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Do you want to start furniture business?
Are you planning to start a furniture business? Well the furniture manufacturing industry requires a lot of capital, manpower and related knowledge but the rate of return you get after investing in this business is simply worth the efforts.
The biggest advantage in starting this business is that furniture is one of the basic necessities of people hence it is a widespread market which keeps blooming throughout the year. And many outclass people also don’t mind to change or update their furniture every now and then.
The first thing before starting any business is to write a comprehensive business plan which establishes the basis of your company’s future operations and decisions, in this will help business consultants. It also provides detailed guidelines about everything you will be doing in the next few years.
If you are wondering how to write an effective business plan then here we are providing you the business plan of a furniture startup named ‘The Wood House’.
Executive Summary
2.1 The Business
The Wood House will be an American furniture manufacturing company located at the outskirts of Wesley Chapel, a village in Caldwell County of North Carolina. The company will be licensed to buy wood from the authorized wood suppliers from the Croatan National Forest, North Carolina and hence we are strategically located at the best available site for a furniture production factory.
The business will be owned and operated by Rick Doug. Rick did his Bachelors in Industrial Engineering from the University of Michigan. After his studies he worked in several furniture companies in the US and has been serving as the director operations at IKEA-US for the last 5 years.
Rick’s father runs a carpentry firm providing various carpentry services throughout the state of North Carolina. It is due to his experience in furniture industry and the similar nature of family business that Rick knows every tiniest bit of detail about how to start a furniture making business.
2.2 Management
The Wood House will be primarily a supreme-class furniture producer. Rick has already acquired license to procure Beech, Oak and Mahogany wood from the Croatan National Forest and some other sources. The company will be initially launched as a small business furniture mainly operating in two units, a major production facility in Wesley Chapel and a small company office in Charlotte, North Carolina which will be overseeing the distribution of products.
Other than these two main units, the Wood House will also open three display centers located in Washington, Chicago and Houston.
2.3 Customers
The company aims to serve the residential and commercial zones of the cities containing its outlets along with exporting its products to other major cities as well.
2.4 Target of the Company
The company aims to provide latest and innovative supreme-class furniture to its customers. Rick’s target is to become one of the leading furniture manufacturers of the US within next ten years of the launch.
Company Summary
3.1 Company Owner
The Wood House will be owned and operated by Rick Doug who has been in furniture industry for the last 20 years. Rick has been planning this startup for the last couple of years and, thus, has all resources including the right knowledge for starting a furniture company.
3.2 Why the Business is being started
Rick has always wanted to bring innovations in the traditional furniture products being used everywhere. He had some amazing innovative ideas in his mind which could not be applied by working in some other company, though holding an executive position. That’s why Rick had been planning his own business for the last couple of years. He aims to revolutionize the world of furniture by introducing foldable compact furniture products to minimize their space usage in homes.
3.3 How the Business will be started
Rick has planned everything about his business. He hired professional experts from various fields to help him craft a detailed map about his business. The financial experts have forecasted following costs for expenses, assets, investment, and loans for the Start-up.
The detailed start-up requirements, start-up funding, start-up expenses, total assets, total funding required, total liabilities, total planned investment, total capital and liabilities as forecasted by experts, is given below:
| Start-up Expenses | ||
| Legal | $72,500 | |
| Stationery etc. | $62,250 | |
| Brochures | $62,875 | |
| Consultants | $0 | |
| Insurance | $32,750 | |
| Rent | $222,500 | |
| Research and Development | $32,750 | |
| Expensed Equipment | $632,750 | |
| Signs | $112,250 | |
| Building Materials | $272,500 | |
| Building Labor | $202,000 | |
| TOTAL START-UP EXPENSES | $1,732,125 | |
| Start-up Assets | $0 | |
| Cash Required | $1,318,750 | |
| Start-up Inventory | $52,625 | |
| Other Current Assets | $222,500 | |
| Long-term Assets | $1,725,000 | |
| TOTAL ASSETS | $1,321,875 | |
| Total Requirements | $2,495,000 | |
| START-UP FUNDING | $0 | |
| START-UP FUNDING | $2,173,125 | |
| Start-up Expenses to Fund | $1,321,875 | |
| Start-up Assets to Fund | $1,495,000 | |
| TOTAL FUNDING REQUIRED | $0 | |
| Assets | $1,203,125 | |
| Non-cash Assets from Start-up | $1,118,750 | |
| Cash Requirements from Start-up | $0 | |
| Additional Cash Raised | $1,118,750 | |
| Cash Balance on Starting Date | $1,321,875 | |
| TOTAL ASSETS | $0 | |
| Liabilities and Capital | $0 | |
| Liabilities | $0 | |
| Current Borrowing | $0 | |
| Long-term Liabilities | $0 | |
| Accounts Payable (Outstanding Bills) | $0 | |
| Other Current Liabilities (interest-free) | $0 | |
| TOTAL LIABILITIES | $0 | |
| Capital | $0 | |
| Planned Investment | $0 | |
| Investor 1 | $3,312,500 | |
| Investor 2 | $0 | |
| Other | $0 | |
| Additional Investment Requirement | $0 | |
| TOTAL PLANNED INVESTMENT | $495,000 | |
| Loss at Start-up (Start-up Expenses) | $1,173,125 | |
| TOTAL CAPITAL | $1,321,875 | |
| TOTAL CAPITAL AND LIABILITIES | $1,321,875 | |
| Total Funding | $2,495,000 | |
Services for customers
The Wood House will be manufacturing following supreme-class furniture products for its customers:
- Single and double beds
- Sofas and luxury wooden chairs
- Study and dining tables
- Drawers and chests
- Desks and office chairs
- Bookcases and cabinets
Rick has started the furniture business to introduce space-efficient foldable furniture products for minimizing space usage along with the commercial production of usual furniture products. The company will also offer repair and maintenance services like polishing and glazing of old furniture.
Marketing Analysis of furniture business
Note
he most important part in developing an effective furniture business plan sample is its marketing analysis that’s why Rick hired the services of marketing experts to help him develop a good furniture business plan. He also went through various plans before making his own plan of starting furniture business.
The success of a startup totally depends upon how it markets itself to target its specific customer groups. A successful marketing strategy for business can only be developed after knowing the target audience and potential customers. Our marketing experts carried out at extensive research to identify our target customers and develop a unique marketing strategy to attract them.
5.1 Marketing Segmentation
The Wood House’s target customers vary from individual buyers to multinational retail stores. We have identified following type of target audience which can become the future customers of our products.
The detailed marketing segmentation of our target audience is as follows:
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5.1.1 Individual Buyers:
The Wood House will open three display centers, initially, in the first year of its startup in Washington, Chicago and Houston. The purpose of these showrooms is to attract individual buyers residing in these areas. All of these cities are well established and comprise of well-off people that’s why they can easily buy our products. We have specifically design luxurious products to target this wealthy community. These individual buyers are expected to buy the biggest portion of our projects.
5.1.2 Institutions:
We will directly supply our furniture products mainly chair, cabinets, and desks to various educational institutions along with courts, churches, hospitals, municipal authorities and other institutions located in our three targeted cities.
5.1.3 Departmental Stores:
The wood House will also supply its products to various departmental stores and mega malls located in the major cities of America. These departmental stores will also display our products along with the products of various competitors and will be our second-biggest consumer after the individual buyers.
5.1.4 Businesses:
We will supply office furniture to various companies, offices, and businesses based in our three target cities especially Washington.
5.1.5 Maintenance Services:
We will offer repair and maintenance services like polishing and glazing of old furniture to our various customers. For this purpose we will allocate a special staff in our display centers located in targeted cities.
The detailed market analysis of our potential customers is given in the following table:
| Market Analysis | |||||||||
| Potential Customers | Growth | YEAR 1 | YEAR 2 | YEAR 3 | YEAR 4 | YEAR 5 | CAGR | ||
| Individual Buyers | 46% | 22,334 | 32,344 | 43,665 | 52,544 | 66,432 | 10.00% | ||
| Institutions | 22% | 11,433 | 13,344 | 16,553 | 18,745 | 20,545 | 13.43% | ||
| Departmental Stores | 17% | 8,322 | 9,455 | 10,655 | 12,867 | 14,433 | 15.32% | ||
| Businesses | 13% | 4,333 | 5,655 | 6,877 | 7,877 | 9,543 | 15.00% | ||
| Maintenance Services | 2% | 233 | 343 | 416 | 576 | 644 | 10.00% | ||
| Total | 100% | 46,655 | 61,141 | 78,166 | 92,609 | 111,597 | 9.54% | ||
5.2 Business Target
We aim to revolutionize the traditional designs of furniture products by introducing foldable compact furniture concept. Our target is to become one of the leading furniture producing companies of America within next 10 years by providing highest-quality wooden products within affordable prices.
At our company, we will provide a top-notch customer service. Our every employee and salesperson will treat our customers with utmost respect so as to build a long-lasting relationship with them.
5.3 Product Pricing
Setting the prices of products is the most challenging part of any startup because it is very difficult to achieve the MARR (minimum attractive rate of return) while also attracting the customers towards it.
Considering all restraints and aspects, we have priced our products in the similar ranges as of our competitors except the compact furniture which include foldable desks, tables, and chairs. These products are slightly expensive because they cost more to produce.
Strategy
Rick carried out an extensive research and also hired financial experts to help him develop an effective sales strategy for the company. Although he knew how to start a furniture business yet he took help of experts from various fields so as to make this venture successful.
The sales strategy of The Wood House developed by our experts is as follows:
Business plan for investors
6.1 Competitive Analysis:
We have a really tough competition ahead of us because there are hundreds of other established furniture companies in the United States. That’s why Rick has thought through everything to make his company stand out among others.
Although we will produce supreme-quality furniture with latest design but our main competitive edge is our concept of space-efficient foldable furniture, designed to fit in the limited space available in compact American homes. We believe that if marketed properly this concept can revolutionize the world of furniture and give us unparalleled superiority in this business.
6.2 Sales Strategy
We will introduce our startup to our target customers and stake holders by sending brochures and introductory letters about us. We will carry out a large-scale social media campaign for our advertisement. We will offer discounts and gifts on our products present in several retail stores to encourage sales.
6.3 Sales Forecast
We believe that people will use our products for the rest of their lives, if they try them even for one. Considering the market demand and the quality of our products, our sales pattern is expected to increase with years. By analyzing our market segmentation strategy, our experts have forecasted the following sales on yearly basis which are summarized in the column charts.
The detailed information about sales forecast, total unit sales, total sales is given in the following table:
| Sales Forecast | |||
| Unit Sales | Year 1 | Year 2 | Year 3 |
| Single and double beds | 1,872,330 | 2,360,320 | 2,588,240 |
| Sofas and luxury wooden chairs | 1,435,320 | 1,250,430 | 1,762,450 |
| Study and dining tables | 539,320 | 770230 | 1,002,310 |
| Drawers and chests | 265,450 | 322,390 | 393,320 |
| Desks and office chairs | 802,370 | 815,430 | 823,540 |
| Bookcases and cabinets | 134,240 | 394,340 | 842,230 |
| TOTAL UNIT SALES | 5,049,030 | 5,913,140 | 7,412,090 |
| Unit Prices | Year 1 | Year 2 | Year 3 |
| Single and double beds | $1,400.00 | $1,500.00 | $1,600.00 |
| Sofas and luxury wooden chairs | $600.00 | $800.00 | $1,000.00 |
| Study and dining tables | $700.00 | $800.00 | $900.00 |
| Drawers and chests | $650.00 | $750.00 | $850.00 |
| Desks and office chairs | $140.00 | $120.00 | $100.00 |
| Bookcases and cabinets | $1,150.00 | $1,300.00 | $1,450.00 |
| Sales | |||
| Single and double beds | $214,800 | $274,000 | $333,200 |
| Sofas and luxury wooden chairs | $120,050 | $194,500 | $268,500 |
| Study and dining tables | $50,110 | $71,600 | $93,000 |
| Drawers and chests | $139,350 | $194,600 | $249,850 |
| Desks and office chairs | $62,350 | $72,300 | $82,250 |
| Bookcases and cabinets | $229,500 | $365,500 | $501,500 |
| TOTAL SALES | |||
| Direct Unit Costs | Year 1 | Year 2 | Year 3 |
| Single and double beds | $0.70 | $0.80 | $0.90 |
| Sofas and luxury wooden chairs | $0.40 | $0.45 | $0.50 |
| Study and dining tables | $0.30 | $0.35 | $0.40 |
| Drawers and chests | $3.00 | $3.50 | $4.00 |
| Desks and office chairs | $0.70 | $0.75 | $0.80 |
| Bookcases and cabinets | $3.00 | $3.50 | $4.00 |
| Direct Cost of Sales | |||
| Single and double beds | $98,300 | $183,000 | $267,700 |
| Sofas and luxury wooden chairs | $66,600 | $119,900 | $173,200 |
| Study and dining tables | $17,900 | $35,000 | $52,100 |
| Drawers and chests | $19,400 | $67,600 | $115,800 |
| Desks and office chairs | $27,700 | $69,200 | $110,700 |
| Bookcases and cabinets | $64,200 | $224,700 | $385,200 |
| Subtotal Direct Cost of Sales | $294,100 | $699,400 | $1,104,700 |
Personnel Plan
Rick hired a Human Resource Manager for helping him develop a personnel plan for starting a furniture making business. He developed the following personnel plan for the staff needed for the company along with their average salaries with the help of experts.
7.1 Company Staff
Rick will act as the Chief Operating Officer of the company. The company will initially hire following people:
- 1 General Manager to manage the operations in the production unit.
- 2 Administrators / Accountants to maintain financial records.
- 2 Engineers responsible for operating and maintaining production unit.
- 4 Sales and Marketing Executives responsible for delivering products to retailers and discover new ventures.
- 3 Mangers to operate display centers.
- 30 Field Employees for operating the production unit and display centers.
- 10 Drivers to transport furniture to display centers, departmental stores, institutions and companies.
- 1 Front Desk Officer to act as a receptionist in the company Charlotte office.
To ensure the best quality service, all employees will be selected through vigorous testing and will be trained for a month before starting their jobs.
7.2 Average Salary of Employees
The following table shows the forecasted data about employees and their salaries for next three years.
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| General Manager | $75,000 | $85,000 | $95,000 |
| Administrators / Accountants | $43,000 | $51,000 | $59,000 |
| Engineers | $54,400 | $67,400 | $87,400 |
| Sales and Marketing Executives | $45,000 | $52,000 | $59,000 |
| Display Center Managers | $55,000 | $65,000 | $75,000 |
| Field Employees | $410,000 | $440,000 | $480,000 |
| Drivers | $200,000 | $233,000 | $300,000 |
| Front Desk Officer | $10,000 | $12,000 | $15,000 |
| Total Salaries | $892,400 | $1,005,400 | $1,170,400 |
Financial Plan
Rick has developed the following financial plan for starting a custom furniture business with the help of financial experts. The plan outlines the financial development of The Wood House over the next three years.
Rick had been saving up for this business for the last couple of years. That’s why the company will be solely financed by him and he will also control the direction of business to make sure that it is expanding at the forecasted rate. No equity funding or outside loan will be required unless the company expands faster than forecasted.
8.1 Important Assumptions
The company’s financial projections are forecasted on the basis of following assumptions. These assumptions are quite conservative and are also expected to show deviation but to a limited level such that the company’s major financial strategy will not be affected.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 11.00% | 12.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
| Tax Rate | 26.42% | 27.76% | 28.12% |
| Other | 0 | 0 | 0 |
8.2 Brake-even Analysis
The following graph shows the company’s Brake-even Analysis.
The following table shows the company’s Brake-even Analysis.
| Brake-Even Analysis | |
| Monthly Units Break-even | 5530 |
| Monthly Revenue Break-even | $159,740 |
| Assumptions: | |
| Average Per-Unit Revenue | $260.87 |
| Average Per-Unit Variable Cost | $0.89 |
| Estimated Monthly Fixed Cost | $196,410 |
8.3 Projected Profit and Losss
The following charts show the company’s expected Profit and Loss situation on the monthly and yearly basis.
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
The following table shows detailed information about profit and loss, and total cost of sales.
8.4 Projected Cash Flow
The following column diagram shows the projected cash flow.
The following table shows detailed data about pro forma cash flow, subtotal cash from operations, subtotal cash received, sub-total spent on operations, subtotal cash spent.
| Pro Forma Cash Flow | |||
| Cash Received | Year 1 | Year 2 | Year 3 |
| Cash from Operations | |||
| Cash Sales | $401,024 | $453,046 | $505,068 |
| Cash from Receivables | $70,923 | $80,610 | $90,297 |
| SUBTOTAL CASH FROM OPERATIONS | $471,943 | $533,651 | $595,359 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| SUBTOTAL CASH RECEIVED | $471,943 | $533,651 | $595,359 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $216,457 | $242,204 | $267,951 |
| Bill Payments | $135,939 | $153,285 | $170,631 |
| SUBTOTAL SPENT ON OPERATIONS | $352,396 | $395,489 | $438,582 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| SUBTOTAL CASH SPENT | $352,396 | $395,489 | $438,582 |
| Net Cash Flow | $119,551 | $138,167 | $156,783 |
| Cash Balance | $218,523 | $252,381 | $286,239 |
8.5 Projected Balance Sheet
The following projected balance sheet shows data about total current assets, total long-term assets, total assets, subtotal current liabilities, total liabilities, total capital, total liabilities and capital.
| Pro Forma Balance Sheet | |||
| Assets | Year 1 | Year 2 | Year 3 |
| Current Assets | |||
| Cash | $184,666 | $218,525 | $252,384 |
| Accounts Receivable | $12,613 | $14,493 | $16,373 |
| Inventory | $2,980 | $3,450 | $3,920 |
| Other Current Assets | $1,000 | $1,000 | $1,000 |
| TOTAL CURRENT ASSETS | $201,259 | $237,468 | $273,677 |
| Long-term Assets | |||
| Long-term Assets | $10,000 | $10,000 | $10,000 |
| Accumulated Depreciation | $12,420 | $14,490 | $16,560 |
| TOTAL LONG-TERM ASSETS | $980 | $610 | $240 |
| TOTAL ASSETS | $198,839 | $232,978 | $267,117 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $9,482 | $10,792 | $12,102 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| SUBTOTAL CURRENT LIABILITIES | $9,482 | $10,792 | $12,102 |
| Long-term Liabilities | $0 | $0 | $0 |
| TOTAL LIABILITIES | $9,482 | $10,792 | $12,102 |
| Paid-in Capital | $30,000 | $30,000 | $30,000 |
| Retained Earnings | $48,651 | $72,636 | $96,621 |
| Earnings | $100,709 | $119,555 | $138,401 |
| TOTAL CAPITAL | $189,360 | $222,190 | $255,020 |
| TOTAL LIABILITIES AND CAPITAL | $198,839 | $232,978 | $267,117 |
| Net Worth | $182,060 | $226,240 | $270,420 |
8.6 Business Ratios
The following table shows data about business ratios, ratio analysis, total assets, net worth.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | INDUSTRY PROFILE | |
| Sales Growth | 4.35% | 30.82% | 63.29% | 4.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 5.61% | 4.71% | 3.81% | 9.70% |
| Inventory | 1.85% | 1.82% | 1.79% | 9.80% |
| Other Current Assets | 1.75% | 2.02% | 2.29% | 27.40% |
| Total Current Assets | 138.53% | 150.99% | 163.45% | 54.60% |
| Long-term Assets | -9.47% | -21.01% | -32.55% | 58.40% |
| TOTAL ASSETS | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.68% | 3.04% | 2.76% | 27.30% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 25.80% |
| Total Liabilities | 4.68% | 3.04% | 2.76% | 54.10% |
| NET WORTH | 99.32% | 101.04% | 102.76% | 44.90% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 94.18% | 93.85% | 93.52% | 0.00% |
| Selling, General & Administrative Expenses | 74.29% | 71.83% | 69.37% | 65.20% |
| Advertising Expenses | 2.06% | 1.11% | 0.28% | 1.40% |
| Profit Before Interest and Taxes | 26.47% | 29.30% | 32.13% | 2.86% |
| Main Ratios | ||||
| Current | 25.86 | 29.39 | 32.92 | 1.63 |
| Quick | 25.4 | 28.88 | 32.36 | 0.84 |
| Total Debt to Total Assets | 2.68% | 1.04% | 0.76% | 67.10% |
| Pre-tax Return on Net Worth | 66.83% | 71.26% | 75.69% | 4.40% |
| Pre-tax Return on Assets | 64.88% | 69.75% | 74.62% | 9.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 19.20% | 21.16% | 23.12% | N.A. |
| Return on Equity | 47.79% | 50.53% | 53.27% | N.A. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 4.56 | 4.56 | 4.56 | N.A. |
| Collection Days | 92 | 99 | 106 | N.A. |
| Inventory Turnover | 19.7 | 22.55 | 25.4 | N.A. |
| Accounts Payable Turnover | 14.17 | 14.67 | 15.17 | N.A. |
| Payment Days | 27 | 27 | 27 | N.A. |
| Total Asset Turnover | 1.84 | 1.55 | 1.26 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | 0 | -0.02 | -0.04 | N.A. |
| Current Liab. to Liab. | 1 | 1 | 1 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $120,943 | $140,664 | $160,385 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 0.45 | 0.48 | 0.51 | N.A. |
| Current Debt/Total Assets | 4% | 3% | 2% | N.A. |
| Acid Test | 23.66 | 27.01 | 30.36 | N.A. |
| Sales/Net Worth | 1.68 | 1.29 | 0.9 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
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