Business plan - Ease-Stress De-stressing Stations - Full Report

Ease-Stress Express
De-stressing made easy

Business Plan
Course:
Center:
Instructor:

GM 600
Alpharetta
Prof. Tom Wichser

By:
Laurie Chester
Alessandro Lima
Pulkit Bhatnagar
December 18, 2010

Contents

Executive Summary

………

03

Company Profile

………

05

Organizational Structure

………

08

Marketing Plan

………

09

Competitive Scenario

………

19

Operations Plan

………

24

Financial Plan

………

37

Valuation

………

39

References and Image Credits

………

40

Appendices

………

42

Acknowledgement

………

49

Note: This Business Plan is prepared towards partial fulfillment of the course: Business Planning Seminar being instructed by Prof. Tom
Wichser for the November 2010 session at the Alpharetta campus of Keller Graduate School, DeVry University. The logo for Keller is
reproduced here as a student and not an endorsement by the School. The content of this report has been prepared by the authors and
without any intention of infringement or harm. Images and Data have been sourced through Google, and credits or references are included
where applicable. However, these may not be exhaustive and any other omissions can be pointed out and will be duly included. Also, the
authors plan to implement the business idea and hence any readers of this report should consider the contents of this report copyrighted,
proprietary and confidential. Any replication or usage for the purpose of commercial activity or business profit should be done only after
taking consent (in writing) from the authors.

Ease-Stress De-Stressing Stations – Business Plan

Page 2

Executive Summary:

Stress has become a major problem today. It leads to low productivity, as well as
mental and physical issues. Companies are losing $300 billion in profits each
year because of low productivity related to stress. Doctors are experiencing an
increase in the number of patients suffering from being overly stressed.

People are trying a variety of products to de-stress, buy these products have
various side-effects, or their costs may become prohibitively high. It has become
a necessity to produce a product that will be able to eliminate stress in a positive
manner and that can be used for a lifetime of stress management.

The answer to this problem is Ease-Stress Express’ De-Stressing Solutions. It is
not just a product, but an experience. It consists of a massage chair inside an
acoustically optimized cubicle with an LCD monitor and surround-sound. The
massage chair will gently relax muscles while soothing sights and sounds relax
the mind. Users will immediately feel refreshed, relaxed, and de-stressed.

The product can be customized to meet the specific needs of the user. It allows
an individual to choose a variety of sights and sounds that make each feel
relaxed. These include nature sounds, nature sights, music, motivational
lectures, or religious material and chants.


Page 3

The product will initially be marketed in the Atlanta, Georgia and Charlotte, North
Carolina areas. These locations have been chosen because of their strong
industrial and business concentrations. Innovative marketing strategies will be
adopted to make stressed out nurses, teaches, emergency workers, etc as
advocates of our product and thereby unleash positive word-of-mouth and build
credibility. Displays for customers to experience the product will be positioned at
airports, trade show, schools, doctor offices, and sports events. The product will,
in large part, market itself. Once customers experience the product and feel the
benefit, they will want one immediately. A social networking website will add to
the sharing experience of each user.

The office and warehouse will be located in Smyrna, Georgia. The company will
start with approx 20 employees including 4 management, 6 sales, and 10
operations. Each director has expert knowledge of business areas, so outside
professional assistance will be kept to a minimum, in the first year. Materials for
production will be purchased locally. Assembly is fairly simple, so there will be
little lead-times between purchase orders and delivery.

The result is a product that will be unique and in a niche by itself. We anticipate
high demand, and as we show in our financial section, the paybacks are within a
couple of years with high returns for investors.

All in all, we offer investors an opportunity of a lifetime.


Page 4

DeDe-Stressing Made Easy:
Ease-Stress Express, ESE, is a company which provides de-stressing stations.
These stations provide consumers with a way to de-stress, on their own time,
schedule, and in an environment where they want to. They are designed to allow
consumers the ability to have 30 minutes of uninterrupted time – time to relax,
unwind, meditate, and just leave all their worries behind. During this time, the
consumer can choose to take a 3-D adventure to a beautiful rainforest, quiet
waterfall, serene beach, or soar high above the clouds.

They could choose to

listen to motivational speeches or expert opinions on how to maintain a healthy
lifestyle. They could choose to listen to prayers and chants from their religion of
choice. Or – they could enjoy the powerful sounds of total, unblemished silence.
Any of this, while getting a relaxing gentle message using the company’s
proprietary ESE-stressTM technology. The choice is theirs.

A refreshed mind and a relaxed body is the perfect concoction for a productive
employee.

Whatever their choice, an employer can be certain that their employees will
return to their duties, rejuvenated and blissful. ESE’s solutions, not only help
users reduce stress so that they feel better personally, but have also been
proven in improving workplace productivity.


Page 5

What’s in a Name?

Ease-Stress Express, ESE, states the two main goals of the company in its
company name. The goal is to provide the customer with the ability to not only
ease their stress, but to do it on their own time and within the constraints of the
work environment. The name is designed to reflect the convenience that users
will feel while using the product, and the calmness they will experience after
each session.

Identification of Gap / Product Need:

Stress is one of the most significant problems that we face today; and somehow,
each day compounds stress-related problems even more. Family pressures,
social obligations, constant anxiety about the future, the list is endless! But for
most people - the top of the list belongs to work-related tensions and professionlinked worries. As more and more Americans are facing tough economic times,
more and more are bringing that stress to work with them, adding to their stress
at work. The cycle continues, when they take work-pressures home to create
more friction in an already fragile eco-system.

A few facts about stress in the work-environment:

•

1 million employees are absent on an average workday due to stress
related problems - National Safety Council estimate.


Page 6

•

78% of employees describe their jobs as being stressful.

•

75-90% of visits to primary care physicians are for stress related problems.

•

Stress can directly or indirectly be linked to heart attacks, hypertension,
diabetes, asthma, chronic pain, insomnia, allergies, headache, backache,
various skins disorders, cancer, accidents, suicide, depression, immune
system weakness, decreases in the number and function of white blood
cells, ad infinitum.

•

United Nations National Report even calls Job stress as the 20th Century
disease.

But the most important statistic for corporate America is:

•

USD 300 billion is lost annually, on stress-related compensation claims,
absenteeism, reduced productivity, employee turnover, accidents, health
insurance costs, and direct medical & legal expenses.

ESE’s

de-stressing

solutions

are

designed

to

help

employers

get

more

productivity out of their employees. Increased output per worker can result in
substantial revenue and profit growth for the organization. A de-stressed
employee can be an enthusiastic individual with their energy and motivation
acting as catalysts for other employees as well. ESE’s solutions are ideal for
individual employees who want to improve their quality of life and for employers
who wish to grow their businesses. ESE’s solutions are an investment that
managers recommend as they pay for themselves over and over again.


Page 7

Form of Company (LLC):

Ease-Stress Express will be formed as a Limited Liability Company. There are
several reasons for this decision. LLC’s offer advantages that will benefit the
company. Members will avoid double taxation by forming as a LLC rather than a
corporation. This pass-through of income will allow less paperwork for the
company and reduce the high costs of certified accounts that might otherwise be
needed. On-line forms are available to create an LLC, and this will also help keep
costs to a minimum while still adhering to legal and tax laws.

Organization Tree:

Chief Executive Officer
(Professional Manager)

Finance & Admin

Operations

Account
Managers

Production

Accounting

Online Presence

Forecasting

Corp Comm

Quality

Controller

Software &
Content

New Business
Development

Supply Chain

Financing

ERP / SCM / CRM


Technology

Strategy

Marketing

Page 8

Marketing Plan

Mission:

To create products of positive environment which provide customers
with an alternative method of reducing stress to enhance wellness
and business productivity.

Vision:

To become the leading non-drug stress relieving product company in
the industry.


Page 9

Marketing Mix:

PRODUCT

PLACE
PEOPLE

PRICE
PROCESS

PROMOTION
PHYSICAL EVIDENCE

Product:

Metal Framing
Acoustic Insulation
LCD Panel
Surround Sound

Recycled Plywood

Massage Chair

ESE offers products which give customers the ability to de-stress on their own
time, and in their own environment. Each de-stressing station consists of:

1. Fully-reclining,

leather,

whole-body

massage

chair

providing

a

comprehensive automated massage, with heating and vibration options.
2. A 6’x10’x8’ cubicle with acoustic insulation. (Optional)
3. A 30” LCD monitor on front-facing inside wall. (Optional)
4. A programmable touch-enabled LCD console to control all aspects of the
experience, with 1 TB memory to store music, audio, video and animation.
5. An acoustically-optimized headset to provide high-fidelity sound.


Page 10

Users can decide on how long they want to use the station or employers can fix
an upper time limit. Recommended activity time is 30 minutes to 1 hour. Users
also have the flexibility of choosing between a variety of music, motivational
audio lectures, 3D animations or high-definition videos that have been selected
by experts and are proven in relaxation therapy. The cubicle and monitor are
optional and are targeted towards work-environments where there is a lot of
noise and surrounding activity. These will be used for creating a sound-proof
ambience and to enhance the visual aspect of the experience.

Place:

Ease Stress Express will begin marketing in the metropolitan areas of Atlanta, GA
and Charlotte, NC in year 1. The combined population of these two metro areas
is over 7 million (Atlanta – 5.4 mn, Charlotte – 1.7 mn), and both cities have
witnessed significant growth in the last decade.

While Atlanta has the fourth-largest concentration of Fortune 500 companies and
is the primary transportation hub of the South-East, Charlotte has grown to
become the second-largest banking center in the US. A large number of
manufacturing giants have production facilities in these two cities. Similarly,
service industry companies are major employers as well. Both cities are well
connected by air, road, rail and are within a day’s driving from major US ports.
The two cities have also been relatively less hit during the economic downturn
and are expected to bounce back quicker than other US cities.


Page 11

The five year plan will first see ESE spread out into the South-East (in years 2 &
3), in the six states of Georgia, North Carolina, South Carolina, Florida,
Tennessee and Alabama. The target markets in these states would be decided on
the basis of home industries, employment rate, employee base, tourism
popularity, economic status, etc. The third phase of the rollout in years 4 & 5,
will see ESE’s coverage grow to the entire East Coast, and the states of
California, Texas and Nevada. The intent will be to target states and cities with a
high concentration of companies (CA, TX), as well as cities which are alternative
destinations for fun, relaxation and having a good time (NV, CA).

ESE’s manufacturing facility as well as our distribution center will be located in
Atlanta, Georgia. There are a number of prospective unused facilities that are
being considered. Negotiations are on with property managers and the final
choice would be made depending on the best deal offered.


Page 12

Price:

Pricing for the product will be based on a cost-plus model. The raw material,
labor and variable overhead costs will be covered by the price of the product and
a substantial margin would be added to recover the initial capital costs quickly.
Since the business works on a low initial investment, but very high working
capital model, therefore the product price will need to also account for shortterm financing costs.

There are three product categories: The “Regular” model will comprise of the
massage chair, the control console and the headset, and will be priced at
$12,000/- (incl. tax). The “Deluxe” model will comprise of an additional soundproof cubicle, and the price of the model would be $25,000/-. The target market
would be manufacturing and service setups which have a lot of physical activity
happening on their premises, which leads to high decibel levels. The “Elite”
model will include a 42” LCD screen and a vast selection of content. Since the
target market for this will be the CXO levels and high-end business users, the
price tag for the Elite model would be $50,000/-.

Price in $ per unit

Regular
Deluxe
Elite
-

10,000

20,000

30,000

40,000

50,000

60,000

The Deluxe model would come with six months of free upgrades available at 30day intervals. The Elite model would be offered with a two-year warranty, and
free upgrades every 30 days to new content added on ESE servers.

Page 13

Promotion:

The promotions strategy would be implemented in multiple phases.

The most critical aspect of the promotions strategy would be to generate positive
word-of-mouth publicity through viral marketing and innovative advertising
campaigns. A social-networking website would be at the crux of this strategy. A
representative webpage for a user is shown in the image below. This has been
explained in greater detail in the operations section. The target segment would
be centered around high-stress jobs like teachers, nurses, emergency services,
stock brokers, etc. Getting a positive reference from these would carry additional
credibility as these professionals desperately seek

methods to

de-stress

themselves during and after a hard-day’s work.

www.your-de-stress-zone.com
HOME
MUSIC
VIDEOS

GANDHI

GOSPEL

CHANTS

TRANCE

SAVED PROFILES

WATER

GANDHI

FRIENDS

REFER

BUY MORE

PARTNERS

Enjoying a massage & a motivational lecture by Gandhi.
Feeling better already.

MUSIC
WHAT FRIENDS FIND RELAXING
WHAT FRIENDS RECOMMEND

SIMILAR INTERESTS


Page 14

The initial plan would be to create awareness of our product and the advantages
of ESE’s de-stressing solutions in Atlanta and Charlotte. The Sales team would be
advocates of the products and would double-up as the Business Development
team. This would be a five member team serving different geographical areas.

A two-pronged awareness strategy would be used: 1) Direct 1-on-1 interaction
with CXO level executives and HR departments as well as soft-surveys with
employees in various formats about their interest in our product. 2) Nonconventional Trade-show participation – i.e. tying up with organizers for
providing free de-stressing stations and taking permission to distribute catalogs
& product flyers. Mobile billboards and mobile demo stations will also be
circulated through the city at peak traffic hours and will be targeting employees
with free demo sessions in parking lots, cafeterias, etc.

The second phase of promotions would coincide with the commercial launch of
the product and would be executed by having high-visibility demo stations at
increased footfall & wait-time locations like Airports, Hospitals, Dentists,
Government Offices, etc.


Page 15

The third phase of the strategy would come 12-18 months later, and would be to
have an all-encompassing media campaign to supplement the efforts of the
direct sales team. This media coverage will consist of billboards, promotional
material, radio, internet and television advertising. Expositions and Conferences
would still be a significant part of the promotions strategy. ESE will become a
member of the local Chamber of Commerce in both metro target areas, as well
as joining other groups, such as SHRM, which will grant access to C-level
managers and HR representatives.

Extended Marketing Mix

In addition to the original 4 P’s of marketing, an additional 3 P’s have been
added to make up what is known as the extended marketing mix.

People:

The people, who are initially making up the Ease-Stress Express, will be the
original owners that will recruit additional personnel for sales team and
operations. Incremental recruitment will be done through the operational year
with the scaling of business. Administration, finance & accounting, technology
and delivery personnel will be added as needed. Trainees, willing to work for free
but getting credit hours would be encouraged, and will form a significant part of
the work-force. This would allow us to keep manpower costs down.


Page 16

The customer segments to be targeted can be broadly classified as those in highstress jobs (like teachers, nurses, emergency services, etc) and high-waiting
(high-boredom) locations (like airports, hospital waiting rooms, post offices, etc).
A minor customer segment will be trade show participants (exhibitors can use
our massage chairs as a method to attract visitors to their booths).

Process:

The manufacturing process is explained in more detail in the Operations Plan.
The

responsibility

of

the

sales

process

(including prospecting,

pre-sales

marketing, actual sale, after-sales support, up-selling/cross-selling) by which the
product will reach the consumers will lie with the Marketing & Sales team.


Page 17

Cold-calling and pre-decided appointments will be part of the scheduling process
for the sales teams. Additionally, they will have to bear responsibility for the
initial awareness building and subsequent advocacy of the product. The entire
customer-approach to after-sales cycle is shown below. The sales team would
also be in-charge of after-sales support once the installation has happened at
customer’s facility. A basic functional understanding training module would also
be administered by the sales team during installation. Maintenance and warranty
will also be discussed at the time of installation.

Physical Evidence:

The tangible aspect and benefits of the product notwithstanding, there will be
additional elements associated with the service delivery, which will also be used
for customer delight. This will include continued follow-up with current customers
to ensure their satisfaction of the product and service.

Page 18

Regular updates for the software/content as well as periodic maintenance will
add to the life and value associated with the product. It is the word-of-mouth
advertising that will drive the success for the product. Another form of physical
evidence will be the demo sessions that will be offered at various trade shows
and conventions. A lively website and attractive marketing collaterals will also be
key physical evidence attributes.

Competitive Scenario:

While the narrower purview can be considered to include the wide range of
automated massage chairs; however the broader context would include any
activity or product that can relieve stress.

We carried out a representative survey to consider how people map the costs,
risks and side-effects associated with any stress-relieving techniques with the
corresponding benefits that the techniques bring. The summarized chart is given
below.

The survey consisted of a rating matrix that responders had to fill. The matrix
(with the average ratings) is shown below. We also asked the responders to list
some risks associated with each technique. This would explain important criteria
that people consider while doing a risk-benefit analysis related to any stressrelieving technique.


Page 19

IDEAL

High

Yoga,
Meditation

Recreation,
Sports

Drugs,
Liquor

Low

DE-STRESSING BENEFITS

ESEDe-Stressing Solutions

Church,
Religion

Pets

Medication
Food

Low

High

COST, SIDE EFFECTS

S. No.
1
2
3
4
5
6
7
8
9

Technique
Medication
Recreation / Sports
Alcohol / Drugs
Pets
Yoga / Meditation
Church / Religion
Food
Others
ESE Solution

1

2

3

4

5

6
X

X
X
X
X

7

8
X

9

10 Associated Risks
Side Effects, Addiction, Money, Health
Injuries, Cost, Convenience
X Consequences, Addiction, Social Status, Health
Commitment, Convenience, Lifestyle Change, Immediate Results?
Cost, Convenience
Choice, Convenience, Immediate Results?
Health, Weight, Cost, Overall Effectiveness?

X


Page 20

SWOT Analysis:

Strengths:
•

Local job creation.

•

Belief in company product.

•

Strong & unique value propositions - like
helping decrease job related illnesses,
increasing employee & company
productivity, increasing morale / job
satisfaction.

Weaknesses:

•

Direct / pre-existing contacts with CXO
levels.

Quick order-to-delivery cycle.

•

•

Made from local and / or recycled
material. (“green effect”)

•

Professional management leader
(founders are strong in their respective
areas – but lack management
experience).

Cheaper than other commercial stress
relievers (Gyms, Food, Drugs, etc.).

•

•

Customizable.

Opportunities:

Threats:

•

Potential to partner with other stressrelieving products to market to
customers.

•

Businesses trying to reduce overhead
may not be willing to purchase in
current economy.

•

Potential to partner with content
providers (Books, videos, digital
wallpapers, candles, herbal teas,
supplements, etc).

•

Lack of initial financing.

•

Other established stress-relieving
products.

•

Downward integration by becoming a
complete store for various de-stress
products.

•

Location / convenience of other stress
relieving products.

•

Global sales through a
franchising/licensing model.

•

Migration opportunities into a
licensing/content/software model for
getting sustainable revenues and high
profit margins rather than being
dependent on product sales.


Page 21

Porter’s Competitive Forces Model:

Bargaining power of Suppliers: (Risk – Low)
ESE will be purchasing materials and
components
through

that

many

can

be

different

bought

suppliers.

This allows ESE the advantage of
keeping costs down and prices at
levels that will allow us to meet our
target gross profit.

The possibility of easy substitution of suppliers will also keep vendors on their
toes, thus ensuring quality materials at competitive prices. Long Term Supply
Agreements and sourcing from low-cost countries/vendors will also add to the
profitability.

Bargaining power of Customers: (Risk – Low)

ESE will be able to obtain and retain customers through customer delight,
product differentiation and brand loyalty. ESE provides a unique market niche in
the stress relief industry. Since the universe of target customers is so large and
because the customer base will not be negotiating for orders together, therefore,
the threat of collective bargaining from customers to reduce prices or offer
higher value addition is minimal. However, ESE will be proactive to reach-out to
customers to incorporate their needs in a customized package to ensure
repeated customer-delight.


Page 22

New market entrants: (Threat Level - High)

There are many companies entering the stress relief product market. Most
concentrate on separate items such as candles, hand massagers, music, herbal
supplements, etc. These companies have low entry barriers for getting into the
market. However, companies attempting to enter the market to duplicate ESE
will have a relatively harder time due to financing requirements as well as the
late-mover disadvantage. ESE is also trying to build a strong Intellectual property
portfolio to discourage new market entrants, but till the time this is in place, the
risk from new market entrants remains high. We will be mitigating the risk by
utilizing our first mover status and quickly building mind-share and market-share
to entrench ourselves in the market-space.

Substitute products: (Risk – Low)

While there can be many stress-relieving products or lifestyles, there are few
true substitutes for the ESE product. ESE is a unique experience that provides
multi-dimensional relaxation by incorporating sight, sound, and touch-related
relief at the same time that cannot be gained by using individual products offered
by other businesses. Hence, the threat from substitute products is low.

Traditional Competitors: (Risk – High)

The stress relief market is an ever-increasing one.

It is anticipated that

companies will continue to produce new products and various nutritional methods
for reducing stress. Lifestyle changes can also be considered as traditional
competitors. These pose a high threat level.


Page 23

Operations Plan
Facilities:

Location:

The manufacturing plant will be located at Olympic Industrial Blvd, Smyrna, GA.
This location is very near I-75 and I-285, giving us an advantage of easy access
to several roads. This location will also allow us to offer a faster delivery to
customers located in Georgia and neighbor states.

The space to be utilized for the assembly facility is actually part of a leased
property, and the owner will be sub-letting 14000 sq. feet. for our operations.
Another advantage of the facility is a back-door access directly to a rail-road
which will allow us to move goods and products quickly when we expand into
other geographies.

Proximity to raw material vendors is
another key reason for selection of
this property.


Page 24

The assembly facility will have a total 14000 sq ft to be internally divided as:

6500 sq ft for assembling area;

•

3300 sq ft for inventory;

•

2000 sq ft for quality testing;

•

1300 sq ft packaging & delivery;

•

700 sq ft for offices; and

•

200 sq ft for lunch area.

Office
space

•

A showroom will be located in Buckhead or Alpharetta, where there are high
concentrations of corporate offices and high-end hotels. The showroom area will
have 2000 sq ft, in which, 1600 will be designated to the showroom and 400 sq
ft will be converted into offices, including a small meeting room of 200 sq ft.

Cost of Facilities:

The assembly plant located in Smyrna will have a starting lease of 3 years, with
provisions to extend it by another two years. The first six months have been
negotiated to have zero rent and for the balance duration of the contract, the
rent has been negotiated at $3,000.00 per month – which is nearly 50% of the
current market prices. The lease at the showroom location will be for 1 year, with
an option to renew annually. The monthly payment negotiated is $5,500.00
($66,000 for the whole year).

Equipments:

The company will be purchase different items for both locations. For the
Showroom space, all the office supplies and furniture can be bought after a price
comparison between stores like: Office Depot, Staples, Ikea, and Office Max.
Laptops and laser printers will be purchased from HP or Dell.

Showroom Equipment:

Equipment
Laptops
Desks
Executive chairs
Regular chairs
32” TV monitor
Couches (waiting area)
Cabinets
Laser Printer
Offices supplies
Total

Quantity

Price

Total

4
5
4
12
1
3
8
1

$600
$250
$300
$120
$350
$500
$150
$400

$2,400
$1,250
$1,200
$1,440
$350
$1,500
$1,200
$400
$600
$10,380


Page 26

Assembly plant Equipment:

For the assembly location in Smyrna, the equipment will be purchased from
different stores, as below:

•

Power tools, Compressors, Miscellaneous Tools – Home Depot, Lowes or
Arbor Freight;

•

Tables and chairs – Costco or Sam’s Club;

•

Steel shelves – Cisco Eagle;

•

Metal Cabinets, Office supplies, Office chairs, Office supplies – Office
Depot, Office Max, Quill;

•

Delivery Truck – private sellers (Isuzu NPR HD);

•

Laptops and Laser Printer – HP or Dell.

Equipment
Power Tools
Lunch area tables & chairs
Steel Shelves
Metal Cabinets
Delivery Trucks
Compressors
Miscellaneous Tools
Office chairs
Laptops
Laser Printer
Office supplies
Total

Quantity

Price

10
8
2
2

$600
$270
$30,000
$650

4
4
1

$120
$550
$400


Total
$11,800
$380
$6,000
$2,160
$60,000
$1,300
$3,000
$480
$2,200
$400
$400
$88,120

Page 27

Estimated Costs at Startup:

Item

Price
$4,000
$98,500
$2,600
$1,000
$84,000
$8,000
$100,000
$4,500

Utilities (monthly)
Equipments (once)
Corporate Website (once)
Phone (monthly)
Leases (1 year)
Construction Supplies (once)
Inventory
License & Permits
Total

Total
$48,000
$98,500
$2,600
$12,000
$84,000
$8,000
$100,000
$4,500
$357,600

Permits:

To being operating an assembly facility in the city of Smyrna, the company will
have

to

contact

the

Business

License

Division

that

administers

business/occupation taxes; and then apply for the city’s business license.
Generally, business license fees or occupation taxes are based on projected gross
revenue derived by the business from within the State of Georgia for the
calendar year or the total number of employees operating from the Smyrna
location in the state of Georgia. The fee charged is the larger amount from the
two fee schedules ("Business license guide," 2007).

Before opening the showroom in downtown Atlanta the following procedures
have to be done: apply for the Business Tax Certificate, which are issued on a
calendar year basis and must be renewed each year by February 15th; register as
a new business; verify zoning laws – if any modifications are needed, then an
application needs to be made.


Page 28

Business and Occupation taxes for the city of Atlanta are based upon total
reported gross receipts generated from the business location within the State of
Georgia. The tax for the current year is based upon actual gross revenue.

Taxes are computed (after a Flat Tax of 50.00 for the $10,000) by using the rate
appropriate to your Business Tax Class. The business will be assessed on
maximum gross revenue of $100,000,000 in any one-tax year ("Business license
tax," 2010).

Production Plan:

Production of an ESE de-stressing station will start after a sale has been made,
and the customer has submitted a formal Purchase Order. Every de-stressing
station will be individually built after receipt of the order. This allows us to offer
our customers a choice of three types of stations (Regular, Deluxe and Elite) as
well as to minimize our inventory requirements. Since the factory is located next
to the material suppliers, there would not be a long lead-time for receipt of
correct raw materials – this would keep our materials inventory levels down too.

Production will be divided into the following stages: order receipt, inventory
check, supplies order, manufacturing, mid-inspection, repairs, finished goods,
second inspection, quality control, packaging and Ex-Works. These stages have
been defined in brief below.


Page 29

Order receipt: At this stage, the sales department will inform the production
line that a sale has been made and a Purchase Order has been received. The
sales person will specify the model and the expected date of delivery.

Inventory check: Once the order receipt is received and complete, the
inventory will be checked to find all necessary parts, and to keep these ready.


Page 30

Order balance supplies: In case of any missing parts to complete the unit,
these will be ordered from the neighboring suppliers with a 24-hour revert time.

Inspection: All ordered parts will be inspected on receipt. Parts will be tested
for flaws and quality defects.

Assembly: After all necessary parts are available, workers will start to build and
assemble the walls (sides) and the ceiling. The metal framing and acoustic
materials will be installed as per the unit ordered.

Mid testing: Phase 1 testing would include checking the structure sturdiness
and the acoustic insulation. Necessary tests will be done for the same. These
procedures will ensure elimination of problems that can prove costly in terms of
money and time at the end.

Repairs: If there are any faults identified, the corrective repairs will be carried
out before continuing. After completion of the necessary repairs a retest will be
done, to certify that everything runs normally.

Finished Goods: This is the stage where assembly will be complete, including
surround-sound speakers inside the cubicle; and LCD consoles testing with the
massage chair as well as the LCD TV + remote.

Quality Control: An independent assessment from a non-production team
member will be done to test various aspects of the de-stressing unit.

Packaging & Delivery: Each component will be disassembled, packaged and
transported carefully to the customer premise for final installation.


Page 31

Assembly time estimation:

When a customer places an order, the estimated sales-to-delivery cycle for each
order will be as following:

Model

Estimated Production Time

Estimated Delivery & Installation Time

Regular

2 weeks

1 day

Deluxe

2.5 weeks

2 days

Elite

3.5 weeks

3 days

Estimated cost of production:

Model
Regular

Components
•

Cost of Production

Gross Margin

$ 7,800/-

35%

$ 16,500/-

34%

$ 22,500/-

55%

Completely reclining, plush leather,
fully accessorized massage chair.

•
•
Deluxe

LCD Console
Acoustically optimized Headset

•


•

LCD Console.

•

Metal-framed, recycled-plywood,
sound-proof box.

•

Acoustically-optimized surround-sound
speakers.

Elite

•


•

LCD Console.

•

Metal-framed, recycled-plywood,
sound-proof box.

•

Acoustically-optimized surround-sound
speakers.

•

Turkish carpet.

•

30” LCD panel with remote.


Page 32

Production Quantity Estimation:

Management has a sales forecast of 300 Regular model de-stressing stations for
the whole year of 2011. The Deluxe model has a sale forecast of 90 units.
Finally, the Elite model has a sales forecast of 12 for the entire year. Additionally,
another 20 Elite units will be needed in the first month of operations to act as
demonstration and marketing units – these will be considered as inventory.

Based on these numbers, production of the stations will have to be fast, thereby
leaving room for no errors. Thus, an efficient workforce and work process will be
of paramount importance. Assembling the right manpower, doing proper
scheduling and correct labor division among workers will help to improve
efficiency of the company’s operations.

The production plan will be to assemble 10% extra units as a safety buffer. Thus,
Regular models assembled would be 330 units, 100 Deluxe models and 34 units
of the Elite models (incl. 20 models for inventory/marketing/demonstration).

Workforce:

Initially, the operating team would comprise of:

Production/Assembly line: 10 employees (incl. 2 for Quality Control and 2 for
Packaging).

Installers: 6 employees to move around and assemble the finished product at
the customer’s location (incl. 2 drivers).

Page 33

Inventory:

Our inventory will be using the JIT (just in time) system. This system will allow
our company to buy the necessary materials when we have a new order.

Thus, inventory & warehousing costs will be low. However, an emergency supply
of all items would be maintained as buffer stock. Additionally, 20 Elite models
that will be used for marketing and demonstration purposes will be considered as
inventory and will contribute to the inventory costs.

Using this system will provide us with the benefit of minimizing any inventory
taxes at the end of the fiscal year, which is the law in Georgia – a huge
disadvantage for starting businesses.

Suppliers:

The company will initially maintain a few choice suppliers – which are within the
immediate proximity of the company’s facility. As market share increases, ESE
management will look towards suppliers in low-cost economies. Also, long-term
supply agreements and economies-of-scale discounts would be negotiated.

The following list gives the names of the initial suppliers:

•

Metal framing – Dietrich UltraSteel Framing

•

Acoustic Insulations – Dynamat

•

Recycled plywood – Home Depot


Page 34

•

Fabrics – Charlotte Fabrics

•

Massage chair – Brookstone

•

30” monitor – Brands Mart

•

Surround sound systems – Brands Mart

Delivery & Assembly:

Delivery will be done by the company’s trucks with the company’s own delivery
team, which are also the installers. A team would be comprised of 3 trained
installers (incl. 1 doubling up as driver). The trucks will be equipped with GPS to
avoid any delay in the delivery process.

Both trucks will be internally prepared to accommodate all parts, with proper
packaging done - so that any transportation-related damage is minimized. In the
trucks, all sides will be covered with expanded polystyrene foam; the floor can be
covered with heavy duty carpet.

Each de-stressing unit’s sides and roof will be wrapped in plastic bubble-wrap to
prevent any damage while transporting. The chair and other items would be
wrapped in moving blankets & boxes and further ensconced in heavy bubble
plastic.

Installers will be trained to minimize wastage of packing material, so that the
same material can be re-used, thereby reducing packaging costs.


Page 35

Warranties, Upgrades, Support:

Standard warranties of 1 year will be given for all models. The warranties will
cover parts failures, workmanship and assembly of the station. Any other issues
such as misuse or intentional damage will not be covered. Extended warranties
will be available to purchase for all customers after the first year of use.

A customer will be always allowed to upgrade the station, without having to buy
a whole new unit. This customer will have to pay only the price difference for the
upgrade. Also, for the Elite model customers, they will receive 6 months of free
software upgrades in 30 day intervals.

Tech support or training will be offered to those customers that purchase any
Regular or Deluxe model at the time of installation. Customers buying the Elite
model will receive the same tech support and training at the installation, plus 30
days free of charge tech support over the phone.


Page 36

Financial Plan:

ESE intends to do gross sales of $ 6.45 million in its first year of operations. We
are also projecting a 5 year compounded annual growth rate of 45% to reach $
41.6 million in 2015, which will be our fifth year of operations. As explained in
the preceding sections, the growth curve is expected to remain steep because of
the way the sales territories and market share will be increased.

The company is also looking at gross margins of 35% - 37%. With increased
production efficiencies and economies of scale, there is a further possibility for
higher gross margins. The Net profit (after tax) is expected to be $ 470,000 for
the first year, with 2015 net profit projected at $ 6.5 million (16% margin).

Page 37

This is a very healthy margin for a production/assembly company. However, it is
not as high as pure-play software or content companies. The long term financial
goal of the company is to move towards even higher profit margins to emulate
the software sector. Since, the company’s strategic vision is also to move
towards a more software-focused and social-network oriented model to garner
sustained revenues, hence a further upside to profit margins should be expected
by investors.

The company is also maintaining a healthy net cash flow over the five years.
While the first year will have some negative cash flows on account of initial
inventory building and marketing expenses, the subsequent years will witness
good cash flows. Also, the ending cash balances will steadily keep increasing.

Efficient use of cash will include repaying debt early, buying out equity partners
and looking for quicker international markets investments.

Page 38

Initial Investments:

The four partners will initially be pooling in $25,000 each to make a pool of
$100,000. We have also been able to secure $400,000 in SBA Financing (Small
Business Administration) from Bank of America at very healthy interest rates. An
additional $500,000 is being sought from angel investors to take the paid-up
capital to $600,000 and initial cash available at $1 million. The money will be
used for buying equipment, working capital needs and for payment of salaries.

Valuation:

We have used the Gordon Model to calculate the value of the business at the end
of year 5.

Terminal Value = (Cash Flow of the Terminal Year) * (1 + g) / (ks - g)

g = annual constant growth rate of cash flow

= 3%

ks = discount rate required by investors

= 40%

Cash Flow Terminal Year

= Year 5 cash flow = Year 5 net after tax

income plus year 5 depreciation)

Therefore, company value

= 6,533,135+130,159 = $ 6,663,294.

= $ 6,663,294 * (1+3%) / (40%-3%)

= 18,549,169/-

= ~ $ 18.5 mn.

This is approx 3x of Net profit and 7x of Net Cash flow for Year 5, which is also
as per Industry Standards.


Page 39

References:

City of Atlanta, Business Tax Division. (2010).Business license tax instruction manual. Atlanta, GA:

Marietta City, Business License Division. (2007).Business license guide. Marietta, GA:

Employee

Energizer.

(2010).

Employee

Energizer

Facts.

Stress:

Expensive

Retrieved

November

2,

2010

from

http://www.employeeenergizer.com/ee_facts.php

Hareyan,

A

(2004,

August

7).

Workplace

Stuff.

Retrieved

November

9,

2010

fromhttp://www.emaxhealth.com/38/473.html

Pohl, C (2010 , October 19). Less Stress, More Profit – The Value of Corporate Stress Management Training. Retrieved
November

9,

2010,

from

http://www.evancarmichael.com/Work-Life/1877/Less-Stress-More-Profit--the-Value-of-

Corporate-Stress-Management-Training.html

Wittern, M (2007, February 6). $300 Billion Cost of Workplace Stress.

Retrieved November 9, 2010 from

http://denver.yourhub.com/Parker/Stories/Business-News/Story~179652.aspx

Image credits:

Company Logo - http://artandbusinessconsulting.com/services_we_offer.htm

Massage Chair - http://image.made-in-china.com/2f0j00HevTGCRaRPkE/Deluxe-Massage-Chair-DF-1688F5-A-.jpg

LCD panel - http://www.bhphotovideo.com/c/product/716857-REG/NEC_P551_AVT_S521_AVT_LCD_Display.html

Office table - http://t3.gstatic.com/images?q=tbn:2IEDxehzPOMO1M

Business

Traveler

–

http://static-

p4.fotolia.com/jpg/00/08/05/43/400_F_8054368_Zm9xzZaLx5jNe8g7cx25JqcrvhdLcQT1.jpg

Trade show - http://www.tucsonexpocenter.com/images/trade_show-3.jpg&t=1

Tired nurses: http://news.rutgers.edu/focus/issue.2007-11-27.8621072070/nurses_-_tired.jpg

Happy Nurse: http://www.plu.edu/~beckersl/img/nurse.jpg

Tired teacher: http://www.crossdaily.com/pictures/105/T/Tired_Sunday_School_teacher_105050473.jpg

Happy teacher: http://www.wcasd.net/literacy/Teacher%20reading.gif


Page 40

Angry business traveler - http://www.featurepics.com/FI/Thumb300/20100219/Airport-Delay-Cartoon-1464671.jpg

Business traveler - http://s3.amazonaws.com/pixmac-preview/000045626437.jpg

Tired employee - http://www.lrionline.com/wp-content/uploads/Stressed+out_1727_18802195_0_0_9206_300.jpg

Happy

employee

-

http://t1.gstatic.com/images?q=tbn:Ua3lBZnkSSplZM:http://images.clipartof.com/small/31322-

Clipart-Illustration-Of-A-Happy-Red-Haired-Computer-Geek-Man-In-A-Blue-Suit-Working-On-A-Computer.jpg&t=1

Nurse: http://comps.fotosearch.com/comp/UNN/UNN590/medical-clothing-chart_~u14431432.jpg

Firefighter:

http://www.clipartreview.com/_images_300/A_firefighter_running_with_a_fire_hose_100326-154761-

914009.jpg

Cops:

http://t0.gstatic.com/images?q=tbn:KMZkyDChZKYZCM:http://images.clipartof.com/small/31326-Clipart-

Illustration-Of-A-Male-Caucasian-Police-Officer-Standing-Proudly-With-His-Black-Female-Partner.jpg&t=1

Teacher: http://www.cartoonclipartworld.com/school/images/77002_500.jpg

Employee:

http://drbenito.co.uk/wp-content/uploads/2010/03/0511-0703-0118-

4212_businesswoman_multitasking_clipart_image.jpg

Plane: http://www.airventures.net/Portals/2/plane%20clipart.jpg

Waiting room: http://www.fotosearch.com/bthumb/IMZ/IMZ007/rhu0021.jpg

Mobile billboards - http://www.guerrillabillboards.com/mobile-billboard-images/madeyoulook-mobile-outdoor-advertisingtruck.jpg

Airport lounge - http://www.holidayextras.co.uk/images/hximages/airport-lounges/stansted-lounge-3.jpg

Trade show massage - http://www.mymassageguy.com/Images/chair.gif

Facility

photo+layout

-

http://www.loopnet.com/xNet/MainSite/Listing/Profile/Profile.aspx?LID=16845962&SRID=1306301738&StepID=101


Page 41

Appendix A:

Sales Projections – Year 1.

Appendix B:

Sales Projections – Years 1 to 5.


Page 43

Appendix C:

Projected Income Statement – Year 1.


Page 44

Appendix D:

Projected Income Statements – Years 1 to 5.


Page 45

Appendix E:

Projected Cash Flow Statement – Year 1.


Page 46

Appendix F:

Projected Cash Flow Statements – Years 1 to 5.


Page 47

Appendix G:

Projected Balance Sheet Statements – Years 1 to 5.


Page 48

Appendix H:

Selected Financial Ratios.


Page 49

Acknowledgement
A Spanish missionary was visiting an island when he came across three Aztec priests.
“How do you pray?” the missionary asked.
“We have only one prayer,” they answered. “We say, ‘God, you are three, we are
three. Have pity on us.’ ”
“A beautiful prayer,” said the missionary. “But I’ll teach you one even better.”
The padre taught them a prayer and then continued on his path of evangelism. Years
later, when he was returning to Spain, his ship stopped again at the island. From the
deck, the missionary saw the three priests on the shore and waved to them.
Just then, the three men began to walk ON the water toward him.
“Padre! Padre!” cried one of them, approaching the ship. “Teach us again that
prayer which God heeds. We have forgotten how it goes.”
“It doesn’t matter,” responded the missionary, witnessing the miracle.
Similarly, a teacher is not one who educates, but one who can make his students understand the
magnitude of his teachings. A teacher is never petrified to lead by example but also knows when
to step back into the shadows and allow his students to develop into their own persona and spirit.
A teacher is always ready to guide but is modest enough to listen to any silly idea his students
put forth.
We are grateful to Prof. Tom Wichser who personifies these virtues and who has guided us
through this project. He gave us a free hand allowing us to learn from our mistakes, while at
regular intervals kept making astute observations which helped us navigate through ubiquitous
information for this significant project.
We would also like to thank Lisa Rogers, who started off with the group and gave some very
valuable inputs to the plan, but had to leave midway for personal reasons.

Laurie Chester
Alessandro Lima
Pulkit Bhatnagar

Business plan - Ease-Stress De-stressing Stations - Full Report

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