition Pub. Euromonitor International Plc
7. Finch Brian, How to Write a Business Plan, (2006), Kogan Page Ltd
8. McKeever Mike P., How to Write a Business Plan,(1992) Nolo Press
9. UK Population data accessed from http://www.statistics.gov.uk/glance/#population
Footnotes
[1] The UK cosmetics industry is regulated under the the Department of Trade and Industry’s 1996
Cosmetic Products (Safety) Regulations.
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Fragrance Store Business Plan

21/06/18 Business Strategy Reference this

Business Name: FRAGRANCES

Computer Supplies 1,250

Web design 2,500

General Administration (including rent and salaries) 137,000

Total Start-up Expenses £160,750

Start-up stock £60,000

Fixed assets (Including ﬁxtures) £20000

Total assets £90,000

Total Requirements for Expenses and assets 250,750

Source: National Statistics, accessed from http://www.statistics.gov.uk/cci/nugget.asp?id=6

Potential Customers Growth 2008 2009 2010 CAGR

Working women 0% 142,895 142,895 142,895 0%

Young girls 0% 107,171 107,171 107,171 0%

Ageing women 0% 26,793 26,793 26,793 0%

Others 0% 8,931 8,931 8,931 0%

Total 0% 285,790 285,790 285,790 0%

Strategically-placed ads in women’s magazines and women related websites

FY 2008 FY 2009 FY 2010

Units Sold 109,500 115,000 121,000

Average unit price £ 10 £10 £10

Sales Revenue £ 1,095,000 £1,150,000 £1,210,000

Direct Unit Costs £3 £3 £3

FY 2008 (in £) FY 2009 (in £) FY 2010 (in £)

Management team for 3 Members £45,000 £45,000 £45,000

2 Employees £20,000 £21,000 £22,050

Total Payroll £65,000 £66,000 £67,050

Start up Expenses to fund 160,750

Start up Assets to fund 90,000

Total Funding Required 250,750

Non-cash assets from start-up 80,000

Additional cash Raised 0

Cash Balance on Starting Date 10,000

Total Assets 90,000

Liabilities and Capital

Other current liabilities 0

Shareholders equity 250,750

Additional Investment Requirement 0

Total Planned Investment 250,750

Loss at Start-up (160,750)

Total Capital 90,000

Total Liabilities and Capital 90,000

Break-even Analysis (Year 2008)

Monthly units break-even 1,914

Monthly Revenue Break-even £19,140

Average per-unit revenue £10

Average per-unit variable cost £3

Estimated monthly ﬁxed cost £13396

This Conﬁdentiality Agreement (the “Agreement”) is by and between (hereinafter “Disclosing

2008 (£) 2009 (£) 2010 (£)

Sales 1,095,000 1,150,000 1,210,000

Direct cost of goods 328,500 345,000 363,000

Cost of goods sold 328,500 345,000 363,000

Gross Margin 766,500 805,000 847,000

Gross Margin % 70% 70% 70%

Proﬁt Before Interest and Taxes 370,475 429,333 494,083

EBITDA 370,475 429,333 494,083

Taxes 148,190 171,733 197,633

Net Proﬁt 222,285 257,600 296,450

Projected Cash Flow