Business plan of Dehumidifier Corporation of America

Executive summary

Due to the dynamics of customers’ needs, competition among different organization is ever growing. Consequently, organizations are coming up with strategies of sharpening their competitive advantage. Many of these strategies are either geared towards minimizing the cost of production, maximizing the net profit, minimizing the customers waiting time or even improving the quality of products produced. Product differentiation and integration are some of the ways many organizations have been using to meet their organizational goals.

Dehumidifier.inc, originally specializing in making refrigerators, has been facing stiff global competition. As a result, it wants to venture into making dehumidifiers so as to boost its cash-flows in the positive direction.

A dehumidifier is a device that reduces the amount of humidity in the air. By doing so, it reduces the chances of survival of moths, cockroaches, termites and fleas. Thus, it helps a lot in preventing the diseases that can be transmitted by these pests. Previous studies have shown that by use of a dehumidifier, the chances of transmission of diseases are reduced by 75%. Another advantage of a dehumidifier is that it increases conformability by reducing sweating.

This product will be safe for use and will meet all the current regulations. The advantages of this product over those existing in the market are less consumption of power and automatic defrost. Other key features of this dehumidifier are Automatic Humidistat Control, Automatic Bucket Full Shut-Off, washable air filters and Removable Water Tank. Unlike the product offered by our competitors, the noise level of this product is less than 49dB (A). It also has caster wheels for easy movement.

The initial capital will be used to patent, approve, test, produce, and market as well as providing the initial working capital during the inception year.

To achieve the desired growth, the following strategies will be used by Dehumidifier Inc.:

i. Use differentiation strategy to meet the ever growing customer needs
ii. Develop a first-to-the-market strategy so that many customers can be attracted and retained during the inception years
iii. Develop an effective branding campaign to build positive perception and awareness within the target markets
iv. Use cost strategy to attract more customers
v. Responding to customers’ complaints and needs within the shortest time possible

Basing on the financial projections and analysis, Dehumidifier Inc. will require a funding of $3,002,000. When all factors are kept constant, it is expected that by the end of the third year, Dehumidifier Inc. will have sales of more than $850,000. The IRR is expected to be 69% and the dividends over the next five years expected to be 13%. Figure 1 below shows the expected sales, gross profit and net profit for the next three years.

illustration not visible in this excerpt

Figure 1: expected returns

Keys to success

At Dehumidifier Inc., we will use the following as our main keys to success:

i. A first mover branding campaign to develop awareness to the target market within a very short time
ii. Patent protection to prevent the product concept from the competitors
iii. Complementary relationship with other organizations that directly affect the production and hence the success of this organization
iv. Complementary relationship with suppliers and customers
v. Management: dehumidifier Inc. has a strong management that can push the company to the next level within a short time
vi. Marketing: our marketing strategies gives us a sharper competitive edge as compared to those of our competitors

Objectives

The objectives of Dehumidifier Inc. are;

i. Design, fabricate and Develop a prototype by the end of April in year 1
ii. Test and launch the product by the end of June in year 2
iii. Became the customers’ choice in the united kingdom by the end of year 3
iv. Launch distribution channels all over the world by the start of year 4
v. Hit a sales margin of 850,000 by the end of year 5
vi. Achieve sales of $5 by the start of year 6

Potential risks

Some of the potential risks of this project are (Alexander, 2005):

- The location of the main production unit may be far from the market. This may poses a threat of unavailable market for the products
- Government constraints on the product
- Cost associated with a defective product
- Cost associated with late deliveries
- Visibility of the product by the top management
- Unwillingness of some customers to participate in market reviews
- Unavailability of tools and software for project management
- Lack of training by some project members
- Lack of commitment by some project members

Company background

Company summary

Dehumidifier Inc. already has a net asset of $2.1 M. The organization has an experience of over 20 years in the manufacture of freezers and refrigerators. It has board of directors of vast experience in the fields of production, design, accounting, finance and marketing. To penetrate the already flooded market, this organization will use both direct sales and existing distribution channels in London and later on spread to other cities in the United Kingdom. This will be used as a pilot test. After analyzing the sales results in the United Kingdom, the organization will spread throughout the rest of the world. Major target population will be in Africa. This is because there are manufactures of dehumidifiers in this region.

In the last six years, business process re-engineering has been witnessed by this organization. This has led to an increase in net assets. Figure 2 below shows the net assets of the organization for the last six years.

illustration not visible in this excerpt

Figure 2: The net assets

Consequently, the net sales have been going up since the business process re-engineering started. Figure 3 below shows the net sales for the last 6 years

illustration not visible in this excerpt

Figure 3: Trend of net sales

The company is expected to have five main departments: the mechanical department, the electrical department, the packaging department, the quality assurance department and the maintenance department.

Company ownership

The chief executives of the company will be the initial founders of the parent company: Frank Moses, Wayne Stanley and Joseph Bridge. However, other investors will be encouraged to invest in this company because it shows real signs of growth. The three founders will invest initial investment of 30% in the factory. The remaining 70% is expected to come from investors.

Mission

The mission of Dehumidifier Inc. is to meet the ever changing customers’ needs through continuous improvement of the designs of dehumidifiers. We intend to make maximum profit in the next couple of years so that we can maximize the investors’ return-on-investment.

Start-up summary

The start-up capital is expected to be $250,000. $25,000 has been set aside for consultation fee, $35,000 for legal, $15000 for accounting, $50,000 for lab equipment, and $30,000 for contingency planning. The biggest proportion of the initial capital investment goes towards building of the facility. $45,000 will be used for the purchase of machines production, $ 25,000 for the actual construction of the facility while the remaining $25,000 will be set aside for labor. The division of the capital is as shown in the figure below.

illustration not visible in this excerpt

Figure 4: Division of the initial capital

On top of that, the final value of the long-term asset during the end of the first year is $2,252,000. The company is expected to keep an inventory of $450,000 to keep its operation going throughout its initial year.  Table 1 below shows the actual funding required by Dehumidifier Inc.

illustration not visible in this excerpt

Table 2: Break-down of the funding required

[...]