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. 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.

Furniture business plan - Startup Cost

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

The 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 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.

Furniture business plan - Market Segmentation

The detailed marketing segmentation of our target audience is as follows:

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 CustomersGrowthYEAR 1YEAR 2YEAR 3YEAR 4YEAR 5CAGR
Individual Buyers46%22,33432,34443,66552,54466,43210.00%
Institutions22%11,43313,34416,55318,74520,54513.43%
Departmental Stores17%8,3229,45510,65512,86714,43315.32%
Businesses13%4,3335,6556,8777,8779,54315.00%
Maintenance Services2%23334341657664410.00%
Total100%46,65561,14178,16692,609111,5979.54%

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:

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.

Furniture business plan - Unit Sales

The detailed information about sales forecast, total unit sales, total sales is given in the following table:

Sales Forecast   
Unit SalesYear 1Year 2Year 3
Single and double beds1,872,3302,360,3202,588,240
Sofas and luxury wooden chairs1,435,3201,250,4301,762,450
Study and dining tables539,3207702301,002,310
Drawers and chests265,450322,390393,320
Desks and office chairs802,370815,430823,540
Bookcases and cabinets134,240394,340842,230
TOTAL UNIT SALES5,049,0305,913,1407,412,090
Unit PricesYear 1Year 2Year 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 CostsYear 1Year 2Year 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 1Year 2Year 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 1Year 2Year 3
Plan Month123
Current Interest Rate10.00%11.00%12.00%
Long-term Interest Rate10.00%10.00%10.00%
Tax Rate26.42%27.76%28.12%
Other000

8.2 Brake-even Analysis

The following graph shows the company’s Brake-even Analysis.

Furniture business plan - Brake-even Analysis

The following table shows the company’s Brake-even Analysis.

 Brake-Even Analysis 
Monthly Units Break-even5530
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

Furniture business plan - PROFIT MONTHLY

8.3.2 Profit Yearly

Furniture business plan - PROFIT YEARLY

8.3.3 Gross Margin Monthly

Furniture business plan - GROSS MARGIN MONTHLY

8.3.4 Gross Margin Yearly

The following table shows detailed information about profit and loss, and total cost of sales.

Furniture business plan - GROSS MARGIN YEARLY

8.4 Projected Cash Flow

The following column diagram shows the projected cash flow.

Furniture business plan - Projected Cash Flow Diagram

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 ReceivedYear 1Year 2Year 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
ExpendituresYear 1Year 2Year 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   
AssetsYear 1Year 2Year 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 CapitalYear 1Year 2Year 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 1Year 2Year 3INDUSTRY PROFILE
Sales Growth4.35%30.82%63.29%4.00%
Percent of Total Assets
Accounts Receivable5.61%4.71%3.81%9.70%
Inventory1.85%1.82%1.79%9.80%
Other Current Assets1.75%2.02%2.29%27.40%
Total Current Assets138.53%150.99%163.45%54.60%
Long-term Assets-9.47%-21.01%-32.55%58.40%
TOTAL ASSETS100.00%100.00%100.00%100.00%
Current Liabilities4.68%3.04%2.76%27.30%
Long-term Liabilities0.00%0.00%0.00%25.80%
Total Liabilities4.68%3.04%2.76%54.10%
NET WORTH99.32%101.04%102.76%44.90%
Percent of Sales
Sales100.00%100.00%100.00%100.00%
Gross Margin94.18%93.85%93.52%0.00%
Selling, General & Administrative Expenses74.29%71.83%69.37%65.20%
Advertising Expenses2.06%1.11%0.28%1.40%
Profit Before Interest and Taxes26.47%29.30%32.13%2.86%
Main Ratios
Current25.8629.3932.921.63
Quick25.428.8832.360.84
Total Debt to Total Assets2.68%1.04%0.76%67.10%
Pre-tax Return on Net Worth66.83%71.26%75.69%4.40%
Pre-tax Return on Assets64.88%69.75%74.62%9.00%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin19.20%21.16%23.12%N.A.
Return on Equity47.79%50.53%53.27%N.A.
Activity Ratios
Accounts Receivable Turnover4.564.564.56N.A.
Collection Days9299106N.A.
Inventory Turnover19.722.5525.4N.A.
Accounts Payable Turnover14.1714.6715.17N.A.
Payment Days272727N.A.
Total Asset Turnover1.841.551.26N.A.
Debt Ratios
Debt to Net Worth0-0.02-0.04N.A.
Current Liab. to Liab.111N.A.
Liquidity Ratios
Net Working Capital$120,943$140,664$160,385N.A.
Interest Coverage000N.A.
Additional Ratios
Assets to Sales0.450.480.51N.A.
Current Debt/Total Assets4%3%2%N.A.
Acid Test23.6627.0130.36N.A.
Sales/Net Worth1.681.290.9N.A.
Dividend Payout000N.A.