Business Plan

TYLER GESYLAURA MCNARYDAVID ROBINSON

Casket Covers

Table of Contents Page

Executive Summary 61.0 Introduction 7 1.1 Industry Overview 7 1.2 Mission Statement 7 1.3 Goals and Objectives 72.0 Operations Plan 7 2.1 Site Plan 8 2.2 Floor and Building Layout 8 2.3 Flow of Products 8 2.4 Quality Control Programs 9 2.5 Organizational Tasks 9 2.5.1 Daily 9 2.5.2 Weekly 10 2.5.3 Monthly 10 2.5.4 Yearly 10 2.6 Supply Analysis 10 2.7 Service Providers 11 2.8 Capital Budget 11 2.9 Cost of Goods Sold 11 2.10 Operating Expenses 12 2.11 Working Capital 12 2.11.1 Cash 12 2.11.2 Inventories 13 2.11.3 Accounts Receivable 13 2.11.4 Accounts Payable 133.0 Human Resources Plan 13

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3.1 Organizational Structure 13 3.2 Job Descriptions/ Qualifications 14 3.2.1 General Manager 14 3.2.2 Sales and Operations 14 3.2.3 Operations and Logistics Manager 15 3.3 Human Resource Strategy 15 3.4 Shareholders’ Agreement 154.0 Marketing Strategy 15 4.1 Target Market 15 4.2 Purchasing Patterns of Customers 17 4.3 The Marketing Mix 16 4.3.1 Products 16 4.3.2 Pricing 18 4.3.3 Promotion 18 4.3.4 Place 19 4.4 Competitive Analysis 20 4.5 Marketing Expenses 205.0 Financial Plan 20 5.1 Capital Requirements 21 5.2 Summary of Projected Income Statement 21 5.3 Summary of Projected Balance Sheet 21 5.4 Risk Analysis 22 5.4.1 Critical Variables 22 5.4.2 Contingency Plan 22 5.5 Dividend Policy 22 5.6 Economic Forecasts 22 5.7 Ratio Analysis 22 5.8 Break-Even Analysis 23

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5.9 Net Present Value 23 5.10 Internal Rate of Return 23 5.11 External Rate of Return 236.0 Summary 24

Figures Figure 2.1 Site Location 8 Figure 3.1 Organizational Chart 13 Figure 4.3.1 Casket Cover/ Bio-box 18 Figure 5.1 Break-Even Graph 28

Tables Table 2.1 Capital Budget 11 Table 2.2 Cost of Goods Sold 12 Table 2.3 Operating Expenses 12 Table 4.1 Competitive Analysis 23 Table 4.2 Marketing Budget 20 Table 5.1 Capital Requirements 20 Table 5.2 Projected Revenues, Net Income, and Retained Earnings

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Table 5.3 Balance Sheet 21

Works Cited 25Appendices 26 Appendix A- Balance Sheet 26 Appendix B- Working Capital 27 Appendix C – Income Statement 28 Appendix D – Ratios 29

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Executive Summary

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The enduring funeral industry is a business sector that will be providing services for many years into the future. With the large baby boomer demographic approaching their retirement age, this industry has to prepare for the vast numbers that will need funeral services.

The following document is a business plan proposing to develop a solution to allow consumers to have a respectable funeral at a low cost. The business plan outlines the operations, human resources, marketing and financial components of the proposed business. The plan determines that the proposed business is a profitable opportunity.

Casket Covers will target towards low income families, cost-conscious and eco-friendly consumers. It is this target market that wants to have a respectable funeral but does not have or want to spend the money. The marketing component of the business plan outlines how the business plans to achieve its projected sales, which is its most critical variable. The location of Casket Covers allows very little investment. Competitors do not carrry this type of product so Casket Covers products are one of its kind giving it a competitive advantage. The manufacturers would send the products to the funeral homes allowing Casket Covers to have no inventory.

Casket Covers will have three employees for the first 3 years who each will own a third of the business. In year 4, a sales representative will be hired to travel to funeral homes promoting and selling our product.

Financially the business has potential for significant returns for the intial investment of $10,000. This amount will be entirely financed by equity giving a 336.7% return on investment. The business generates significant revenues, which allow dividends to be paid starting in the first year.

With the introduction of this alternative solution to an affordable and respectable funeral, Casket Covers will be able to be a profitable business expanding across Canada and moving into other markets.

1.0 Introduction

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1.1 Industry Over ViewThe funeral industry is an enduring business sector that will always be needed. Currently in Canada, there are 4.69 million people aged 65 and over which makes up 14% of the total population. The baby boomer demographic more than doubles this at 9.47 million who make up 28% of Canada’s population (Stats Canada). With a life expectancy of 81 years, over the next 35 years there will be over 14 million funerals that will need to be taken care of in Canada .

In Saskatchewan alone there are 96 funeral homes and approximately 1,500 in all of Canada. The United States has an estimated 21,000 funeral homes. For many people in Canada, the business of caskets is a decreasing trend because of the costs associated with them. A casket can be the largest expense when arranging a funeral making up for 1/3 or more of the total price. Consumers are turning to the internet and direct suppliers who often charge as much as 70% less then a funeral home (Trends in Funeral Service).

1.2 Mission Statement“Offering an affordable and environmentally friendly solution for a respectable funeral.”

1.3 Goals and ObjectivesThe goals and objectives for Casket Covers are:

To achieve the projected sales of 6 casket covers and 108 bio-degradable cardboard boxes in the first year

To have our product available across Canada by year 5 To move into the United States market by year 5 To have our product be the choice consumers choose when

planning and having a funeral

2.0 Operations Plan

2.1 Site PlanCasket Covers will be located in the industrial area of Saskatoon, Saskatchewan. The specific location of the office will be located at 844 -47th Street East in a building with one other occupant. The other occupant in the building is a glass and aluminum shop. The map below Figure 2.1 shows the location of the building.

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Figure 2.1 Site Location

This location will be for conducting day to day business activities such as book keeping, operations, and sales calls. This location was chosen because one of the team members family owns the shop and is willing to let us use a space that is not being used. This allows us to operate with no costs such as utilities, property tax, etc.

The space that we are setting up the office in is 450 sq ft, which is plenty of room for 3 desks and computers (one for each team member). As it provides more than enough space for the three people, there will be room to add more desks for any employees that might need to be hired in the future years.

2.2 Floor and Building LayoutThe floor layout of our office will be very simple with 3 desks and 3 computers. Washrooms and a lunch room are located at the bottom of the stairs.

2.3 Flow of Products

2.3.1 Funeral ServiceWhen using a Casket Cover, the funeral service will proceed as a regular funeral would. The body would be placed in the biodegradable box. The cover would then be placed over the box and the securing

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device would be put in locked position. The tapestry would be strategically placed to that no part of the body would touch the cover. The funeral would proceed with an open casket for viewing if the family decided to go this route. The graveside service would also occur like normal but once everyone has left, the securing device would be unlocked and the cover would be removed. The tapestry would then be folded in and a lid would be put on the biodegradable box. It would then be lowered into the ground for burial. If the family requested to see the body be lowered into the ground, that would occur but once everyone left, the body would be raised once up to remove the cover and the aforementioned steps would be taken.

2.3.2 Sales The flow of Casket Cover products will be as follows. A sales representative from Casket Covers will go to a funeral home and show a catalogue of different types of caskets covers that we offer. The undertaker would choose which covers they want, depending on what sells in their area. This would change from one location to the next. Some funeral homes might be situated in a high income area that purchases expensive woods and metal caskets. This funeral home would buy covers according to this and vice versa for funeral homes that sell less expensive caskets. After the funeral home makes a deposit on the caskets they choose, Casket Covers would place an order from the manufacturer. The manufacturer would send the covers directly to the funeral home. The funeral undertaker would also place an order of how many bio-degradable cardboard boxes they need. The manufacturer would also send these directly to the funeral home. The funeral home will have 30 days to pay for the covers and bio-degradable boxes.

2.4 Quality Control ProgramCasket Covers will work with it’s suppliers to make sure that quality of the product we receive is at the forefront of their business. Getting quality casket covers that will last there expected life time is very important not only for the success of Casket Covers but also to insure there are no problems when a funeral is being held. The same applies for the bio-degradable boxes. The supplier must have quality tests in-place to make sure they will be able to stand the weight that is going to be exerted on them.

2.5 Organizational Tasks

2.5.1 DailyCasket Covers will have various hours for different parts of the business. The general manager will spend most of their day going to funeral homes and selling them the product. Hours per day could

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range from 10-12 depending on travel times and locations of the funeral homes. Some days the general manager will market the idea in other ways then going to funeral homes by getting involved with funeral associations and making a presence on the internet.

The sales and operations manager will also have sales responsibility. They too will go to funeral homes and try to sell the product. They are also in charge of making sure that the suppliers are sending quality products to the customers and deal with any questions they may have.

The operations and logistics managers duties will involve working with customers by placing orders from the manufacturers for more biodegradable boxes. Phone calls to the office will also be taken care of from 8am - 5:30pm Monday to Friday. The logistics will involve working with the transportation companies to make sure the funeral homes are receiving their orders on time and that the manufacturers are sending the products to the right location. Lastly, this manager will pay bills and take care of any other day-to-day activities that come up.

2.5.2 WeeklyEvery Monday our team will have a brief meeting to discuss the operations of the business. We will discuss sales that were made and orders that are being processed. We will talk about our goals and objectives for the week and which funeral homes we are going to visit. Team members who are not able to make it to these meetings are required to talk to another team member to relay questions and current activities they are doing.

2.5.3 MonthlyOn the first Monday of each month our team will have a meeting that will go over sales goals, future goals and improvements or bottlenecks in the business. Reports about business activities will be taken each month and last months will be reviewed. This will also be a time for the staff to discuss any ideas on how to improve the business operations.

2.5.4 YearlyAt the end of each year, the equity holders will go over annual reports regarding finances to see the overall performance of Casket Covers. Future expansion and whether the need for more employees will be discussed.

The managers will also develop a budget for the upcoming year to determine where funds can be allocated for the upcoming year and where expenses could possibly be cut down.

2.6 Supply Analysis

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Casket Covers will have different suppliers for different products of the business. The casket covers will come from a casket manufacturer from Alberta or Manitoba because there no manufacturer in Saskatchewan. The same thought applies to the bio-degradable boxes. These companies will ship straight to the funeral homes allowing Casket Covers to have no inventory. In the event that orders increase and a supplier cannot keep up with the demand, we will find additional suppliers that will provide our products. Other miscellaneous supplies such as business cards will be purchased from appropriate local stores.

2.7 Service ProvidersCasket Covers will outsource all its service requirements like legal, accounting, electrical, plumbing, computer technical issues, and web site services.

2.8 Capital BudgetThe capital budget for Casket Covers consists of furniture and fixtures, and the patents. Setting up the office with furniture and fixtures is going to cost $5,000 in the first year. The patent for Canada will cost $25,000 and $30,000 for the United States of America one. They are paid for over their 25 year lifetime with half of it being paid in the first 3 years. The Canadian patent will cost $5000 in the first 3 years and then the rest being equally paid over the rest of its life. The same will be applied for the American patent except will be purchase in year 2 when we are eligible. Overall, the first 3 years will have a capital budget of $10,000 and then in the 4th year it will drop to $7,000 and significantly lower after that.

Table 2.1 – Capital Budget Year 1 2 3 4 5 Patent 5,000 10,000 10,000 7,000 2,000 Furniture and Fixtures 5,000 Total 10,000 10,000 10,000 7,000 2,000

For working capital, refer to Appendix B.

2.9 Cost of Goods SoldThere will be no inventory because we will be sending the covers and bio-boxes straight to the funeral homes. Each year, Casket Covers is projecting to sell 2 covers to each funeral home. In year 1, they would sell to 3 funeral homes. In year 2, they would sell to 5 funeral homes and so on. The bio-boxes are based on how many times the undertaker will use the cover per year. In year 1 and 2, we estimated usage of 1 of the covers, 3 times a month. In year 3 we estimated an increase to 4

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times a month. In year 4 and 5 we estimated one of the covers would be used every week. These numbers are held consistent over time and are compounded every year.

Table 2.2 Cost of Goods SoldYear 1 2 3 4 5Covers @ $2,500 6 10 20 36 50Bio-boxes @ $200 108 288 768 1,704 3,004

COGS 36,600 82,600145,20

0387,50

0 725,800

2.10 Operating ExpensesTable 2.4 shows the operating expenses for year 1 to 5 of the business. The largest expense in year 1 is the prototype development and in the later years, the salaries and travelling expenses.

Table 2.3 Operating Expenses

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Year 1 2 3 4 5 Patent 5,000 10,000 10,000 7,000 2,000 Website and upkeep 0 5,100 100 100 100

Salaries 0 0 0 45,000 50,000 Employee Benefits 0 0 0 6,813 7,570 Travelling Expenses 1,000 15,000 20,000 25,000 30,000 Prototype Development 15,000 0 0 0 0 Miscellaneous Costs 435 860 1,960 3,930 6,255 Capital Cost Allowance 700 1,500 1,720 1,856 1,821

Debt Interest 0 0 0 0 0 Total Operating Expenses 22,135 32,460 33,780 89,699 97,746

2.11 Working Capital Planning

2.11.1 CashThe cash on hand will be dependent on how much is needed to pay all bills and the amount of dividends paid out. Most of the cash will be paid out in dividends but if a projected budget for an upcoming year calls for more to be available, then it will be so. There is also a miscellaneous operating expense that covers any unexpected costs that might arise.

2.11.2 InventoriesCasket Covers will not have any inventories. Instead, the manufacturer will send the casket covers and biodegradable cardboard boxes directly to the funeral home.

2.11.3 Accounts ReceivableWe will offer credit period of 30 days for accounts receivable. Orders for certain caskets will require a deposit prior to production and the balance will be paid in full when the item is complete.

2.11.4 Accounts PayableCasket Covers will have a 20 day period for accounts payable.

3.0 Human Resources Plan

3.1 Organizational Structure: Private CorporationThe three staff positions to be filled at Casket Covers are the general manager’s position, sales and operations position, and an operations and logistics position. The general manager will be responsible for running the company, ensuring that Casket Covers has what it needs to be a successful business. The general manager is also in charge of quality control and customer satisfaction. The following is the organizational chart for Casket Covers.

Figure 3.1 Organizational Structure

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3.2 Job Descriptions/ Qualifications:

3.2.1 General ManagerThe general manager will be in charge of the fiscal activities of the company. He will supervise staff and be responsible for hiring, training, and mentoring employees. The manager will be responsible for managing information and general administration. He will be responsible for planning and implementing procedures to improve the operating efficiency of the company. A large part of the general manager’s job title will include marketing the Casket Covers. Since the general manager will be dealing with customers, he or she must have excellent people and communication skills.

The general manager must have extensive background in sales and marketing as he will be responsible for making sales, and marketing the Casket Covers product.

David Robinson will be the general Manager of Casket Covers. David will complete his B.A. in Commerce in December of 2011, with a major in Management. He has taken courses in many disciplines of business including marketing, human resources and operations management. David has started up multiple businesses during his summers off from school including a paintball field and a rototilling business.

3.2.2 Sales and Operations Manager

General Manager

Sales & Operations Manager

Operations & Logistics Manager

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Sales and Operations is a very important position at Casket Covers. Sales must be made, and the daily operations of the company must be managed. The sales and operations manager is responsible for the mechanical design of the casket covers. The responsibility of making sales will be shared between the sales and operations manager and the general manager of the company. This is beneficial because the general manager will have knowledge in the economics of the casket covers while the sales and operations manager will have knowledge in the special features of the casket cover design. The everyday operations of the company will be shared between the sales and operations manager and the operations and logistics manager. When the sales and operations manager is busy with sales the everyday affairs of the company will be turned over to the operations and logistics manager.

Tyler Gesy will be the Sales and Operations manager of Casket Covers. Tyler completed his B.Sc. in Engineering in April of 2010, major in Mechanical design. He has worked in Mechanical design since May 2008. Several of Tyler’s designs have been implemented and machines he has worked on have been sold internationally. Tyler is a prime candidate to be the sales and operations manager of Casket Covers.

3.2.3 Operations and Logistics ManagerThe Operations and Logistics manager will share the operations responsibilities with the sales and operations manager when the he is busy with sales. The operations and logistics manager will be responsible for communication between the suppliers and the customers. The operations and logistics manager will be responsible for exploring the environmental impact of the design, and ensuring that Casket Covers is an environmentally friendly company in all aspects of the business. She will also be responsible for managing the shipping and receiving of all products.

Laura McNary will be the Operations and Logistics manager. Laura completed her B.Sc. in Engineering in April of 2010, major in Agriculture & Bioresource. Laura worked in mechanical design for three summer terms while she was in University. She began working in the environmental consulting industry in March 2010. By working on several different environmental projects across western Canada Laura has come to understand the importance of making environmentally wise choices. Laura is the perfect candidate to be the Operations and Logistics Manager of Casket Covers.

3.3 Human Resources StrategySince the employees are all equal shareholders in the company the human resources strategy that we will use will be based on creating a

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sense of pride for all of our employees. Small businesses tend to have a “happy family” feel to them and we would like this to be the work environment at Casket Covers. We want to create a workplace that is comfortable, fun, and friendly.

Employees will be expected to become further educated about new trends in the industry. Casket Covers will eventually target potential employees who show and interest in the environment.

3.4 Shareholders’ AgreementThe General Manager will hold 33% of the shares for Casket Covers, the Sales and Operations Manager will hold 33% of the shares, and the Operations and Logistics Manager will hold 33% of the shares and it will be a private corporation.

4.0 Marketing Strategy4.1 Target MarketCasket Covers will target the following three markets:

1. Cost-Conscious2. Low income families3. Eco-friendly consumers

Many consumers are cost-conscious about the purchases they make everyday. Casket Covers would appeal to those who want to have a respectable funeral but do not want to spend the money that is required. Casket Covers offers this by allowing the consumer to rent a high end casket, but at the fraction of the cost to buy. The funeral would proceed as normal except the cost would be nominal.

The cost of a funeral could come at a surprise to some families, especially those who need to have an unexpected funeral for one of their loved ones. Casket Covers offers a low cost alternative compared to the competition while maintaining a respectable look for the viewing, service, and graveside service. Families who have not financially planned for funeral costs or earn a low income will be attracted to Casket Covers caskets of the price and simplicity. This market will be the easiest to enter because families in the aforementioned situation will be driven primarily by price.

Eco-friendly consumers will be attracted to casket covers because they know that the material of the buried casket will not harm the environment. Price is not as much of an issue for this market so long as the environmental impact is proven to be less than the alternative.

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4.2 Purchasing Patterns of ConsumersPeople of all types could potentially be consumers of Casket Covers caskets, they just need to know that it is an option. Purchasing patterns will be geographical. As people attend a funeral in a certain region and discover that a rented casket from Casket Covers was used, they will be exposed to the option of renting a casket for their next funeral occasion. Since guests at a funeral are often people who live in the same locations that the funeral was held, sales of Casket Covers caskets will expand geographically beginning at the primary locations of sale. Saskatchewan will be the initial location for Casket Covers, so sales will expand to other provinces and possibly countries from that location. As the demand for casket covers expands to new areas, Casket Covers will be given the option to expand as well.4.3 The Marketing Mix

4.3.1 ProductsCasket Covers will sell one or more casket covers to an undertaker, who will then rent the covers to consumers. Casket Covers will then sell biodegradable boxes to the undertaker, one for each funeral. The undertakers may choose to stock the biodegradable boxes depending on the storage capacity of their facilities and the location of their facilities relative to the location of the biodegradable box manufacturer.

Casket covers are essentially traditional caskets with the bottom removed and a mechanical supporting system added to hold the biodegradable box prior to burial. Figure shows the arrangement of the casket cover and the biodegradable box that make a Casket Covers casket.

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Figure 4.3.1

Casket Covers would have a catalogue of different types of caskets that could be used for the funeral. The caskets available to the end users will depend on the type purchased by the undertaker. Casket Covers could recommend what types of caskets would be best for the undertaker to purchase, but in the end it is their decision. Undertakers would choose which caskets they want, depending on what sells in their area. They may prefer less expensive or more expensive types, certain materials (wood, metal), or certain designs that they have had previous success selling.

Casket Covers would order the casket cover and the biodegradable boxes from a manufacturer who would send them directly to the undertaker. The chosen manufacturer of the casket covers could be any traditional casket manufacturer that has agreed to modify the casket according to the instructions of Casket Covers. Once a manufacturer has been chosen, a test casket cover must be made to ensure the quality and function of the casket cover meet the desires and expectations of the Casket Covers team.4.3.2 PricingThe idea of having a removable casket from an interior biodegradable box is novel and will be patented in Canada and eventually the United States., so Casket Covers do not have any competitors that sell a similar product. Casket Covers will be competing directly with traditional caskets that get buried with the deceased. If a traditional

Casket Biodegradable Box

Casket Cover

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casket is purchased at a local funeral home, the average price is approximately $2,400 (Rae, Mourning Glory). Caskets can be priced as low as $780 if purchased from a manufacturer’s website if a person plans their funeral with enough time to allow shipping (Casket Depot). Most funerals in Canada are not planned or anticipated with enough time to shop around at multiple casket suppliers or to wait for shipping. Planning a funeral is also a grievous time for loved ones. The common solution for most funerals is to allow the chosen funeral home to take care of the casket along with many other arrangements that a funeral entails. Casket Covers will be primarily competing with the $2,400 price since our caskets will also be available directly from the funeral home.

Casket covers will have a price of approximately $10,000 to the undertaker. This price will vary with style of casket cover. Biodegradable boxes will be sold for $250 each to the undertaker. The undertaker will then rent the casket cover to the end user for $400 and then sell the biodegradable box for $300 for a total cost of approximately $700 depending on the style of casket cover chosen. Casket Covers offers a price that is nearly four times less than then competition. Once a casket cover has been used for two years, it will need to be inspected by a knowledgeable Casket Covers employee to determine if service or replacement is necessary. Service charges will range from $2,000 to $10,000 dollars depending on the work that must be done to return the casket cover to its original mechanical state and/or its appearance. If service charges would exceed $10,000, then Casket Covers would recommend that a new casket cover would be purchased.

4.3.3 PromotionCasket Covers positioning statement is:

“Casket Covers are the cost effective and eco-friendly way to have a respectable funeral.”

Casket Covers offers a low cost alternative to traditional casket choices with a respectable presentation that our customers deserve and an environmentally friendly method of burying loved ones.

Casket covers will enter a market using sales visits to undertakers. To appeal to the undertaker, the Casket Covers’ sales team will need to show how the product will appeal to the end users as well as how the undertaker will profit from the purchase. Promoting low cost, respectable presentation and environmentally friendly burial for the

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end user will give the undertaker the confidence that renting the product will be easy and the initial cost of the product will be justified.

With each casket sale, Casket Covers will give brochures with descriptions and pictures of the particular caskets purchased to the undertaker. It is in the undertaker’s interest to rent the casket covers, so they will promote the product to the end users using the provided brochures. Knowledge of Casket Covers will spread to end-users via word-of-mouth following funeral services that use casket covers. The Casket Covers’ sales team will travel to undertakers and present the product to them, but undertakers will demand to have casket covers if their competitors are using them with success. Ultimately, each successful use of Casket Covers product will promote further use to future customers of undertakers. Undertakers in turn will be persuaded to purchase a casket cover.4.3.4 PlaceCasket Covers will be located in Saskatoon, Saskatchewan in an office on the property of Acara Glass and Aluminum. The chosen manufacturers for the casket covers and the biodegradable boxes will preferable by in Saskatchewan, but possibly in either Manitoba or Alberta depending on the availability and ability of manufacturers in those locations. The chosen manufacturers for the biodegradable boxes will preferably be located in Saskatchewan. As Casket Covers grows over time, sales offices and manufacturers will be flexible and will grow with the demand

The target undertakers will be in close proximity to the target markets, specifically those in the age group of 46 and over because they or some of their loved ones will be needing funeral services sooner than those that are younger. The baby boomer generation consists of people aged 46 to 64 years; 28 % of the Canadian population is in this age group. 14% of the Canadian population is 65 and older. By beginning our sales pitches at funeral homes that are geographically close to those target markets, Casket Covers will have the best success entering those markets. Once those target markets have been entered, the eco-friendly market and the families who have not financially planned for funeral costs can be entered. Geographically, the latter two markets could exist anywhere, so demand for Casket Covers will spread from our initial target locations.

4.4 Competitive AnalysisCasket Covers will be competing with online casket retailers and local funeral homes. below explains competition.

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Table 4.1 Competitive AnalysisCompetitor Casket Price Strength/WeaknessOnline Retailer $1,300 Low price. Hassle to

call, order, and ship to local funeral home.

Local Funeral home $2,400 Bundle all requirements for a funeral into one price. Expensive caskets.

Marketing ExpensesMarketing begins with sales trips to undertakers. Once a sales trip is complete, the undertaker and any customers of the undertaker should be able to research Casket Covers online at their leisure. The marketing expenses for Caskets Covers includes a travelling expense of $1,000 for the first year and $15,000 for the 2nd. By year 5 we projected $30,000 for travelling expenses. Our other expense was $5,000 for a professionally designed website (2.0 Web Design).

Table 4.2 – Marketing Budget

Website and upkeep 0 5,100 100 100 100

Travelling 1,000 15,000 20,000 25,000 30,000

5.0 Financial Plan

5.1 Capital Requirements

Casket Covers requires a total capital investment of $10,000. It is anticipated that the capital requirement will be raised entirely by equity. The initial capital requirements are projected below:

Table 5.1 Capital RequirementsDebt - Equity 10,000 Total Financing 10,000

It is expected that the equity requirement will be met through equal funds from each of the team members.

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5.2 Summary of Projected Income StatementThe revenues for Casket Covers are based on sales projections of 6 caskets and 108 biodegradable boxes in the first year. This is based on 3 funeral homes purchasing 2 casket covers each. We are projecting they would use one of the covers, 3 times a month in the first year for 12 months making a total of 108 boxes.

The following is the total revenues, net income, and end retained earnings for the 5 years projected. See appendix D for a detailed income statement for Casket Covers.

Table 5.2 Projected Revenues, Net Income, and Retained EarningsYear 1 2 3 4 5 Revenues 87,000 172,000 392,000 786,000 1,251,000

Net Income 23,884 48,114 180,002 260,937 361,199End Retained Earnings 5,884 52,286 196,585 300,726 422,565

5.3 Summary of Projected Balance Sheet

Table 5.3 Balance SheetYear 1 2 3 4 5

Total Assets 18,163 67,639 215,095335,18

7475,60

4Total Liabilities 2,279 5,353 8,510 24,461 43,039

Total Equity 15,884 62,286 206,585310,72

6432,56

5See appendix A for the complete balance sheet for Casket Covers.

5.4 Risk Analysis

5.4.1 Critical VariablesCasket Covers has a few critical risk variables associated with the business. The first and most important is the number of covers sold per year. If we cannot sell enough to break-even, we will not be able to continue operations. The number of bio-boxes is reliant on how many covers sold which makes it even more important. The next risk variable is having the funeral homes carry our product. With our product, the margins are probably lower so they might not be willing to carry them. The patent is another risk variable. Since we will have to pay off half of each patent in the first 3 years, it might be then that we realize that

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our business is not profitable. If this were to occur, we will have paid out a lot of money for the patents and get nothing out of them because they will be discontinued.

5.4.2 Contingency PlanIf Casket Covers proves to not be a profitable business, we will get out of the patents by discontinuing payments. We will lay off any employees we have hired and find ourselves other jobs. Since we will not have invested extremely large amounts of money, it will not hurt us that bad financially.

5.5 Dividend PolicyThe financial model shows that dividends will be paid out starting in year 1 with a dividend of $18,000. Following that is a decline in year of $1,713 2 but a increase in year 3 of $35,702. In year 4 and 5 dividends of $156,796 and $239,361 will be paid out respectively.

5.6 Economic ForecastIn the financial model for Casket Covers, an assumption was made that the Canadian economic situation will continue to stabilize over the long-term. To reflect this I used an average inflation rate of 2.0% and an interest rate of 7.0% for the development of future projections.

5.7 Ratio AnalysisThe ratios used in the analysis of the business were gross profit margin and net profit margin. The gross profit margin starts is around 50% for the first 4 years then dips to 42% in year 5. In year one the net profit margin is 27%, year 2, 28% and year 3, 46%. The ratio drops to 33% and 29% in the next 2 years. To see a detailed yearly projection of the ratios see appendix D.

5.8 Break-Even AnalysisThe break even of sales was calculated by determining how many casket covers needed to be sold to make net income zero. The biodegradable boxes are based on how many covers are sold. In the first year our projections were 6 covers and 108 biodegradable boxes whereas break even was 4 covers and 73 boxes. This gave us revenues of $87,000 and $58,593 respectively. As the years progress, we thought the funeral homes would use the covers more and those who have purchased covers in the past would continue purchasing more bio-boxes. This would make each year of sales for bio-boxes compounded. By year 5 we projected 50 covers and 3,004 bio-boxes with revenues of $1,251,000. The break even is 35 covers and 1,891 bio-boxes with revenues of $821,398. For the break even in years 1-5, refer to Table 5.1.

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Figure 5.1 Break-Even Graph

5.9 Net Present ValueThe net present value of the investment of 100% equity for this venture is $1,242,491.

5.10 Internal Rate of ReturnBased on 100% equity investment the internal rate of return is 336.7%.

5.11 External Rate of ReturnThe external rate of return for this venture is 80%. This was based on the termination of the business at the end of year 5, as much of the equity in the business survives by the owner.

6.0 SummaryCasket Covers is a alternative solution to an expensive funeral home while possibly maintaining the respectable quality funeral that consumers want. With its unique and patented product, Casket Covers will be able to grow into a … The business plans demonstrates that Casket Covers is a feasible venture and has a high return on investment.

24

Year 1 2 3 4 5Projected 6 10 20 36 50

Covers to Break Even 4 7 8 23 35

Price 10,000 10,000 10,000 10,000 10,000 Total sales 40,409 66,614 81,093 229,595 348,694

Number of Bio-Boxes/ye

ar72.74 192.64 387.26 984.21 1890.82

Price 250 250 250 250 250 Total sales 18,184 48,160 96,816 246,053 472,704

Works Cited

Mouhneeb. 2 Web Design, Saskatoon Interview. Monday,

November 2, 2009.

Rae, Kurtis. Mourning Glory, Saskatoon Interview. Friday,

25

November 12, 2010.

"The Daily, Wednesday, September 29, 2010. Canada's

Population Estimates." Statistics Canada: Canada's

National Statistical Agency / Statistique Canada :

Organisme Statistique National Du Canada. 29 Sept.

2010. Web. 02 Dec. 2010.

<http://www.statcan.gc.ca/daily-quotidien/100929/dq

100929b-eng.htm>.

"Trends In Funeral Service." Carnell's Funeral Home, St. John's, Newfoundland, Canada. Web. 02 Dec. 2010. <http://www.carnells.com/help-support-article.aspx?id=51>.

Welcome to Casket Depot. Web. 03 Dec. 2010.

<http://casketdepot.ca/woodcaskets.html>.

Appendices

Appendix A – Balance Sheet Balance SheetYear 2010 2011 2012 2013 2014

26

Current Assets Cash 1,713 35,702 156,796 239,361 341,379

Accounts Receivable 7,151 14,137 32,219 64,603 102,822

Total Current Assets 8,863 49,839 189,015 303,963 444,201

Non-Current Assets Patent 5,000 15,000 25,000 32,000 34,000

Furniture and Fixtures 5,000 5,000 5,000 5,000 5,000 Accumulated CCA (700) (2,200) (3,920) (5,776) (7,597)

Total Non-Current Assets 9,300 17,800 26,080 31,224 31,403

Total Assets 18,163 67,639 215,095 335,187 475,604

Liabilities Accounts Payable 2,279 5,353 8,510 24,461 43,039

Long Term Debt 0 0 0 0 0 Total Liabilities 2,279 5,353 8,510 24,461 43,039

Common Shares 10,000 10,000 10,000 10,000 10,000 Retained Earnings 5,884 52,286 196,585 300,726 422,565

Total Equity 15,884 62,286 206,585 310,726 432,565

Total Liab & Equity 18,163 67,639 215,095 335,187 475,604

Appendix B – Working CapitalYear 1 2 3 4

Cash 1,713 35,702 156,796 239,361

Accounts Receivable 7,151 14,137 32,219 64,603

Inventories - - - -

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Accounts Payable 2,279 5,353 8,510 24,461

Total Net Working Capital 11,143 55,192 197,525 328,425

Appendix C – Income Statement

Income StatementFor the year ended 2010 2011 2012 2013 2014

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Sales 87,000 172,000 392,000 786,000 1,251,000 COGS 36,600 82,600 145,200 387,500 725,800

Gross Profit 50,400 89,400 246,800 398,500 525,200

Operating Expenses Patent 5,000 10,000 10,000 7,000 2,000

Website and upkeep 0 5,100 100 100 100 Salaries 0 0 0 45,000 50,000

Employee Benefits 0 0 0 6,813 7,570 Travelling Expenses 1,000 15,000 20,000 25,000 30,000

Prototype Development 15,000 0 0 0 0 Miscellaneous Costs 435 860 1,960 3,930 6,255

Capital Cost Allowance 700 1,500 1,720 1,856 1,821 Debt Interest 0 0 0 0 0

Total operating Expenses 22,135 32,460 33,780 89,699 97,746

Taxable Income 28,265 56,940 213,020 308,801 427,454 Income Taxes 4,381 8,826 33,018 47,864 66,255

Net Income 23,884 48,114 180,002 260,937 361,199

Appendix D – Ratios

29

30

Year 1 2 3 4 5Gross Profit Margin 58% 52% 63% 51% 42%

Net Profit Margin 27% 28% 46% 33% 29%