Executive Summary of Start Up of "Your House, Your Dream" - interior design turnkey solutions in China

1. 1 Executive Summary
Mission “Your House, Your Dream” is a retailing company of interior design products
Statement which aims to become a national champion in the Italian market and the “Italian
interior design brand” in the Chinese market.
The Market Market potential is attractive due to overall dimension and growth rates.
Chinese market is growing appox. 20% YoY basis related both to the high
speed development of real estate in urban and rural areas, and to renovation
waves driven by new interior design trends: overall market potential is
approximated at 28 B€ in 2010, and high end products have increased
penetration due to increasing wealth conditions of Chinese population. Italian
market presents a general stability (+1% YoY growth; market value 2008
approx. 13B€) with a general product switch tendency towards low-cost and
“green” products.
The Business The business model of the company operating both in the Chinese and in the
Model Italian markets leveraging on arbitrage opportunities arising from the two
markets:
§ Economic arbitrage of China, selling high-quality / low cost Chinese
products to Italian mass market customers through a differentiation
strategy, increasing the perceived value of the product offered retailing the
products using high-quality showrooms and offering value added services
to the customer (i.e. interior design, installation, financial services, etc.)
§ Geographic arbitrage of Italy, selling Italian design to Chinese VIP
and high wealth customers through a strong differentiation strategy,
leveraging on the high value assigned by Chinese customers to Italian high-
end products and Made in Italy brand, offering design & architecture
services combined to interior design products and value added services
marketed through high-quality showrooms and design offices.
Centralized operations and logistics through hub-and spoke regional hub
model will enable general inventory optimization and logistic costs. The regional
hubs will be located close to national harbors and able to connect efficiently
shops located in the same area.
Marketing investments will be made using an integrated marketing campaign
approach, increasing general brand awareness and enhancing visits in local
showrooms. Customer days will be main selling promotion tools, where
customers attracted with direct marketing campaigns will receive tailored offers
on a single-day basis.
Competition Competition in the markets is not strong due to the structure of the industries in
the two countries. On the Italian market high level of fragmentation is the main
characteristic of competition which enables new-comers with a strong vision and
potential to enter the market: the first 200 retailers in Italy account for approx.
20% of market value. The Chinese market reveals competition on the mass
consumer segment of the market, where international players compete adopting a
“Cash and Carry” model; low level of competition and fast growth rates on the
high-end market reveal low entry barriers and entry opportunities.

2. Management The company starts up with a strong and sound management team, capable of
Team covering management and technical competences in both target markets. All
managers presently involved have an MBA preparation and specific
competences to cover the position assigned: CEO has 10+ years work
experience, 6 years of strategic consulting background (Boston Consulting
Group, Ersnt & Young) and has been sitting on boards of companies operating in
the retailing of Building Materials in Italy; CEO China has 7+ years work
experience, and profound knowledge of the Chinese market given by previous
experiences as Internal Consultant or Marketing Expert; Business Development
Manager Italy has 7+ years work experience 5 of which in BD in several
industries or as sales coordinator. Added to the management team, a Technical
Advisor with 30+ years experience in the industry and specific competence in
start-ups in the interior design industry will facilitate marketing, sales and
operations in the start-up phase. All the management team has agreed to cut
their actual salary of 50% in order to facilitate start-up of the business:
management equity will be available if operational and financial targets will be
matched.
Financial Financial and operational goals are challenging but feasible with the market
and opportunities: 85 shops and 7 logistic warehouses to be opened in 6 years time
Operational (2015); presence of the company in 4 Chinese provinces and 6 Italian regions
Goals by 2015; break even of the company in 3 years time; 170 M€ turnover, 10%
EBITDA margin, stable ROI ~ 30% and ROE ~ 50% in 6 years time (2015);
dividend payout ratio of 50% from year 5 (2014) with ~ 6 M€ paid in period
2010-2015.
Funding Operations will be funded through a three wave funding plan for a total estimated
funding plan of ~ 11 M€
§ Partnership phase: ~ 3 M€ raised through business angels and VCs
and partnerships with Italian retailing company, Chinese producers and
international logistic company: such partnerships will contribute to the
sensible reduction of the working capital required for operations through
stocks on sales account. Minimum investment offered to shareholders is 5 k€
and maximum investment in 30% of the shares of the company. In addition to
money raised, negative working capital, mainly driven by the Italian long
trade payables both for goods sold and for showroom equipment, will sustain
funding requirements to carry on the investments planned
§ Institutional Investors and Management Equity: massive shop and
warehouse opening plan and marketing investments in general brand
recognition of the firm require increase of equity through new share
emission. Such shares will be offered to current shareholders or institutional
investors in order to raise ~ 5 M€: potential new investor will be enabled to
acquire up to 30% of the company with the payment of a premium price.
§ Debt raising: in order to take advantage of financing opportunities on the
debt market, the company will borrow money on the Italian financial market,
changing the overall capital structure of the firm to a 25%/75% composition.
An estimated value of ~ 3 M€ has been budgeted
Listing of the The company general plan is to go public by the end of 2016, providing an exit
company strategy to all potential investors involved.