AC Millwork_Sections 1-6 (2)

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Cover Page

January 2010


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Legal Page

Confidentiality Agreement

The undersigned reader acknowledges that the information provided by ________________ in this

business plan is confidential; therefore, reader agrees not to disclose it without the express writtenpermission of ________________.

It is acknowledged by reader that information to be furnished in this business plan is in all respects

confidential in nature, other than information which is in the public domain through other meansand that any disclosure or use of same by reader, may cause serious harm or damage to

________________.

Upon request, this document is to be immediately returned to ________________.

_____________________Signature

_____________________Name (typed or printed)

_______________

Date

This is a business plan. It does not imply an offering of securities.


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Table of Contents

Page 1

1.0 Executive Summary .................................................................................................................... 1

Chart: Highlights .......................................................................................................................... 2

1.1 Mission .......................................................................................................................................... 2

1.2 Keys to Success ........................................................................................................................ 3

1.3 Objectives.................................................................................................................................... 3

2.0 Company Summary ..................................................................................................................... 4

2.1 Company Ownership ............................................................................................................... 4

2.2 Company History .....................................................................Error! Bookmark not defined

Chart: Past Performance ..........................................................Error! Bookmark not defined

Table: Past Performance ..........................................................Error! Bookmark not defined

2.3 Company Locations and Facilities ...................................................................................... 4

3.0 Products and Services ................................................................................................................ 5

3.1 Product and Service Description ........................................................................................ 5

3.2 Competitive Comparison ....................................................................................................... 5

3.3 Sales Literature ......................................................................................................................... 5

3.4 Fulfillment.................................................................................................................................... 6

3.5 Technology.................................................................................................................................. 6

3.6 Future Products and Services .............................................................................................. 6

4.0 Market Analysis Summary ........................................................................................................ 7

4.1 Market Segmentation ............................................................................................................. 7Table: Market Analysis ............................................................................................................... 8

Chart: Market Analysis (Pie).................................................................................................... 8

4.2 Target Market Segment Strategy ...................................................................................... 9

4.2.1 Market Trends.................................................................................................................... 9

4.2.2 Market Growth................................................................................................................... 9

4.2.3 Market Needs ..................................................................................................................... 9

4.3 Service Business Analysis ................................................................................................... 10

4.3.1 Distributing a Service ................................................................................................... 10

4.3.2 Business Participants .................................................................................................... 10

5.0 Strategy and Implementation Summary .......................................................................... 12

5.1 Sales Strategy ......................................................................................................................... 12

5.1.1 Sales Forecast.................................................................................................................. 12

Chart: Sales Monthly ............................................................................................................ 14


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Table of Contents

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Table: Sales Forecast ........................................................................................................... 14

5.2 Marketing Strategy ................................................................................................................ 15

5.2.1 Positioning Statement .................................................................................................. 15

5.2.2 Pricing Strategy............................................................................................................... 16

5.2.3 Promotion Strategy ....................................................................................................... 17

5.3 Strategic Alliances.................................................................................................................. 18

5.4 Milestones.................................................................................................................................. 18

Table: Milestones ....................................................................................................................... 18

6.0 Management Summary............................................................................................................ 18

6.1 Organizational Structure ..................................................................................................... 18

6.2 Management Team ................................................................................................................ 19

6.3 Management Team Gaps..................................................................................................... 19

6.4 Personnel Plan ......................................................................................................................... 19

Table: Personnel ......................................................................................................................... 19

7.0 Financial Plan ................................................................................Error! Bookmark not defined

7.1 Important Assumptions ........................................................Error! Bookmark not defined

Table: General Assumptions ...................................................Error! Bookmark not defined

7.2 Break-even Analysis...............................................................Error! Bookmark not defined

7.2 Break-even Analysis...............................................................Error! Bookmark not defined

Table: Break-even Analysis.....................................................Error! Bookmark not defined

Chart: Break-even Analysis ....................................................Error! Bookmark not defined

7.3 Key Financial Indicators........................................................Error! Bookmark not defined

Chart: Benchmarks.....................................................................Error! Bookmark not defined

7.4 Projected Profit and Loss......................................................Error! Bookmark not defined

Chart: Gross Margin Yearly .....................................................Error! Bookmark not defined

Table: Profit and Loss................................................................Error! Bookmark not defined

Chart: Profit Monthly .................................................................Error! Bookmark not defined

Chart: Profit Yearly .....................................................................Error! Bookmark not defined

Chart: Gross Margin Monthly..................................................Error! Bookmark not defined

7.5 Projected Cash Flow ...............................................................Error! Bookmark not defined

Table: Cash Flow .........................................................................Error! Bookmark not defined

Chart: Cash ...................................................................................Error! Bookmark not defined


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Table of Contents

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Appendix

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1.0 Executive Summary

IntroductionAmbergris Caye Millwork Co. (AC) is a start up custom mill house specializing increating architectural woodwork in the form of wall paneling, custom cabinets, and other

products for the local residential market. AC Millwork is creating this business plan to formulate

a strategic market penetration initiative inclusive of investment options. AC will be located inBelize, Central America. The precise location is to be determined

The Company

AC Millwork's mission is to compete profitably in the commercial and residential market for

custom and make to stockwoodwork product and services in Belize, Central America. It willemphasize custom wood products of the highest quality, and specialize in the most demandingneeds of new and remodeled designer homes in the $1.0 mm to $5.00 million price range.

However, the Company will also benefit from the current marketplace need of repetitive, highvolume, standard woodwork products for homes in the $100k - $1.00 mm market. With thisstatement, AC Millwork is ready to design, manufacture, distribute and service a market from$100k to over $5.0 mm.

Products

AC Millwork is engaged in custom architectural woodwork in the form of wall paneling, custom

cabinets, molding, pilasters, radius units, circular staircases in special woods, elaboratedressing rooms, specialty kitchen work, etc. The ability of state-of-the-art CAD (design)

through internal and external partner companies will help substantially to increase sales of

higher-end products by targeting design professionals who are in a position to influence choicesof subcontractors building "trophy" homes costing in the range of $1.0 mm to $5.0 mm."Custom" is the key word at AC Millwork. The average home would not use this product line.

Custom woodworking of the type carried out by AC Millwork is designed and manufactured to

order only. No finished goods are made up for stock for customers in this category. However,as stated above, a second product line will also be offered. There is an immediate market need

for more of traditional woodwork products and features. This product line will be developed

around make to order, make to stock, repetitive manufacturing scenarios. In other words, verylittle finished goods inventory, some semi-finished goods that can be customized throughcontrolled variant configuration or controlled specification product platforms.

The Market

The industry is immature and not well-represented. There are manywoodworkingshops in

the same market area which are focused providing one off packages for general contractors anddevelopers. One mill shop may concentrate on custom furniture and form special alliances withupholstery shops. Other mill shops may specialize in standard kitchen cabinetry. AC Millwork is

targeting the highest end of the residential market and repetitive units. This work is less price-sensitive and relatively steady, even during economic valleys. The most critical competitiveweapon which the company will hold is its design, manufacturing, and distribution capabilities

(Supply Chain and Logistics). AC Millwork should be able to set itself apart from the local oneman shops and smaller competition, and be able to fully utilize its offshore and possibleonshore delivery models.


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Financial ProjectionsThrough our internal operations and external partner network, AC Millwork has the capability in

advanced new Computer Numerical Control (CNC) machinery, coupled with industry-adapted

Computer Aided Drafting (CAD) capability, will propel start up sales to nearly $200,000 by theend of 2010 (6 months), $1,000,000 by the end of 2011, and $3.2 million by the end of 2012.Profits will grow as well.

Chart: Highlights

1.1 Mission

AC Millwork's mission is to compete profitably in the commercial and residential market forcustom and make to stock woodwork product and services in Belize, Central America.

Sales

Gross Margin

Net Profit

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

2010 2011 2012

Highlights

New Graph Needed.


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Appendix

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1.2 Keys to Success

The most important keys to success in the contractors' mill shop industry are:

1. An aggressive Sales and Marketing Team with local governmental, professional, andbusiness networks.

2. A rolodex of potential clients and immediate projects.3. A complete manufacturing operations center capable of manufacturing custom and make to

stock products,4. Responsible bidding which is to avoid bidding projects which are likely to be awarded based

primarily on price, projects being undertaken by those who are disreputable (no matter how

badly the company needs work), projects which are too big (more than 50% of previousyears sales), or projects which do not fit the company's core market objectives and thusunlikely to advance the company's marketing strategy.

5. Accurate Job Estimating/Costing which requires:

o Accurate take-off and listing.

o A clear understanding between the company and the client, in reference to qualityand terms of payment.

o Correct calculation of material (including wastage) and labor required to completethe project.

o Correct application of overhead factors and profit margins, plus any specialconsiderations.

o Complete Supply Chain Logistics and Distribution Expertise.

6. Accurate Job Costing which requires an ERP or similar back office system supported byoperating procedures that accurately tracks the job costing and compares the job as bid

with the actual costs of completing the job. Constant adjustments to bid formulas.

7. Reliable production staff that communicates well with administration to assure that the job

is produced on time and as bid, making maximum efficient use of labor, materials, andavailable machinery.

1.3 Objectives

AC Millwork's major objectives are:

1. Start Up Production. Given the new start up operations (machinery and production staff),full productive capacity has been estimated. The goal is to reach, on a monthly basis, 80%of this capacity in the last quarter of 2010, 85% in year 2001, and 90% in year 2012. This

80% of capacity translates into monthly production ofx feet of crown molding,x

pilasters,xdoors of various grades, andxlinear feet of cabinets (or some equivalent

combination of these items). This will result in monthly sales of $60,000.2. Continue efforts to bring the company's in-house CAD capability to the attention of more

design professionals, especially those in Hartford, Belize, Stamford, Norwalk, and Shelton,as these are the areas with the greatest concentration of the chosen $3 to $15 millionresidential homes.

3. Join the Local Business Chapters as an industry partner as well as network with local andgovernmental resources.


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2.0 Company Summary

AC Millwork's mission is to compete profitably in the commercial and residential market forcustom and make to stock woodwork product and services in Belize, Central America. It willemphasize custom wood products of the highest quality, and specialize in the most demanding

needs of new and remodeled designer homes in the $1.0 mm to $5.00 million price range.

However, the Company will also benefit from the current marketplace need of repetitive, highvolume, standard woodwork products for homes in the $100k - $1.00 mm market. With this

statement, AC Millwork is ready to design, manufacture, distribute and service a market from$100k to over $5.0 mm.

Market conditions in Belized are primed for a company that can deliver the above mentionedcapabilities. There is limited competition and with ACs Sales and Marketing team located inAmbergris Caye, San Pedro Town, AC will have immediate contracts to fulfill.

Within three to six months, profits are expected to be in the black and increase dramaticallyover the next 3 years..

2.1 Company Ownership

AC Millwork will be a limited corporation owned by ... It will be incorporated in Belize, CentralAmerica (C.A.). Tentative date for incorporation is slated for Q3 2010.

2.1 Company Ownership

AC Millwork is a start up millwork company.

2.3 Company Locations and Facilities

The company will be located in Belize, C.A. Initially, the company will be in rented facilities on

a long term lease with several options to buy and/or extend. Total area is estimated to be2,500 square feet of which about 100 square feet is taken up with administration.Considerations will be given for future expansion(s).

A diagram of the production hall showing the location of the various major pieces of machinery

is given in Appendix x.


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3.0 Products and Services

The products used in this plan were limited to only five items to simplify calculations. "Custom"is the key word. The average home (make to stock- MTS) would not use these items but willbe included as a separate category. Custom woodworking of the type carried out by AC Millwork

is made to order (MTO) only. No finished goods are made up for stock. For this reason, there

are rarely very long production runs unlike those in the MTS environment.

3.1 Product and Service Description

AC Millwork is engaged in custom architectural woodwork in the form of wall paneling, custom

cabinets, molding, pilasters, etc. Although by nature of the word "custom" the milled productscan be totally unique, the vast majority of products estimated to be milled will fall into only

these few general categories. However, assuming success with the company's marketing

strategy, AC Millwork could easily gravitate toward more upper end products within the high-end residential market (see Chapter 4.0, Market Analysis Summary). Rather than produce

ordinary high-quality casework, the company, for example, might produce a custom casework

item in soft maple with an antiqued crackle finish designed to hide a stereo system. Radius

units, circular staircases in special woods, elaborate dressing rooms and kitchens with a lot ofcurves would be further examples of challenging work that would be in line with stated strategy

goals. More ordinary jobs would be accepted if the jobs fit into the company's core business

guidelines. The potential addition of state-of-the-art CAD capability will substantially help toincrease sales of higher-end products by targeting design professionals who are in a position toinfluence choices of subcontractors building "trophy" homes costing over $1 million.

3.2 Competitive Comparison

Performing a competitive comparison with products produced by other mill shops is not a

simple task as there are NO large-scale, commercial millwork operations in Belize. The most

important aspect to this statement is that AC is unaware of any operation that can produce drykiln products.

In addition, there are no one-stop big box (off the shelf) retailers that can accommodategeneral millwork orders and services. There are no price lists. Financial comparisons cannot be

made, however, AC has verbal commitments for two large developers to exclusively use ourproducts and services based on ACs business model.

These two developers present combined sales of of which AC can estimate 35% of costs

allocated for millwork products. This demand clearly outstrips supply in respect to suppliers inBelize for the demand in the area..

As stated, AC Millwork is targeting the highest end of the residential market (multi million

homes). This work is generally less price-sensitive with greater margins and relatively steady,even during economic cyclic swings.

3.3 Sales Literature

At the present time no sales literature is available. Brochures of high quality will only beproduced after formulation of products, features, and capacity. All literature will be electronic

based structured primarily for on-demand printing focused on the end user. This will keepexpenses to a minimum.


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3.4 Fulfillment

All materials used in the company's production are available from a number of local suppliers(primarily lumber dealers). Sourcing is not projected to be an issue of concern. Hardwarecatalogs will be readily available and shipment from key suppliers in the United States will be

established. Estimated delivery of hardware components are expected to be less than 3 weeks.

3.5 Technology

Technology does play a part in this industry. Major custom woodworking machinery hasincorporated time and labor-saving advantages of the computer age. Precision digital settings

and the use of lasers make measurement faster and more exact. However, currently, ACMillwork does not expect to incur this type of costly technology in Belize. This type of

technology is needed to be competitive in the United States. AC initial start up technology

business model will only include CAD capabilities from internal personnel and external partnerorganizations. This type of CAD development is an attractive addition which is

already demonstrating success in image-building with interior designers and architects to thewealthy.

AC Millwork will reevaluate its technology position on an annual basis.

3.6 Future Products and Services

Initially, the stated marketing direction of the company (see chapter on Target Market SegmentStrategy) will introduce the product line to the upper end market by producing more

challenging items, such as radius units, staircases, elaborate kitchens and libraries in exotic

woods, etc. A second phase of market penetration will include make to stock products andservices.


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4.0 Market Analysis Summary

The following analysis is based on AC market area defined as, commercial and/or residentialprojects within a 30 mile radius of Belize City, Belize.

The highest end of the residential market is represented by the new construction and the

renovation of "trophy" homes in the $1.0 $3.0 million price range. These homes have anannual need for custom woodwork products of approximately $3.0 million.

An estimated further need of $1 million is generated by repetitive MTS products and services.

4.1 Market Segmentation

A market need for custom and repetitive woodworking is generated by new construction andresidential remodeling. This market segmentation market study was undertaken by John Turley

and Jim Sutton. This study examines demand patterns in both new construction and homeimprovement markets. Figures on specific millwork products are included. Without this study,

statistics are generally not available. However, the following opinion is consistent with many

local professionals.

"Even with a flat economy, there is a population increase, increasing commercial andresidential projects, and more people owning their own homes are resulting in a increasedemand for new construction

The generations of people that especially impact this statement are:

Baby Boomers: This includes anyone born between 1945 and 1964, comprising almost45% of the American population. With large incomes and investment funds, Baby Boomersare looking to invest internationally rather than accept the poor performance of theirtraditional investment portfolios. This represents the greatest potential for high-end custom

woodwork, primarily Baby Boomers with home purchases in the $1.0 3.0 million category(referred to as "trophy homes"). AC Millwork is also noticing similar trends for the babyboomers of Canada and Western Europe.

Mature Market Investors:These are individuals of various ages who like the babyboomers realize the need for additional investment opportunities or desires new luxuries.This sector does represent a market for AC Millwork. Among this group are semi-wealthy

individuals who wish to purchase make to order products and are considering homes in

the $500k to $1.0 mm range.

Generation X: These are Belize Citizens born between 1965 and 1980 that are beingsubsidized by the Belizean Government for home ownership. The Generation X-ers are, to a

large extent, will require an off the shelf product model. This product model will be

offered through our repetitive manufacturing processes.

Partners and Alliances: These are the result of our extensive sales and marketingrelationships in Belize. AC estimates that over 75% of contracts will initially obtainedthrough these resources.


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Initially, since the major market for AC Millwork's services is custom woodwork to veryexpensive single family homes in the price range of $1.0 3.0 million, it is useful to know how

many new homes are built annually in that price range in Belize, C.A. area, and how many

existing homes in that price range engage in major renovations. Research indicates overxsingle family homes within a 30 mile radius of Belize City in this price range actually changedhands in the past two years.

This would suggest that at least x homes valued at about $xmillion.

If we use the statistic of $.30 spent on new home construction for every dollar spent on new

homes, that would indicate that $xmillion is annually being spent on construction of newtrophy homes in this price range.

The Market Analysis Table shown below has omitted three zeros in all the numbers, for spacereasons.

Table: Market Analysis

Chart: Market Analysis (Pie)


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4.2 Target Market Segment Strategy

In line with AC Millwork's mission statement, the target market is trophy homes, both newconstruction as well as renovations. The results of our market study indicate that the total high-end trophy home market need for custom woodworking in the Belize area outstrips the supply

from available local custom woodworking suppliers. To compete in this market sector, AC

Millwork has chosen a special service which is proving successful with design professionals. ThisCAD service is explained more fully in the chapter on Market Needs. All four high-end market

sectors are in need of the products supplied by AC Millwork. All of these construction projects,

whether new construction or major renovation, will involve design professionals of the higheststandards and some clients with deep pockets. With properties of this caliber, the work isrelatively recession-proof since it is very diversified with different market segmentations. This

diversification will allow requests for custom woodworking products that are most challengingand requests for off the shelf products, thereby fulfilling AC Millwork's expressed missionstatement and abilities.

4.2.1 Market Trends

With greater and greater demand for high-end trophy home construction, coupled with theincreasing ability to offer competitive off the shelf products, AC Millwork's move toward

linking its CAD capability with the practices of design professionals will allow the company to

capture market share immediately and expand more quickly toward a greater diversificationstrategy.

4.2.2 Market Growth

Market growth of 2.4% is based on the actual growth rate inxas tabulated by the localBelizean Chamber of Commerce.

4.2.3 Market Needs

The new CAD service offered by AC Millwork evolved as a result of the inefficiencies in the

current market capabilities. One major problem noticed by ACs management team is focusedon design services.

Currently, the best case is that all visual representations for finished products are providedthrough 2D artist renderings of the finished product. This type of presentation does not allow

the customer to fully visualize the end product. With this type of purchase, customers areincreasingly demanding the ability to visualize, change, and accept design concepts.

Secondly, whichever construction company won the bid would send the blue-prints (forexample, Kitchen) to custom wood mill shops to bid over. The mill shop will do its "take-offs"from the blue-prints and bid to do the kitchen. Upon delivery of the finished product, the

designed kitchen cabinets will not fit into the room. This results in expensive problem-solving

and meetings with architects. The architects themselves do not understand the way in whichwoodworkers build cabinets, so often the architects' design concepts are made more difficult

(and thus more expensive) to realize. The new CAD service offered by AC Millwork circumvents

all of this. By working together with the architect at the initial stages, the architect only needsto do the inexpensive design concepts. The actual details of how the cabinet is structurallydesigned, as well as the exact measurements to fit the room, are left to AC Millwork's CAD

person or respective partner company. The architect can save money on drafting, save again by

eliminating the usual problem-solving and re-drafting. The client of the architect also saves by


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Appendix

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insuring that the woodwork is done in a way that suits the latest woodworking methods withoutinterfering with the design concept -- the look of the final product. A further advantage is that

AC Millwork saves the expense of on-site measuring.

Finally, this type of service offering expedites the logistics of the supply chain and reduces the

actual construction interior finishing timeline(s).

4.3 Service Business Analysis

The industry is immature and not well-represented. There are many mill shops in the samemarket area. Mill shops have traditionally focused on specialty areas and one off projects.

This often happens as a result of the type of woodworking that the shop owner likes to do or asa result of his previous background as an employee in another mill shop. One mill shop may

concentrate on custom furniture and form special alliances with upholstery shops. One millshop may employ 3 people in January, 10 in February, and 2 in March.

NONE of these job shops have the capability of dry kiln products.

By concentrating on the highest end of the residential market, the requirements of therepetitive manufacturing market, offering dry kiln products, and coupling this with its CADexpertise, AC Millwork should easily differentiate itself apart from the competition.

4.3.1 Distributing a Service

The traditional pattern in this industry is for: an architect to draft the plans according to

the specifications, copies given to contractors to bid on, and elements, such as millwork, subcontracted to mill shops which in turn, make competitive bids.

Through AC Millwork's marketing strategy, this traditional distribution pattern will be altered tobenefit each organization and lower the total cost of ownership as indicated below:

The architect will save on the design drafting (and redrafting), The contractor will reduce the costs of change orders to the same degree (more

confident that the redesign will fitinto the finished home as built,

AC Millwork will not have to be as price sensitive in quoting the work, and finally, AC Millworks connection to the design professional will assure that the work is

awarded to AC rather than being sent to the competition.

4.3.2 Business Participants

The table below lists major competitors in ACs market area. Appendix B is a map marked with

red dots indicating the location of mill shops in the Greater Belize area. None of these mill

shops has the same level of CAD capability, dry kiln processes and few have singled out thetrophy home market as their prime focus.

Competing Mill Shops

NAME LOCATION Niche EMPLOYEES


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5.0 Strategy and Implementation Summary

Inroads into the stated trophy home and off the shelf markets in the Belize have alreadystarted. As previously stated, ACs sales and marketing team has verbal commitments toobtain the business of two large developers/contractors immediate. These verbal commitments

will be transition into sales contracts upon ACs commitments to manufacture products locally.

In addition, our sales and marketing team will also be AC Millwork's new CAD features to thosearchitects and interior designers who are best known for residential work in this price range.

5.1 Sales Strategy

After having successfully priced the job to insure an adequate profit margin after all expenses,it is important to close and bring back the sale. The will be accomplished through a Sales Teamconsisting of John Turley and . Local AC Guy.

John Turley will be responsible for the aspects of customer relationship management. John hasan extensive network in Belize and will leverage this network for sales opportunities.

Local AC Guy is an individual, most likely, minority owner in the Company. He will beresponsible for the design, estimating, manufacturing, and delivery of the products andservices.

With this approach, AC Millwork will encompass a cradle to grave sales cycle with pre-definedtransition and milestones.

5.1.1 Sales Forecast

There are two sources of revenue:

Plant Produced Sales: This revenue comes from manufacturing custom cabinetry, paneling,

and other wood products. To project revenue we have chosen several representative items thatmake up the majority of plant produced sales. The materials for each of these items have beencarefully calculated, as has the labor hours going into each item. The material inputs will show

up in the direct cost of each item. The labor hours information allow us to determine how manyitems we can produce with given manpower and machinery. The cost of the labor is calculatedin detail in the Personnel Plan Table. Projected sales will begin as of October, 2010. Therepresentative items chosen are:

250 linear feet of Crown Molding 16 Pilasters 20 Haunched passage doors (paint grade) 20 Haunched passage doors (stain grade)

45 linear feet of cabinets

The Costing/Pricing Work-up Sheet in Appendix C will break down, in detail, the various

materials going into each of these items, as well as the labor hours for each. Labor break-downs for each phase in the production of these items is also included. For example, the CrownMolding (250 linear ft.) requires a total of 4.25 man hours and only one material. The Pilasters

however needs two materials in different quantities. Since 4 man hours per pilaster are needed(see labor break-down sheet), 16 pilasters will require a total of 64 man hours. These 64 manhours have been split equally between the two materials (8/4" Mahogany and the 4/4"Mahogany). From the totals in Appendix C the total labor input for the above items is 390.4


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hours. Since production is limited to 160 manhours per week (8,000 manhours per year), theseabove-listed items can only be produced 20.5 times in one year. Total yearly full production,

assuming only these items are produced, would be:

5,125 linear feet of Crown Molding 328 Pilasters

410 Haunched passage doors (paint grade) 410 Haunched passage doors (stain grade) 922.5 linear feet of cabinets

These items have been projected in the attached table on a monthly basis beginning October,

2010 and on a yearly basis for years 2011 and 2012 assuming 80% of full production October-December, 2010, 85% in 2011, and 90% of full production efficiency in year 2012.

Contract Site Labor: Revenue is also derived from providing carpenters/installers at certainwork sites. There are six site workers listed with an "S" next to their name. Below are listed theall-in costs of these workers as well as the rates that they are billed out at.

Worker All-In Wage Rate Bill Rate Hours Net Revenue

1. $34.38 $39.00 1,960 $9,055.20

2. $30.00 $36.00 1,960 $11,760.00

3. $22.00 $31.00 1,960 $17,640.00

4. $30.03 $36.00 1,960 $11,701.20

5. $25.00 $34.00 1,960 $17,640.00

6. $24.71 $36.00 1,960 $22,128.40

Totals 11,760 $89,924.80

Total net revenue from Site Services comes to $89,924.80 annually assuming a full 40 hour

week for 49 weeks. For projection purposes we have chosen "hours" as the unit. The averagesales price is $35.33. The average cost is $27.69.


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Chart: Sales Monthly

Table: Sales Forecast

Sales Forecast2010 2011 2012

Unit SalesCrown Molding 4,239 4,356 4,612Pilasters 219 279 295

Haunched Passage Doors (Paint Grade) 234 348 369Haunched Passage Doors (Stain Grade) 234 348 369Cabinets 591 785 831Site Work 7,647 11,760 11,760Other 0 0 0Total Unit Sales 13,164 17,876 18,236

Unit Prices 2010 2011 2012Crown Molding $4.02 $4.00 $4.00Pilasters $316.96 $316.96 $316.96Haunched Passage Doors (Paint Grade) $592.35 $592.35 $592.35Haunched Passage Doors (Stain Grade) $783.09 $783.09 $783.09Cabinets $194.76 $194.76 $194.76Site Work $35.33 $35.33 $35.33Other $0.00 $0.00 $0.00

SalesCrown Molding $17,027 $17,424 $18,448Pilasters $69,414 $88,432 $93,503Haunched Passage Doors (Paint Grade) $138,610 $206,138 $218,577Haunched Passage Doors (Stain Grade) $183,243 $272,515 $288,960Cabinets $115,103 $152,887 $161,846Site Work $270,169 $415,481 $415,481Other $0 $0 $0Total Sales $793,566 $1,152,876 $1,196,815


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Direct Unit Costs 2010 2011 2012Crown Molding $2.00 $1.82 $1.82Pilasters $48.25 $44.09 $44.09Haunched Passage Doors (Paint Grade) $142.05 $130.53 $130.53Haunched Passage Doors (Stain Grade) $269.76 $247.88 $247.88Cabinets $62.40 $57.66 $57.66

Site Work $25.74 $27.69 $27.69Other $0.00 $0.00 $0.00

Direct Cost of SalesCrown Molding $8,486 $7,928 $8,394Pilasters $10,566 $12,301 $13,007Haunched Passage Doors (Paint Grade) $33,240 $45,424 $48,166Haunched Passage Doors (Stain Grade) $63,123 $86,262 $91,468Cabinets $36,878 $45,263 $47,915Site Work $196,871 $325,634 $325,634Other $0 $0 $0Subtotal Direct Cost of Sales $349,165 $522,813 $534,584

5.2 Marketing Strategy

The marketing strategy, as explained in other chapters, is to leverage AC Millwork's special CAD

capability, as it relates specifically to custom woodworking, with design professionals (interiordesigners and architects) to increase the type of high-end work taken on, as well as to "jump"

the bidding process by creating a situation in which AC Millwork must be given the bid. A good

place to ask for the names of the interior designers with the best reputations is to speak to thedesigner workrooms. These are the workrooms that carry out the work connected with interiordesigners' concepts for architects, window treatments, fabrics, etc.

The best known of these workrooms in and around Belize are:

.

A polling of these workshops indicates the following interior designers are often sought bytrophy home owners:

** Names****.

Architects are another important group of design professionals that work in concert with interiordesigners on trophy homes. The latest edition of the Directory of Architectural Firms in

Belize is.. The directory lists xarchitectural firms in Belize. Details of each company aregiven .. Although an architectural firm is likely to have work outside of the city where it is

located, it would be a good start to find out which of those residential architects are located inthose areas of Belize with the greatest concentration of trophy homes.

5.2.1 Positioning Statement

AC Millwork's CAD capability is an especially strong marketing tool. It allows the mill shop to

build the desired items using the most practical methods of construction without interfering


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with the design concept. It automatically calculates the exact dimensions of each element andproduces exact material lists. In the future, AC Millwork could also consider subcontracting our

non-core operations and/or features. These features allow simpler elements to be

subcontracted to other mill shops, thus allowing the company's productive capacity to be usedto produce the higher end elements.

By pushing this capability with architects who have reputations for designing homes in the $1.0- $3.0 million range, AC Millwork will position itself to receive the bulk of this price-insensitive,

recession-proof work, while at the same time building an image for the highest quality, most-

challenging work. In addition, AC Millwork will solidify contracts for its repetitivemanufacturing, off the shelf, products and services.

5.2.2 Pricing Strategy

Simply stated, the goal of the bidding process is to provide to the end customer a competitiveprice while achieving internal business goals.

To facilitate this, a two product pricing system will be developed. First, a dual value-add

system for our custom products is being conceptualized. One value add for materials andanother for labor. The reason for the separate mark-ups is that in custom woodwork the mix, or

ratio, of material and labor changes with every job. Therefore, a system is needed thataccommodates the variations. The system is fairly straightforward and uncomplicated and, once

set up, it reduces the bidding process' complexity. The system requires two separate overhead

factors to be computed--an administrative overhead and a factory overhead. Refer to AppendixB.

The second pricing system will consist of a standard costs model for our repetitivemanufacturing and will be amended to this document at a later date.

Administrative Overhead

The concept is founded on the belief that everything which is sold, whether goods or services,must pay its fair share of the administrative overhead. Whether we use material in

manufacturing a product, or merely resell it as is without further processing, it should still makea contribution. So a multiplier factor is calculated and applied to everything sold including direct

labor, plant-processed materials, future "buy-outs" (out-sourcing to another mill shop),installations, etc.

The administrative overhead mark-up factor is arrived at by dividing the total administrative

overhead expenses by the total of materials and direct labor. As an example, if Total

administrative Expenses were $123,821. Total Direct Labor and Material Expenses were$324,495, the resulting .3816 translates into a multiplier factor of 1.3816. By applying this to

everything sold it means that the company is setting aside 38.16% of every dollar to cover thecost of bidding, the cost of paperwork to execute the job, the cost of collections, loss

opportunity costs, etc.

Plant OverheadThis mark-up is only applied to labor. It's calculated by dividing plant overhead costs by direct

labor. The resulting .837 when added to the .3816 (administrative overhead) builds to amultiplier factor of 2.218 (1.00 + .3816 + .837 = 2.218). The reasoning here is that an item

sold that involves plant-processed labor should contribute to defray a portion of those plantoverhead expenses (machinery depreciation, insurance, machinery maintenance, etc.) that


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would not be there if everything were merely sold without any value-added milling by factorymillworkers.

With application of the above-described overhead factors, pricing is now reduced to calculatingthe total materials (including wastage) involved in a job, and projecting the labor input in hours

needed to complete the job. Assisting in these calculations is a Job Costing Library which lists

the actual materials and the actual labor input involved in similar past jobs. (See a samplesection of the Job Costing Library in Appendix C.)

Performing the "take-offs" from blue prints and converting this to materials and labor hours

needed to complete the job requires skill, but once this has been done, those figures can be

passed on to an administrative assistant who can apply the overhead mark-ups to materialsand labor. One can also check the latest prices of the materials as well as the up-dated all-inman-hour rates. (See Appendix D for a schematic of all-in wage rates.)

Up to this point in the pricing process all that we have done is to calculate the actual all-in costs

of both materials and labor and added on formulas to cover overhead costs--both

administrative and plant. It is a necessary stage in the pricing process to plan in, and insist on,

a profit margin. Although industry averages are less since averages include those sufferinglosses, successful woodworkers do attain a 15% sustainable net profit. Adding 15% to

anticipated costs is not going to achieve a net 15% result (15 divided by 115 is only 13%). The

best way is to divide total anticipated costs (after application of the two overhead factors) by.85.

To facilitate the costing/pricing, an Excel spreadsheet has been designed to incorporate theprocess including the two overhead factors as well as the 15% profit mark-up. Appendix E is a

sample of the Costing/Pricing Work-up Sheet for a representative job. This spreadsheet also

has a database capability. It allows the user to access statistics to facilitate material bulkpurchasing, etc.

5.2.3 Promotion Strategy

With the introduction of an in-house CAD capability that is especially designed for the mill shopindustry, the best way to spread the word is to directly contact the architects and interior

designers. Only one or two trophy homes in the targeted $1.0 3.0 million range can keep amill shop fully occupied for several weeks. Advertising is not expected to become necessary.

However, joining the local business communities as an "Industry Partner" is an excellent way to

network with design professionals. Also it would be helpful to get listed in the ResourceDirectories of each of these organizations.


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5.3 Strategic Alliances

It is planned that AC Millwork will establish strategic alliances with several other businesses(possible other mill shops) who will mutually profit from an association. Exact drawings and cutlists can be given to other mill shops when subcontracting the more mundane items, leaving

the more challenging work for AC Millwork. Profits from work performed through these alliances

has not been considered in preparing this business plan, but when the plan is updated later in2010, there should be enough historical experience with these alliances to include this aspect in

projections.

5.4 Milestones

The table below outlines the strategic milestones for AC Millwork for the coming years.

Table: Milestones

MilestonesMilestone Start Date End Date Budget Manager DepartmenComplete Administrative ControlChanges 10/1/2010 11/30/2010 $500 Managemen

Complete Procedures Manual 10/1/2010 10/1/2001 $0 Managemen

Join Local Business Groups 11/1/2010 12/30/2010 $4,000 Managemen

Obtain Contracts 11/1/2010 11/1/2001 $1,000 Managemen

Hire Production Manager 4/1/2001 5/1/2001 $60,000 Managemen

Totals $65,500

6.0 Management Summary

Like other start businesses with less than $1 million in sales, the owners of AC Millwork are

expected to wear several hats and shuttle back and forth between production, site visits, theoffice, and client calls. The company is in the process of making major strides in establishing amore classical managerial structure, as the following chapters will explain.

6.1 Organizational Structure

Ideally, the owner of the mill shop should have three major functions:

1. Identify and find customers.2. Maintain proper balance of people, plant and machines.

3. Innovate, and set policies.

A plant manager should be responsible to see that the production staff and the availablemachinery work together at maximum efficiency. He needs to anticipate questions, answerthem, and keep production rolling with a minimum of waste and a minimum of down-time.

An office manager should handle all the administration and coordinate well between the plantmanager and the CEO. A need for the plant manager is well recognized by management, but a

certain financial position needs to be reached to afford him. This position is planned to start in


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April, 2011, which will help substantially to free up needed time for the CEO to carry out theabove listed major duties.

The office manager will be responsible for performing the bookkeeping. Procedures have beenset up which will serve as a beginning for a procedures manual. The handling of inventory is

also dealt with in the procedures as well as paperwork flow to insure correctness in billing. A

costing/pricing scheme has been devised to assure correct all-in costing and to insure that afair profit margin is built in to the pricing.

6.2 Management Team

Currently, there are three parties involved.. John, Jim, Jerry..

6.3 Management Team Gaps

At the present time.

6.4 Personnel Plan

Milling Costs Personnel:The Plant Manager - Jerry

Sales and Marketing:The Sales Guy - John

General and Administrative Personnel:

The Office Guy - Jim

Table: Personnel


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