Business Plan

“K&F Fireplaces”

James J. Keane

Brian Fogarty

Awarded an A1

in the Graduate Diploma in

Computing from the

University of Limerick

2

CS5131

Decision Support Systems Module

Mr John Cohalan, Lecturer

Welcome to

“K&F Fireplaces”

Project

for

Graduate Diploma in Computing

written by

James J. Keane: 0321427

Brian Fogarty 0312339

December 14, 2003

3

Acknowledgements

Thanks is due to the following people for their helpful advice which was very

fortcoming:

John Cohalan, Senior Lecturer in Economics, University of Liimerick.

James Franklin, Fireplaces Direct, Ballysimon, Co. Limerick.

Joe Kemmy, Treaty Fireplaces, John Street, Limerick. 413000.

Annette Dineen, Dineen Refractories, Ballylehane Upper, Wolfhill, Athy, Co. Laois.

Citizen‟s Information Services, 54 Catherine Street, Limerick.

William Bennett, Manager of PTSB, Upper William Street, Limerick.

Michael Barron, Limerick Enterprise Network, Limerick.

Tony Ryan, Ryan Timber Works, Limerick.

Fiona Smith, P.J. Matthews Supplies, Ballysimon, Co. Limerick.

Joe Hopkins, Hopkins Machinery, 33 Seafield Crescent, Blackrock, Co. Dublin.

Denis O‟Mahoney, Fireplace Accessories, Old Creamery & Stores, Doneraile, Co.

Cork.

Ned Toomey, Limerick County Enterprise Board Ltd, County Buildings, Mallow

Street/O‟Connell Street, Limerick.

John Shanney, Mr. Binman, 4, St. John‟s Square, Limerick.

Adrian Hopkins, O‟Mara Motors Ltd, Toyota Main Dealer, Ennis Road, Limerick.

Con O‟Connell, Heiton Buckley Builders Merchants, Ballysimon Road, Limerick.

Michael Kinchella, GMP House, Unit 112, Ashbourne Industrial Estate, Ashbourne,

Co. Meath.

Gerry Doherty, High Tech Machinery Ltd, Unit 3, Red Cow Interchange Estate,

Ballymount Road, Nass Road, Dublin 22.

Michael Cantwell, Limerick County Enterprise Board Ltd, County Buildings, Mallow

Street/O‟Connell Street, Limerick.

Liam Judge, Accountant, „Hillcrest‟, Ballysheedy, Co. Limerick, 061-412347.

Revenue Commissioners, River House, Charlottes Quay, Limerick, 061-318711.

Geraldine Thornton, Solicitor, Mill Road, Corbally, Limerick.

4

Midwest Mantle and Design, Fireplace Manufacturers, Cork Road, Raheen, Limerick.

061-301666.

Marble City, Unit 2B, Eastway Business Park, Ballysimon Road, Limerick.

5

Acknowledgements ................................................................................................................... 3 Executive Summary .................................................................................................................. 7 Self-Assessment ........................................................................................................................ 9 Overview of the Irish Market .................................................................................................. 11

Review of Ireland‟s Economy in the Recent Past ............................................................................. 11 Medium-Term Review of Ireland‟s Economy .................................................................................. 12

Mission and Objective ............................................................................................................ 14 Mission Statement ............................................................................................................................ 14 Objectives ......................................................................................................................................... 14

Market Research ..................................................................................................................... 15 Marketing Strategy .................................................................................................................. 16

Market Analysis ................................................................................................................................ 17 SWOT Analysis ................................................................................................................................ 18 Competitive Advantage .................................................................................................................... 24 Market Planning ............................................................................................................................... 25 Marketing Mix .................................................................................................................................. 25 Marketing Control ................................................................................................................... 26

Legal Structure ........................................................................................................................ 29 Simple Partnership .................................................................................................................. 29 Insurance .......................................................................................................................................... 30

Taxation .................................................................................................................................. 32 Calculating business taxable profits ................................................................................................. 32 Self-assessment ................................................................................................................................. 33 PAYE/PRSI ...................................................................................................................................... 33 VAT .................................................................................................................................................. 34

Accounting .............................................................................................................................. 35 Recording transactions ..................................................................................................................... 35 Analysing transactions ...................................................................................................................... 35 Interpreting the figures the transactions offer ................................................................................... 35

Plant and Machinery ............................................................................................................... 37 Plant & Planning permission ............................................................................................................ 37

Sourcing the Raw Materials .................................................................................................... 41 Calcium Aluminate Cement ............................................................................................................. 45 Tenax ................................................................................................................................................ 45 Timber .............................................................................................................................................. 46 Lacquers and Sealers ........................................................................................................................ 48

Solver ...................................................................................................................................... 51 Allocation of scarce resources .......................................................................................................... 51 High-Low Profit Contribution Problem for Solver ........................................................................... 52 High-Low Profit Contribution Problem for Students ....................................................................... 53 Solver outputting all the optimal points ............................................................................................ 56 Calculating coordinates for X & Y axis............................................................................................ 57

Production ............................................................................................................................... 58 Producing a Fireplace ....................................................................................................................... 58 Cost of Producing each Fireplace ..................................................................................................... 62

Staff ......................................................................................................................................... 63 Division of labour ............................................................................................................................. 63 Recruitment, Induction & Training .................................................................................................. 63 Wages & Work ................................................................................................................................. 64 External agents ................................................................................................................................. 65 Department of Social, Community and Family Affairs .................................................................... 65

Finance .................................................................................................................................... 67 Loan .................................................................................................................................................. 67 Overdraft .......................................................................................................................................... 68 Internal sources of finance ................................................................................................................ 68 Grants ............................................................................................................................................... 69

Training, Mentoring & Assistance .......................................................................................... 70 Conclusion .............................................................................................................................. 72 Appendix 1 - Questionnaires................................................................................................... 73

Retailer‟s Questionnaire .......................................................................................................... 73 Builder‟s Questionnaire .................................................................................................................... 75

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Appendix 2 – Survey Results .................................................................................................. 77 Results from retailers‟ questionnaire ................................................................................................ 77 Results from builder‟s questionnaire ................................................................................................ 81 Results of the Survey ........................................................................................................................ 84

Appendix 3 - Brochure ............................................................................................................ 86 Appendix 4 – Linear Programming ........................................................................................ 93 Appendix 5 – Financial Costings .......................................................................................... 100

Cost of Renovations, Breakdown of Capital Expenditure, Depreciation ........................................ 100 Cost of Wages................................................................................................................................. 101

Appendix 6 – Projections for cash flow plan ........................................................................ 102 Sales Forecast for 2004................................................................................................................... 102 Sales Forecast for 2005................................................................................................................... 107 Sales Forecast for 2006................................................................................................................... 111

Appendix 7 – Accounts for 2004 .......................................................................................... 115 Cash Flow Statement ...................................................................................................................... 115 Trading and P&L Account ............................................................................................................. 116 Balance Sheet ................................................................................................................................. 117



Appendix 10 - Database – K&F Fireplaces .......................................................................... 125 Appendix 11 – List of Materials Needed .............................................................................. 126 Appendix 12 – List of Suppliers ........................................................................................... 127 Appendix 13 – List of Customers ......................................................................................... 128 Endnotes ................................................................................................................................ 129

“Some people dream dreams that never were and ask why,

but I dream dreams that never were and ask why not”

said John F. Kennedy.

7

Executive Summary

Mr John Cohalan entrusted J J Keane and Brian Fogarty with a project. They were to

present a business plan in the manufacturing of two items. Upon completion of the

project an interactive audio visual presentation was to be made to their class.

Secondly, a written report is to be submitted to Mr John Cohalan.

Since Ireland is a small, open economy the partners felt it important to look at its

place on the world economic stage. It is one of the fastest growing economies. Its

competitiveness is in danger because of rising labour costs, the rising euro, and the

threat of inflation. It meant thinking globally not just to who is supplying fireplaces

put also for sourcing raw materials in the manufacturing of fireplaces. It is clearly a

global market that the firm is competing in both in purchasing and retailing.

The manufacture of fireplaces is labour intensive. Therefore the Asian countries

especially China with cheaper labour could make inroads into this market as they

could in many areas of manufacturing. Currently, many of the raw materials come

from China with comparable quality to European products but better priced.

Ireland is a nation flush with cash, and growth rates will remain at about 5% to the

end of this decade. As market research will show Ireland is continuing to need

fireplaces for the 60,000 houses a year it is currently building. This is anticipated to

continue so for the next 8 years. Homeowners are eager to spend to maintain high

standards in their new and second-hand homes.

The younger customer tends to like the light coloured soft woods demanding quality

marble and granite. The older purchaser prefers the darker solid woods, like

mahogany, but again seeking quality marble and granite.

The partnership is competitively placed. It has a premises a few miles from Limerick

city at a very nominal rent. It has an opportunity to enter an agreement with GMP

which would be financially beneficial to them. GMP is part of a UK conglomerate

that imports all the main components for fireplaces from China which are made to

GMP specifications. This deal would give them the cheapest quality raw materials in

Ireland. Signing this agreement would mean that K&F Fireplaces would buy solely

from GMP.

JJ has shown his financial aptitude over the past 20 years. He is passionately

interested in production and maintaining quality standards – no half measures for

him. Brian has a strong background in marketing, being able to acquire the vital

information on what customers want. They would intend employing a skilled labourer

in the summer of year two for deliveries, and labourers work around the plant in

mixing concrete and assembling the marble after training.

The partnership intends to set up their business as partners initially. They will finance

it with a loan of €50,000 from PTSB and €65,000 from their own personal savings.

Their motto is – “if you fail to plan then you plan to fail”. They wanted to be prepared

for the obstacles that will arise, for new skills they will have to learn, for tasks they

will have to handle, for rules and regulations they will have to encounter, right

through to the agencies that will help.

8

1. They have the personal wherewithal to run this business.

2. There is a market for fireplaces in Ireland.

3. The chosen prize winning designs appeal to people.

4. Examined current competitors and how they are going to enter the market.

5. Running costs for the firm.

6. Projected income and expenditure for the business.

7. Premises with planning permission to manufacture the fireplaces.

8. Sourced the machinery, raw materials, and the workforce.

9. Skilled in the production of the fireplaces.

10. Experienced in Promotion & Sales.

11. Understand what is required in financing the business.

In preparing this Business Plan all of Microsoft Office packages were used including

the flawed Solver, or more correctly the limited Solver facility. One of the partners

formulated a mathematical expression which overcame these limitations with Solver.

This facilitated their easy use of Solver having six different time constraints which

are visible in Heaven.xls.

All prices are quoted inclusive of Value Added Tax (VAT) unless otherwise stated.

9

Self-Assessment

J. J. Keane showed entrepreneurial skills at an early age when he invested some of his

Confirmation money in market gardening on the home farm where the fruits of his

labour were sold in the Milk Market, Limerick on early Saturday mornings.

During his years of study in secondary school and in Maynooth for a degree in

philosophy and theology he worked with his neighbour „Franklin Fireplaces Direct‟.

There he gained valuable experience in the manual trades of making fireplaces and

the managerial skills of running the business.

After going to work in the civil service he invested in three holiday homes at the age

of 19 years. Because the scale of the operation was not big enough he sold it on

making a modest profit from the venture.

He turned his eyes from holiday homes to real estate. In his late 20s he had enough

capital to make his first serious investment. From there on everything snowballed

with further purchases. At the age of 40 he retired a millionaire from fulltime work to

pursue software engineering and live with his ageing parents. His current earnings

come from being a part-time property manager.

During those years of purchasing, renovating, real estate he made a huge network of

contacts in the construction business and the ancillary businesses and services. He

had first hand experience in raising hundreds of thousands of Irish pounds to finance

his projects as well as hands on experience of the many and varied tradesmen‟s job.

As well as being efficient in managing projects he developed personal qualities of

resilience in the face of setbacks and crisis. He has been described as affable with

people and effective in teamwork, applauded for being articulate in public speaking,

astute in offering counsel, and resolute in work. He is critical in thought which this

project will show. He gained this latter quality from his studies of philosophy and

theology which earned him an NUI degree. This also included the study of

psychology and sociology.

Because of the appeal the construction industry has for him he would like to engage

in the manufacture of fireplaces. His particular skills that will be invaluable to this

project are the fact that he has:

1. first hand experience as an manager and especially in construction

2. financial resources and backing to support this project

3. years of experience in the trades of construction

4. and the determination to persevere in the face of discord.

10

Brian Fogarty holds a degree in Business and Economics from Trinity College Dublin

and a Master of Business Studies in International Business from the Michael Smurfit

Business School at University College Dublin. Both of these provide him with a

strong knowledge of the theoretical concepts associated with strategy, marketing, and

to a lesser degree, finance. Significantly, over many group projects, Brian learned

many skills that will be valuable in working with others.

In addition, he has worked for two years from Goodbody Stockbrokers, where along

with other members of his team, he was involved in the start up of the first online

stockbroking service in Ireland. While hardly the same line of business as that of

K&F, his time at Goodbody‟s nonetheless involved much work in spreading

knowledge of the new service to Goodbody‟s existing customer base, an activity not

unlike K&F‟s task of creating awareness of it‟s products in an already mature market.

Also, since these potential customers‟ portfolio managers frequently had strong

reservations regarding the possibility of losing their custom to Goodbody Online,

Brian also gained valuable experience of how competitive business can be, and a keen

appreciation of how limited mere business theory becomes once you enter real world

environments.

Finally, Brian‟s uncle works in the plumbing business, and over many summers of

helping him out, Brian has gained some limited experience of the construction

business and how business is conducted in Ireland among small businesses not unlike

K&F fireplaces.

11

Overview of the Irish Market

Review of Ireland’s Economy in the Recent Past

In 2003 the Economic and Social Research Institute published an overview of the

Irish Economy 1 and these are some of the points it made:

Ireland is a small, open, trade-dependent economy and is one of the fastest growing

economies in the developed world. Its openness is reflected both in the international

mobility of its labour and capital.

Over the last decade, unprecedented economic growth has seen the level of Irish real

Gross Domestic Product (GDP) almost double in size.

Irish living standards have increased significantly over the last decade. A recent the

Organisation for Economic Co-operation and Development (OECD) study found that

in terms of (GDP) per capita, based on current purchasing power, Ireland is ranked

4th in the world. Ireland‟s GDP per capita in 2001 is estimated at US$ 30,000, with

only the US, Norway and Luxembourg ranking higher.

PriceWaterhouseCoopers offers similar positive views in a recent publication, “Doing

business and investing in Ireland”2, wrote, “With an economy growing at a rate

consistently above EU levels, Ireland is one of the most favoured locations for

investment in Europe. This is evidenced by approximately 1,240 companies from all

over the world which have chosen Ireland as their base to do business.

The continued success of Ireland as an investment location has been founded

on the positive approach of successive Irish governments to the development of

businesses. This approach has ensured a favourable tax environment, competitive

operating costs, a productive and flexible workforce with world-class support

services.”

12

In a very visible manner, the strength of the Irish economy is demonstrated in the vast

amount of money, almost €20bn in 2001, being spent of new residences. The

following graph shows the number of new dwellings, both social housing and private

completed the years 1992 to 2002. This is based on figures supplied by the Central

Statistics Office.3

The value of construction output in 2001 exceeded €19.7bn. This represents 19%

total economic activity in Ireland. The output of the construction industry is now 50%

higher than the output of the Agricultural and Food sectors combined.

Employment in the industry has now reached 185,000. A further 75,000 people are

employed in the construction materials/materials providers and within the

construction profession.

Medium-Term Review of Ireland’s Economy

Some of the main findings of the ESRI Medium Term Review4 include:

The economy is quite strong. While in the short-term the outlook is very uncertain,

the Irish economy remains fundamentally healthy. In the medium term it has the

potential to grow at 5 per cent a year. Any underperformance in the next two years is

likely to be matched by a subsequent spurt of activity, returning the economy to its

trend growth path from 2005.

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Competitiveness is a major challenge. A further substantial appreciation of the euro

could also pose serious problems for the Irish economy. However, there remains the

possibility that the actual outturn would be better than forecast, fuelled by skilled

immigration and further infrastructural investment.

The building sector will not grow significantly, with some fall in output likely later in

the decade. This is supported by the Construction Industry Federation who forecast,

“the medium-term outlook for the industry remains positive for both activity and

employment levels following a significant dip in 2001 in the absence of any

international shock which would sharply reduce Ireland's economic growth

performance.”5

OECD‟s Economic Outlook for Ireland can be summarised in June 2003 as follows,

after unexpected resilience in 2002, real GDP growth is forecast to slow to 3¼ per

cent in 2003, before rebounding to 4¼ per cent in 2004 with the strengthening of

export market growth. Wage pressure is expected to weaken throughout the forecast

period. While inflation is also forecast to fall, it is likely to remain above the

European Union average, reflecting persistent price pressures in the service sector.

Now that private sector wages have begun to adjust to slower growth.6 In September

2003 ISME echoed similar concerns about high inflation when it said that small

business is suffering through increased costs, thus undermining competitiveness.

Many sectors particularly in manufacturing are already under threat as evidenced by

everyday announcement of redundancies.7

Drawing from the past economic trends and predictions for the future from reputable

bodies the following conclusions are pertinent to the manufacture of fireplaces.

1. The number of houses being built is currently running at almost 60,000 annually

and this growth will remain comparatively steady to the end of the decade. This

offers a strong market for fireplaces.

2. Skilled immigration will continue to be attracted to the open Irish market giving a

productive and flexible workforce.

3. The Irish economy is set to grow at 5% up to 2010 with one or two years maybe

not reaching this target. It is dependent on no international crisis. This will give a

large disposal income to the consumer.

4. With an open market, rising labour costs, appreciation of the euro, high inflation,

competitiveness is weaning especially with imports from the Far East.

14

Mission and Objective

Mission Statement

It shall be the mission of K&F Fireplaces to manufacture and sell high quality, Irish

made fireplaces, crafted from the finest materials sourced both from home and

abroad. The fireside has always traditionally been at the centre of the Irish home, and

with a K&F fireplace in your living room,

Objectives

Short term objectives

To successfully establish their business and to begin trading as K&F

Fireplaces.

To move into profitability within one and a half to two years.

Medium Term Objectives

To expand their product range so as to cater for a wider range of individual

tastes.

To expand their workforce in line with the growth in product demand.

Long Term Objectives

To move into the fireplace retail and installation market, if necessary

switching premises or acquiring a second premises.

To expand K&F Fireplaces to service a greater portion of the country.

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Market Research

The best businesses don‟t start simply by identifying a market need and then filling it.

They identify where the need is going to be and meet it when it arises. In football

parlance, you have to look where the ball is going to be, not where it is now. The

kernel of success with this venture is manufacturing a product that the builder and

retailer will buy. It must be developed in response to customer demand, and do so in a

sustainable manner. This is pivotal. Everything else revolves around this one issue.

As the UK Chartered Institute of Marketing say: „Marketing is the management

process responsible for identifying, anticipating and satisfying consumers‟

requirements profitably‟.8

Firstly, the partners needed to determine whether there is a market for fireplaces. In

the above chapter, „Overview of the Irish Market‟, they have shown that there is a

market for fireplaces with the large number of houses being built. They also showed

that people have and will continue to have the ability to purchase fireplaces.

Secondly, they needed to build up a customer profile of their prospective customers.

This included knowing who their potential customers are and why they will buy from

them rather than from their competitors.

They drew up a questionnaire for retailers and builders. Coupled with the

questionnaires were 7 samples of timber, 2 samples of medite, 20 samples of marble,

resin stone-effect, and granite all of which they were familiar with and could be used

in the manufacture of fireplaces. They were asked to show how popular these

materials were with their customers.

Ten large retailers and ten moderate sized builders in the Munster region were

interviewed in autumn 2003. Appendix 1 (RetailersQuest) contains the questionnaires

while the results deduced from them are in Appendix 2 (Results).

16

Marketing Strategy9

Marketing has moved from Henry Ford‟s old adage that the car buyer could have

„any colour he wanted so long as it was black‟. The partnership has embraced the

headline promise offered by Texaco, „100% satisfaction guaranteed – or your money

back‟. In the 1980s Michael Porter suggested that businesses should develop a

market-focused approach. The partnership want to do that in order to build a more

concrete and long-term relationship with customers. They believe that first

impressions are lasting i.e. if the customer has a positive initial experience then they

will most likely stay with them. Generally, people go to the same doctor, accountant,

solicitor, garage, pub, bank, barber, hairdresser etc. throughout their lives. As a staff

member at Dillon‟s Garage, near the Parkway expressed, „90% of our customers are

regulars. I believe people are creatures of habit.‟ The partnership want to offer a high

level of service and show a deep interest in doing business with its customers because

they believe that is what determines whether buyers will remain loyal or decide to

take their business elsewhere. Marketing was the task of the salespeople but now it is

seen as an attitude that should permeate the minds of all staff.

So what precisely is marketing? The Institute of Marketing writes: Marketing is the

creative management function which promotes trade and employment by assessing

consumer needs and initiating research and development to meet them. It coordinates

the resources of production and distribution of the goods and services; determines the

nature of the total effort required to sell profitably the maximum production to the

ultimate user.10

Ultimately, the partners think of marketing as endeavouring to widen

public understanding and confidence in their fireplaces and keep the customer

satisfied.

Since this is such an important aspect of business the partners took a model of

marketing proposed by Tiernan, Morley, and Foley which is outlined below; the

former two authors are UL lecturers.

Analysis Planning Marketing

Mix

Control

o Customers

o Competitors

o Company

Capability

o Market

Research

o Strategic and

tactical

marketing

plan

o Integration

into overall

plan

o Products

o Prices

o Promotion

o Distribution

o Services

o Monitoring

effects of plan

o Controlling

manpower and

costs

o Measuring

market response

Feedback

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Market Analysis

Market research of the potential customers can be viewed in the previous chapter.

Since buying a fireplace is classed as a relatively expensive and infrequent purchase

people move through a sequence of steps in the buying process. They gather

information, evaluate alternatives, and make a purchase decision. To capitalise on this

the partners produced a brochure which can be viewed in Appendix 3. This enables

the customer to give time and thought to what K&F Fireplaces have actually on sale.

The quality of the materials used by them is second to none in the world since they

have sourced them from the best exporters all over the globe.

The last step in the buying process is post purchase evaluation. This is where

they aim to achieve high satisfaction rates with customers who will result in the

promotion of their brand name and products.

Analysis of the competitors is essential. Firstly, who are they? How will they react

to a new competitor in the market? What are their strengths and weaknesses? Michael

Kinchella of GMP through some light on this issue. He is a supplier to fireplace

retailers in the south of Ireland. He organised a golfing day out for his customers. The

rivalry between some of them was so intense that he finally had to hold a three-day

outing for the different factions so they wouldn‟t have to meet each other.

K&F Fireplaces are competing in the medium to lower end of the market. They are

selling very similar fireplaces as their competitors. The raw materials in most cases

are sourced from the same suppliers. The machinery user, the standards employed,

and staff qualifications are very similar. This is most certainly true for the purchase of

resin, marble, and granite. Where the difference does come is in the moulding of the

timber mantelpiece.

Kilkenny Fireplaces produce award-winning fireplaces, due principally to their ornate

mantelpieces which they specialise in. Treaty Fireplaces have the sole franchise for

their products in the Mid-West region. Even though Kilkenny products are of a very

high standing the Treaty showroom is more akin to a builder‟s yard than the stylish

ambience that people look for today. Secondly, since Kilkenny fireplaces command

such a high price the retailer‟s margin is small and Treaty Fireplaces doesn‟t tend to

highlight their products.

The partners have closely replicated one of Kilkenny‟s fireplaces and are giving

higher margins to their potential customers who haven‟t got Kilkenny‟s products.

This will encourage other potential customers to offer K&F Fireplaces an opening in

their market. Even though they are new entrants into the market they have a large

financial starting, J. J. can work for the partnership for 12 months without taking an

income because he has independent financial sources, and their plant is very cheap to

rent. This will be discussed in more detail in the chapter, „Financing‟. The larger

competitors will not be able to compete financially with the partners who do not have

the huge expense of an urban premises and high wage bills for a large staff.

Gerard Murray Products will examine their plant after one year. If the K&F

Fireplaces‟ sales and standards are high they are prepared to give them their franchise

for the Mid-West region. This is important because they are part of an English-Irish

conglomerate that has an agreement with a Chinese factory to manufacture products

to their standards and specification. Because of their huge buying power and the low

Chinese wage bills GMP raw materials cannot be matched for quality and price. Then

the partners would have to agree to buy exclusively from them.

18

The biggest weakness is that the partners are new to the market, not established and

have no track record for quality. Because of their other strengths they have the

capacity to make inroads into the market and establish their brand name as one for

quality. They have reason to be optimistic as one builder made this opening remark to

them, “if the price is right you have a customer”.

SWOT Analysis

EXTERNAL FACTORS:

Opportunities

The continued rise in the number of new dwellings in Ireland. Even as

growth in the Irish economy has slowed in comparison with the levels

experienced in the mid to late 1990s, the number of new homes under

construction continues to rise year-on-year. The vast majority of these new

dwellings will be fitted with a fireplace.

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The prospect of expanding their range of products going forward. Although they plan to offer only two products initially, they intend to expand

on this as their knowledge of the market deepens. As is noted in the section on

„marketing control‟, to stand still in a market that is changing around you is

not an option.

The signs of recovery evident in the Irish and world economies. According

to the ESRI, while the short term outlook is quite uncertain, the Irish economy

still remains fundamentally healthy with a potential for growth of up to 5% in

the medium term. This is echoed by the OECD who forecast growth of over

4% in 2004.

Threats

The existence of established experienced competitors. they are entering a

mature market populated by competitors with many years of experience in the

business. Therefore, a willingness to persevere and to learn quickly will be

essential to success.

The emergence of China and elsewhere as sources for cheaper raw

materials. As China opens up more and more to the world market, a

combination of cheap labour and an abundance of raw materials have

implications for many industries, including the fireplace industry. The same

can be said of Eastern European countries as the EU expands in that direction.

Continued uncertainty in the Irish and world economies. As stated above,

the Irish and world economies are currently performing better than of late.

However, with the continued possibility of terrorism and conflict, coupled

with the continued low risk threshold of investors (particularly in the

technology sector) there is still much uncertainty in the economy.

Furthermore, the present high U.S. growth rates owe much to President

Bush‟s summer tax cut, so a fall in the growth rate is therefore expected in

coming quarters. Alan Greenspan does not envisage a rate increase between

now and the end of 2004, and as long as this is the case, any optimism must

also be accompanied by due caution.

Inflation. Ireland continues to be beset by an above average rate of inflation,

which has the potential to increase costs for a small business such as K&F,

thus eroding competitiveness.

INTERNAL FACTORS:

Strengths

Distinctive product. Not content to simply duplicate the products offered by

other operators in the industry, chief among their strengths will be their

distinctive product.

Use of high quality materials. While other operators in the industry are

content to offer products composed of materials that will not last the test of

time, K&F is dedicated to superior quality.

20

Dedication to success. As highly motivated individuals not easily

discouraged by initial difficulties or disappointments, they are determined that

K&F will penetrate the fireplace industry and make its mark.

Own premises. While other entrants to the market may be at a disadvantage

owing to the need to invest in premises, K&F are fortunate in that they already

have their own premises.

Collateral. Banks will not lend money without collateral. K&F can use its

premises as collateral to acquire finance for initial set-up and for future

expansion of its business.

Barriers to entry. On the whole, the fireplace industry would appear to

present medium barriers to entry. While this presents challenges to K&F as

new entrants, it provides a measure of protection once that difficult hurdle has

been crossed.

Willingness to learn. They are aware that they are entering a mature industry

and that they face a learning curve in order to make K&F a success.

Weaknesses

Inexperience. JJ and Brian are new to self-employment, and new to the

fireplace industry. In addition, this is their first time to go into partnership

together. All of these factors combined mean that their willingness to learn

and to persevere will be vital to the success of K&F.

Narrow initial product range. Coming to the market with an initial product

range of just two fireplaces will deprive K&F of a certain number of

customers in the short to medium term. Therefore it must be a priority to

expand their product range as soon as is practically possible.

Need to establish brand name and reputation. Through a combination of

advertising and word of mouth, it is vital in such a mature industry that K&F

makes efforts to extend knowledge of their brand throughout the market.

Location. While their rural setting provides K&F with advantages in terms of

low rate charges and set-up costs, it is also liable to present challenges should

they wish to enter the retail market.

Debtor’s slowness to pay. K&F will not be operating in a seller‟s market, and

therefore must be cognisant of the reality in the industry that builders are

frequently very slow in paying their suppliers.

21

Porter’s Five Forces

22

Barriers to Entry

The barriers to entry to the fireplace industry

could best be described as being medium.

Entering the industry obviously does not

require the capital outlay of, say, a car

company, but on the other hand, it is not as

easy as, for example, going into business as a

website designer. The cost in terms of plant

and machinery therefore class this as an

industry with medium barriers to entry.

Supplier Power

For almost all of the raw

materials required to build a

fireplace, the abundance of

competing suppliers results

in supplier power being

quite low.

Buyer Power

Since K&M will initially be

selling to the construction

industry and the retail trade,

the potential is there for buyer

power to be quite high since

they can trade off one

fireplace manufacturer against

another.

RIVALRY

Government

Tax Rates

Inflation Rates Charges

Bureaucracy

Chance

Threat of Substitutes

The threat of substitutes comes

from several angles. More and

more homes are now heated by oil

or gas, and due to safety concerns,

more consumers are now opting for

stoves as opposed to fireplaces.

However, the market for fireplaces

remains a strong one.

23

Porter‟s model has been criticized for being quite a static model, but is nevertheless

extremely useful for analysing any industry, particularly a mature one such as the

fireplace industry. Nevertheless, in order to compensate for this limitation in the

Porter model, it is vital to re-evaluate the situation in the industry on an ongoing

basis. This is addressed in the section on „marketing control‟.

Competitive Advantage (Porter)

One of the central goals of business strategy is to create and sustain a competitive

advantage. A competitive advantage exists when a firm is able to deliver the same

benefits as its competitors but at a lower cost (cost advantage), or deliver benefits that

exceed those of competing products (differentiation advantage). Thus, a competitive

advantage enables the firm to enjoy high profits than its rivals by delivering better

value than its rivals.

Cost Advantage or

Differentiation

Advantage

Value

Creation

Distinctive

Competencies

Capabilities

Resources

24

Value Chain Analyses

In order to go about creating a competitive advantage, Michael Porter identified five

generic steps that could be used to analyse any firm from a value-creation viewpoint.

As a result, Porter argued, sources of competitive advantage could be found.

Competitive Advantage

Gerard Murray Products (GMP) Ltd., based in Ashbourne, Co. Meath are wholesale

distributors of a wide range of fireplace and heating products, and supply almost all

of the materials - apart from the timber - required for the manufacture of both the

Thomond and Liberty fireplaces.

The major attraction of GMP is that they are part of a conglomerate of buyers,

Gallery Fireplaces in the UK, who use their collective buying power to lever cost

advantages by purchasing in bulk from a Chinese manufacturer. Not only that, but

Gallery Fireplaces sent engineers, designers and ceramicists to China to work with

the manufacturers in improving the quality of the products they purchase. GMP as

part of Gallery Fireplaces has worked proactively to get a quality comparable to

European standards at a much lower price.

Michael Kinchella is GMP‟s sales representative for the mid-west region in Ireland.

According to him GMP‟s business strategy involves signing contracts with

manufacturers on a region-by-region basis giving them the sole rights to purchase

GMP‟s materials. GMP is willing to take on K&F as its sole trader in the mid-west

region.

This lucrative deal - similar to the notion of car dealerships - gives K&F a significant

cost advantage over its competitors, thus affording them an important source of

Inbound

Logistics

Operation

s

Outbound

Logistics

Sales &

Marketing

Service

Administration

&

Infrastructure

Product &

Technology

Development

25

competitive advantage. Because of the cost advantage afforded to K&F by the

agreement with GMP, they can produce fireplaces at a much-reduced cost.

For example, the Thomond fireplace is close in appearance to an international award-

winning fireplace currently manufactured by Kilkenny Fireplaces. They can offer this

similar product - and do so on a sustained basis - for significantly less. As K&F

attempts to penetrate the market, they are in a position to offer retailers an increased

mark-up as against that offered by their competitors.

Market Planning

Market planning involves asking three crucial questions:

1. Where are we now (markets, products, competitors)?

2. Where do we want to be (marketing mission)?

3. How do we get there?

In spite of being new entrants to the market the SWOT analysis shows that they are

motivated young men who have considerable competitive advantage with them as

they are propelled into business.

Within two years of starting business they want a 7% share of the market in the Mid

West which amounts to selling 420 fireplaces annually. This will give them both a

good income and money to invest in the business. Even though they are offering only

2 standard fireplaces they are being sold in a huge range of colours and materials.

They intend to expand their repertoire of designs each year as they listen to their

customer‟s preferences and peruse what is happening in the national and international

fireplace industry. With J. J.‟s understanding and interest in the real estate market he

is keen to invest in city centre property with the possibility of retailing their fireplaces

in it.

They are going to reach their intermediary goal of breakeven within 18 months by

integrating key areas of business: the product, the price of the product, attracting the

buyer, and channels of distribution, as described by McCarthy and Perreault11

. It will

also include controls flowing from periodical reviews of the entire marketing

operation. All this is described as the marketing mix, which follows next.

Marketing Mix

Huge investment of time and talent has been made by the partners in designing their

two fireplaces. Coupled with that work, time was and is being invested in promoting

these two products. Prices are being kept low and margins high for the partners to

gain market share and reach the breakeven point. As customers become aware of the

products sales will grow, then production. This will lead to expansion, opening

further opportunities and ensuring that the product mix will have both width and

depth to it meaning a larger range and variety within each item of the range.

Once the fireplaces go on the market they have a life cycle which ultimately leads to

decline. This happens after sales peak. As this is about to happen there are two

options open to the partners. The fireplace needs to be redeveloped and relaunched to

revive customer interest. A new selling point needs to be presented. This is as

26

important as new product development according to T. Nilson12

. The second option is

produce a new product in response to customer demands.

Next the fireplace has to be priced. Initially the production costs, a small mark-up for

the partners, and VAT is the selling price. This will give the customer a higher

margin and make a greater inroad into the current market. This is known as

penetration pricing. Once the partners have received their target share of the market

i.e. 7%, and established themselves for quality then they can review their pricing

hoping for an increase.

As they launch their business their promotional aim is to highlight the brand name

„K&F Fireplaces‟, make prospective customers aware of their two fireplaces,

highlight its distinctive qualities and features to the consumer. To the initial customer

i.e. builder and retailer, in addition to the above they will contrast it as value for

money when examined against other fireplaces.

Personal selling is the primary method of promoting their fireplaces. They sought out

potential customers through the yellow pages. Then they met them and gave them a

copy of their five-page brochure. There will also be an insert for the customer

explaining trading conditions. To the retailers, not the builders, they would place a

sample of both fireplaces in their showroom free of charge with a large poster and a

bundle of brochures. Once the customer agrees to accept the fireplaces the partners

maintained close relationships with them. Both the retailer and builder proved to be a

valuable source of customer information and marketing intelligence.

The firm would attend „Ideal Home‟ Exhibitions in their area. They would

have an insert in the yellow pages, sign on their premises for the public to see, signs

on the front and sides of their van. After initial sales they are conscious word of

mouth will be a great boon to promoting their business.

The final concern in this section on the marketing mix is distribution. This calls on

the partners to have their fireplaces for sale in the right place, at the right time and at

the right price. They have purchased a van which they will use for transporting the

fireplaces to the their customers. As orders increase and the seasonality of sales are

logged they will be able to decide from these trends on the numbers they will need to

have in storage. This will ensure that they can respond to the prompt demand for a

fireplace.

Marketing Control

Having drawn up their initial marketing strategy and begun its implementation, their

marketing duties are far from over. Rather, because the task of marketing a firm‟s

products is not a one-off activity but a continuous one, their task as marketers is only

beginning. While Porter‟s model is an extremely powerful tool in a static situation, its

limitations quickly become apparent in a dynamic environment.

For a wide variety of reasons, consumer tastes change over time, as does the power of

buyers and suppliers, the quantity and quality of competing products, and the

resources and capabilities of competing firms.

Therefore, as their first and subsequent years of trading progress, it is vital that they

continuously reassess other products in line with their performance in the evolving

marketplace. They must never stop listening to the market, in particular when it

27

comes to adding to their range of products and services. To constantly rely on their

initial research will simply not be good enough.

This process of re-evaluating their performance and adjusting their marketing strategy

accordingly is known as „marketing control‟, and provides the basis for a feedback

loop into the first stage of the process.

One of the tools used in self-evaluation is finding out the Break-even in K&F

Fireplaces‟ sales. Illustrated below is a diagrammatical explanation of what it means:

This is the formula going with it showing how the break-even point is arrived at:

UnitperCostsVariableUnitpervenueSales

CostsFixedPoEvenBreak

_____Re_

_int_

This is important to Brian in the Sales and Marketing department. In 2004 this is the

break-down:

Thomond Fireplaces:

350600

264,118473

OR

28

Liberty Fireplaces:

175400

264,118525

In 2004, 473 Thomond Fireplaces or 525 Liberty Fireplaces must be sold to reach

break-even. In practical terms, a combination of both will be sold which will be

somewhere between 473 and 526. The threshold that has to be crossed is €118,264.

This figure is reached by multiplying the number of each fireplace by the profit

contribution on each, and then adding them.

At their monthly meetings Brian will need to show that his sales are surpassing these

figures. Otherwise he will have to offer an explanation and a strategy to reverse that

downward trend.

29

Legal Structure

Simple Partnership

The allure of owning a private limited company appealed to JJ and Brian initially. So

they visited Liam Judge, an accountant, for advise on the merits of pursuing that idea.

He suggested that they should presently form a simple partnership.

He outlined what was entailed in starting a limited company. Financially it would

cost about €1,000 to set up. Accounts would have to be audited by a qualified

accountant costing an extra €2,000 at minimum annually on top of the usual

preparation of yearly accounts. They must be then lodged in the Companies

Registration Office on time to avoid penalties. They are available to the public to

examine and that also includes their competitors.

They learnt the main advantage of a limited company is that their financial liability is

limited to the assets of the company. That is the theory. That has been rolled back

with current legislation. If the directors of the company are shown to be guilty of

reckless or fraudulent trading, or where the company has failed to keep “proper books

of accounts” they can be pursed personally through the courts for losses suffered by

their traders or investors. On top of that there is also a whole raft of legislation

governing the setting up and operation of private limited companies. The two

principal documents to be completed are – The Memorandum of Association and the

Articles of Association. For the uninitiated in business this is putting expenses and an

unwanted burden on their shoulders.

As regards the loss of their own money, well the banks will not give out loans that are

unsupported. The financial institutions have to be assured that their money will be

repaid. Debtors are the only people who could loose financially with a limited

company.

So what are the advantages of a private limited company? Geraldine Thornton, a

solicitor explained three principle benefits. The limited liability would most certainly

kick in where insurance policy didn‟t cover a loss. She explained that insurance

companies are reluctant to providing an all encompassing, comprehensive insurance

cover e.g. after a fireplace is installed will insurance cover extend to damages that it

might cause in twenty years time? If it didn‟t the limited company would protect the

owners from unlimited responsibility. In a partnership they would be jointly and

severally responsible for losses and liabilities.

Secondly, when the profits in a business get very large there is a lower tax regime for

private limited companies which is not available to partnerships.

Finally, Ms Thornton, highlighted that there can be extra problems in sharing the

assets when one of the partners leaves or dies. It may even result in the closure of the

business. This is avoided with a private limited company because it is a separate legal

entity from its shareholders.

They chose to set up a simple partnership. They went with Liam Judge‟s advice for

the following reasons.

30

The accounting and legal costs are much less. The benefits of Corporation Tax will

not arise in the early years.

When securing borrowings from the bank they need to provide collateral whatever

legal structure they adopt. Risks can be covered by business and personal insurance

which are outlined at the end of this section.

Liam Judge explained that the company name must be registered. This is done by

completing Form RBN1B and sending the prescribed fee of €25 to the Registrar of

Companies in Dublin. Registration of a business name is obligatory if any individual

or partnership carries on business under a name other than their own true names. Its

purpose is to make public the identities of those individual(s) being the legal entity

behind the business name. This is to comply with the “Registration of Business

Names Act, 1963”. They have chosen “K&F Fireplaces” because it is unique, easy to

remember, pronounce and spell, informative and image-creating. It is not a registered

company‟s name or a trade mark.

The banks require this before a business account can be opened. The company also

needs to register with the tax office. He explained that when profits grow thought

should then be given to starting up a private limited company.

Since a partnership, essentially is an agreement between two or more people to go

into business together it would be wise to draw up a formal agreement. The

agreement addresses the issue of liabilities, losses, profits, and one of the partners

abandoning the partnership. The signed partnership agreement sets out how the

business is to be financed, how profits and losses are to be shared, and what will

happen if one of the partners decides to leave.

If the partnership breaks up, for any reason, all business contacts need to be notified

immediately and the proprietor needs to formally take „public leave‟ of the

arrangement. Otherwise, he could remain liable for the partner‟s continued activities

and end up being sued for his liabilities, according to David Kirby13

.

Insurance

Business insurance will cover the following areas of a business:

Fire – to cover rebuilding costs following a fire.

Buglary/theft – to replace stolen or damaged goods

All risks – coverage against loss of assets, however caused.

Public liability – coverage against claims by members of the public.

Product liability – coverage against loss relating to defective or dangerous

products.

Employer‟s liability – coverage against claims against staff.

Motor insurance – cover against driving accidents.

Personal insurance is worth considering when the K&F Fireplaces are up and

running. It grants security to JJ and Brian in the case of sickness or death. It will

provide an income or lump sum. This will help in providing replacement staff and

31

allowing the business to continue. Their families or next-of-kin will also be

guaranteed financial security. This insurance is costly.

32

Taxation14

K&F Fireplaces are subject to Income Tax, Value Added Tax (VAT), and

PAYE/PRSI. All figures quoted below relate to the tax year 2002.

They are obliged to notify the Revenue Commissioners of the establishment of their

business. By returning the completed Form TR1 K&F Fireplaces are registered for

the relevant taxes. They will receive a “new Business Visit” from a Revenue official

who will go through the requirements to ensure that you have proper systems in

place.

Calculating business taxable profits

Taxable profits are calculated by deducting allowable business expenses from

turnover. Turnover is the gross amount of income earned (i.e. total amount for sale of

goods or provision of services) by a business before deducting any business expenses.

This turnover figure should not include VAT. If a business makes a loss, it is either

offset against other taxable income or carried forward against the future profits of the

business.

Revenue expenses (expenditure) cover day-to-day running costs (exclusive of VAT).

Capital expenditure is regarded as capital spent on acquiring or altering premises

which are of lasting use in the business. It cannot be deducted in arriving at the

taxable profit. Capital allowances which is the wear and tear allowance of capital

expenditure can be deducted e.g. office equipment, business plant and machinery.

The following gives a diagrammatic view of what has just been explained:

Everything below is Exclusive of VAT

Profit = income – expenditure

Turnover is the Income Revenue expenses is expenditure

Total sale of goods Revenue expenses Allowable:

Provision of services Purchase of goods for resale

Wages, rent, rates, repairs, lighting,

heating etc

Running costs of vehicles or

Machinery

Accountancy fees

Interest paid on any monies borrowed

to finance business expenses/items

Lease payments on vehicles or

machinery used in the business

Capital expenses not Allowable

Purchase of business premises

Alteration of business premises

Capital allowances Allowable

Wear & Tear on capital expenses

33

Self-assessment

Income tax is payable by JJ and Brian on all income earned in the tax year which now

corresponds to the calendar year. They will be calculated on salaries, investment

income, rental income, and on annual profits that each receives from K&F Fireplaces.

Their preliminary tax, tax returns, and any balance of tax, must all be submitted on or

before 31 October each year. These charges include PRSI and Health Contribution.15

It is 100% of what was paid the previous year or 90% of projected earnings for this

year.

PAYE/PRSI

JJ and Brian are obliged to deduct tax at a specified rate from an employee‟s pay.

This system is known as Pay As You Earn (PAYE). They have also to deduct Pay

Related Social Insurance (PRSI) on behalf of the Department of Social, Community

and Family Affairs. The system is designed so that, as far as is possible, the correct

amount of tax is deducted from an employee‟s pay to meet his/her liability for the

year. The standard rate of income tax is 20% and 42% at the higher rate.

These payments must be paid to the Collector-General within 14 days from the end of

the income tax month during which the deductions were made. A form P30 Bank

Giro/Payslip is issued to the employer each month on which the figures for total tax

and total PRSI contributions should be entered and returned.

Or JJ and Brian can arrange to pay PAYE/PRSI through a direct debit scheme and

make an annual return/declaration of liability. At the end of the tax year, they must

complete end-of-year forms P35, P35L and P35/T which are returned to the

Collector-General.

Below is an example of the weekly deductions to be made from an employee earning

€450 each week:

What Wages Cost

Weekly Wage € 450.00

Employee PAYE € 45.00

Employee PRSI € 21.92

Employer's PRSI € 45.00

Employee Receives € 383.08

Revenue Receives € 111.92

Costs Employer € 495.00

34

VAT

Valued Added Tax is a consumer tax collected by VAT-registered traders on their

supplies of taxable goods and services in the course of business and by Customs &

Excise on imports from outside the EU. K&F Fireplaces are obliged to register and

pay VAT because their annual turnover is likely to exceed €51,000 in goods or

€25,500 in services sales.

They will pay VAT on goods and services acquired for the business, and charge VAT

on goods and services supplied by the business. The amount by which VAT charged

exceeds VAT paid must be paid to the Collector-General. If the amount of VAT paid

exceeds the VAT charged the Collector-General will pay over the access to K&F

Fireplaces.

VAT is charged at 21% on all sales of goods. VAT is charged at 13½ % on services

offered. It is paid bi-monthly. VAT is due before the 19th

day following the end of the

two monthly period. It must be paid to the Collector-General through the Revenue‟s

direct debit scheme and form VAT3 returned.

35

Accounting

Daniel Defoe said, “A tradesman‟s Books, like a Christian‟s Conscience, should

always be kept clean and clear; and he that is not careful of both will give but a sad

account of himself either to God or Man.” Accounting is an integral part of a

business.

Microsoft Office, especially Excel with its spreadsheets, is a most helpful

software package in keeping records, but stationary will also be needed.

It consists of three steps:

1. Recording transactions

2. Analysing them so that they provide information

3. Interpreting them so that they are useful for decision-making.

Recording transactions

The partnership have decided to record the following transactions:

Purchases

Sales

Receipts for lodgements into the bank

Payments of cash from the bank

Analysing transactions

Analysis deals with categorising or processing the records in a meaningful manner.

When examining purchases the analysis could be done under the following headings:

o Fixed assets

o Stock

o Overheads

o Miscellaneous

A similar analysis could be done for sales, and bank transactions.

Interpreting the figures the transactions offer

This is where the fruit of recording and analysing is seen. This is where the purpose

of accounting is most evident. This is where action within the business is impelled

forward. It has to be done on an annual basis but either monthly or quarterly would be

deemed necessary also.

At a most fundamental level records need to be kept in order to pay VAT,

wages, bills, loans, overdrafts, and sharing profits. They are also necessary to charge

customers for goods and services offered. This is essential, as credit granted or

received will expire at the end of a time period.

36

The accountant will give advice on the kind of information that needs to be

collated to run the business effectively. Examples of this would be:

o Checking the bank balance – if it is always overdrawn, either schedule a

meeting with the bank manager or examine the flow of cash in and out of the

company.

o If purchases are too high and sales are too low, this could lead to cash flow

problems, so there may be a need to cut back on purchases.

o If overheads are high, then it is time to look at the least necessary purchases –

don‟t purchase a van for another 12 months.

At the end of the year the following documents are required by the Revenue

Commissioners:

o Trading Account -

o Profit and Loss Account

o Capital Account

o Balance Account

37

Plant and Machinery

Plant & Planning permission

We estimate that 1,000 square feet will be needed for manufacturing, as well as for

the storage of both materials and finished products. This is based on similarly-sized

businesses in their industry. In addition, there needs to be three-phase power in this

manufacturing plant. J.J. has a suitable farm shed to offer at a rent of €200 a month.

However, it will require some work in order to convert it to a production facility at a

cost of €15,000. This photo depicts how their plant will look when completed.

K&F plans to operate out of a converted hayshed in Ballysimon, Co. Limerick, a

development which falls under the Planning and Development Act 2000 This law sets

out the basis for all aspects of planning and building in Ireland, and stipulates that

planning permission is needed for practically every significant development.

If applying for planning permission, a planning application form was obtained from

the Limerick County Council. In addition to the submission of an application fee,

copies of a location map, and a site plan. There are also requirements that the

application be made publicly known through local newspapers and by erecting a

notice on the site. The plans can also be viewed at the County Council offices and at

local libraries.

A decision is normally returned within eight weeks of the submission of an

application. This allows any member of the public to comment on or object to an

application, and all such comments must be made available for viewing by the

applicant.

Permission will generally not be granted if the plans contravene the local

development plans that are drawn up every few years by each planning authority.

However, given the current presence of at least two other small businesses within half

a mile of the proposed location of K&F Fireplaces - including a rival fireplace

manufacturer - this is not expected to become an issue. Should the need arise

however, failed applications for planning permission can be appealed to An Bord

Pleanala.

39

As part of this production facility, the following machines will be required:

PANEL SAW(€4,840)

BAND SAW(€4,235)

COPYING LATHE (€8,470)

OVERHEAD ROUTER (€6,050)

SPINDLE ROUTER (€4,235)

FOUR FOOT BELT SANDING MACHINE

(€14,200)

These machines will all be sourced from Hopkins Machinery Suppliers, apart from

the van pictured below (O‟Mara Motors), and the cement mixer (Heiton Buckley). In

the event that a piece of machinery develops a fault, these firms will also service the

equipment. Hopkins, their most important supplier of machinery, will come to the site

within twenty-four to forty-eight hours, depending on urgency.

40

A table is required for the production of both the hearth and the insert. The frame of

this table needs to be made of strong steel that can hold a granite top of dimensions 6

feet by 10 feet. The flatness of the granite top is essential for the correct production of

hearths and inserts. Such a table costs €1,000, and they have secured one second-hand

from Joe Kemmy, Limerick.

Costings for the above and additional equipment :

Wet saw (for cutting stone) €1,800

Diamond-tipped blades for wet saw €200

Granite Table €1,000

Angle Grinder (for smaller pieces of stone) €150

Bollhoff spraying machine €4,000

Belle, half-bag, Honda engine cement mixer €800

Nissan Van €20,200

Total cost €28,150

41

Sourcing the Raw Materials

Extra details can be found in the database: View Database for full listing of materials

and their suppliers. After double clicking this K&F Fireplaces.mdb opens the Reports

Object and double click „Materials Needed‟. The same material is in printed form in

Appendix 11, Materials.

Contact details for each of the companies mentioned below are in Appendix 12,

Suppliers.

After compiling a list of all the raw materials that were needed to manufacture

fireplaces the partnership needed to find suppliers for them. After consulting the

Golden pages, recommendations from people in fireplace manufacturing, the internet,

and a directory of Irish businesses they produced a catalogue of possible suppliers.

After ringing or writing to them at least one member of the partnership would meet

with a sales representative from each of the respective companies. They travelled as

far away as Athy, Co. Laois for one such meeting. The Dublin companies met with

them while on their sales rounds in the south-west of Ireland.

They sought the following information when they met each of the company reps:

1. Range of products produced

2. Samples of the products

3. Price of products

4. Lead time for deliveries

5. Credit arrangements

6. Size of the company

7. Examine their production where necessary

8. Quality awards achieved

9. History of their past

10. Competing companies in the market

The standards of all the companies inspected were very high offering a very

competitive and efficient service. Many of them are involved in the importing of

materials from around the globe and show a prosperous future. Any of the raw

materials, if ordered before 12 noon on Tuesday, will be delivered within 48 hours.

Initially, these companies wanted cash on delivery but after 6 months the partnership

could apply for credit. 30 days credit is the standard. The prices quoted below are

exclusive of VAT.

42

Granite

Amerillo Brazil

Baltic Brown Bianco Luna Pearl

Blue Pearl

Eagle Black Emerald Pearl

Eucalyptus

Multicolour New Baltic Green

New Dakota

Pure Black Red Venga

Rosso Porrino

Sapphire Blue Ubatuba

Venetian Gold Verde Gloria Verde Star

43

Marble

Bianco

Carrara

Statuario

Statuario

Venato

Calacatta

Oro

Statuario

Lightly

Veined

Arabescato

Cervaiole

Calacatta

Carrara

Arabescato

Vagli

Port'Oro Marquinia

Bardiglio

Carrara

Bardiglio

Imperiale

Crema

Valencia

Giallo di

Siena

Broccatello

di Siena

Moca Cream

- Fine

Moca Cream

- Rustic

Vicenza

Antico

Pietra

Vicenza

Breccia

Antica di

Siena

Rosa

Portugal

Chiaro

Rosa

Portugal

Venato

Rosa

Portugal

Salmon

Trani

Verde Alpe

Rosso

Alicante

Rosso

Francia

Rosso

Verona

Rosso

Vidraco

Verde

Guatemala

44

Michael Kinchella from Gerard Murray Products Ltd visited JJ in Limerick with

many samples of their products, colour brochures of their entire range, and photos of

their new 50,000 square feet premises. They are part of a purchasing conglomerate

involving Irish and UK companies who source most of their materials from a Chinese

manufacturer who produces to their standards and specification. In general their

overall costs are the most competitive. On the occasion item that competitors surpass

them on the margin is very slight. Listed below are the products which would meet

their needs.

Gerard Murray Products Ltd

Product Price

Insert €100

Granite hearth – unfilled €56

Granite insert – unfilled €90

Steel reinforcing – 15 items €29

Fireback €25

Fret €10

Grate €10

By buying in bulk prices would be much less. For example, an insert priced at €132

each would be purchased for €100 each if bought in a crate of 20 units.

When it came to sourcing granite, marble and stone glue the following companies

responded to their invitation to be suppliers: Marble & Granite Supplies Ltd,

Stonefacings Ltd, and Comet Marble. These were specialists in marble and granite as

distinct from GMP Products above who were distributors of a much wider range of

associated fireplace and heating products.

Marble & Granite Supplies offer the greatest supply of colours in granite as their

website will show www.marblegranite.ie e.g. Amerillo Brazil, Baltic Brown, Bianco

Luna Pearl, Blue Pearl, Eagle Black, Emerald Pearl, Eucalyptus, Multicolour, New

Baltic Green, New Dakota, Pure Black, Red Venga, Rosso Porrino, Sapphire Blue,

Ubatuba, Venetian Gold, Verde Gloria, and Verde Star.

Marble & Granite Supplies offer the following supply of colours in marble: Bianco

Carrara C Venato, Rosso Verona/Asiago, Perlato Olimpo, Nero Marquina, Imperial

Green.

Granite generally comes in slabs 60 x 18 inches, or 54 x 18 inches. The risers are 2

inches high and come in various lengths. These items are 7/8 inches thick. Slabs

generally cost €65 each depending on the colour, quality, availability, source of origin

and quantity required. Marble comes in tiles 1 foot by 2 feet. The Chinese is softer

and cheaper than the South African.

A large range of fireplace accessories are available from Blackwater Crafts Ltd

among them fire trims starting at €19.05. They are the major supplier to the south of

Ireland.

A phone call to Brick Yard Builders Providers, Limerick city in the morning would

have sand and chippings delivered that evening.

45

Calcium Aluminate Cement

Ciment Fondu Lafarge

Lafarge Aluminates, Inc., in Paris is the North European

Headquarters of Lafarge Aluminates, the world's leading

manufacturer of calcium aluminate cements. Lafarge Aluminates is

an ISO 9002 certified production facility. „Ciment Fondu Lafarge‟

can be imported directly from London or Dineen Refractories Ltd,

Co. Laois. It costs €14.50 for a 25 Kg bag.

JJ made a visit to Dineen Refractories Ltd, Athy, Co. Laois who

are manufacturers of a wide range of residential and industrial chimney products

including firebacks, and are the largest importers of „Ciment Fondu Lafarge‟. They

have also imported the cheaper Chinese replacement and tested it over the past 3

years with satisfactory results.

Zhengzhou Dengfeng Smelting Materials Co., Ltd. (ZDSM) is the China leading

manufacturer of calcium aluminate cements, and holds the number four position in

the world market. They export to more than 30 countries to areas such as America,

Mexico, Germany, Holland, Japan, South Korea, Pakistan, Taiwan and Hong Kong.

The product CA65-H has been used in constructing blast slideways for a satellite

launching pad in Jiuquan Satellite Launching Center many times, and lots of praises

were given for the good application result. It costs €11 for a 25 Kg bag.

Both these cements impart excellent mechanical strengths to mortars and concretes

and can retain these properties when subjected to heat.

Tenax

Tenax S.p.A is the brand name for stone, marble, and granite

glue which comes from Italy. Tenax is certified ISO 9001.

In the stone business Tenax is a recognized landmark for the

quality of its products. It maintains the undisputed

leadership in its field using top quality structures, products

and services. Tenax offers a qualified technical support and

worldwide sales support for its clients. The small fabrication

shop as much as the large slab manufacturer, find among

Tenax products all the necessary materials for the gluing, the

filling, the reconstruction and the superficial treatments of marbles and granites. In

this sector, Tenax is the undisputed world leader. They have a reputable name

worldwide and export east as far as Iran and west to Brazil and USA.

46

Timber

In choosing timber for their fireplaces they took their lead from Kilkenny

Mantlepieces Ltd who are the undisputed leaders in the field of producing

mantelpieces. They have won international prizes for their work.

They use five kinds of timber: maple, sapele i.e. mahogany, red oak, white oak,

cherry wood and pine. The partnership also included iroko i.e. teak, red deal, white

deal in their examination. The latter two failed their analysis and tests. They were too

soft especially the white deal and would be liable to warp with continuous heat.

All these timber are readily available for sale here in Limerick. The partnership

turned to the McMahon timber importers who are the biggest timber providers in the

country. They have a reputation for high standards of quality which they have built up

since 1830. They source their timber in Europe, Asia, Africa, and America.

Red Oak and Cherry Wood come from the Appalachian region of the USA. Maple

originates further north in southern Canada. The hardwoods iroko and sapele come

from West Africa. Sapele is the darker of the two. The former is becoming

increasingly popular due to its consistency of colour and affordable price. Even

though much of the imported pine comes from the Scandinavian countries the best of

it originates in the southern part of America. It displays excellent machining qualities.

All these timbers have high strength values. That‟s what makes them suitable for use

in mantelpieces. They vary in colour, hue and grain pattern, even when cut from the

same tree. No two pieces of natural wood are alike. That is what makes them

attractive to the consumer.

Cherry wood and maple would be the most expensive to purchase, followed by red

and white oak, and finally pine, teak and mahogany would be about the same price.

The cheapest way to buy the timber is rough, unplanned, and large planks.

Available shades of solid timber finishes are shown below. If a person has a specific

shade in mind to match existing colour schemes then the person can simply bring a

sample to the partnership and they will do their utmost to match it at minimum

charge.

47

Light Mahogany Light Burnished

Mahogany

Traditional

Mahogany

Scandinavian

Pine

Teak

Mahogany

Antique Brown

Mahogany

Old Style Pine

water based

Light Pine

Golden Pine Waxed Pine Cottage Pine

water based

Light Oak

Medium Oak Traditional Oak Light Maple Light Cherry

Champagne White

Stone Finish

Semi Matt

Black

Magnolia Jade Wash

On Pine

Medite and other artificially produced cant compare to solid hardwoods when it

comes to holding nails and screws and withstanding the stresses, loads, shocks and

abrasions of daily life.

Species – percentage of total U.S. Production

Species (Kiln-dried)

Pressure to Mar

(In pounds)

Hard Maple 1,820

Sapele 1,500

Teak 1,450

White Oak 1,360

Red Oak 1,290

Soft Maple 950

Cherry 950

48

The term pine technically refers to evergreen coniferous trees of which about 70

species are known.

The production of the timber surround

involves thoroughly testing, inspecting and

kiln drying the wood before use to help

ensure its stability in modern living

conditions. Then begins the cutting of the

timber, sanding, woodturning, routing, and

assembling. Brackets, screws, and glue

were the only materials needed for the

assembling apart from the timber.

Lacquers and Sealers

Granyte was founded in 1850 in Salford UK. It

quickly established a reputation for the excellence of

its paints, french polishes, stains and woodfillers. The

company was awarded the coverted ISO9001

certificate for both development and manufacture.

Throughout the UK and Ireland, a combination of Granyte's own expert distribution

and strategically-sited stockists ensures speedy supply of off-the-shelf products.

Through its Colourspeed service Granyte offers from its Salford site, and selective

stockists a 24 hour colour matching of Pre-Catalysed and Acid Catalysed enamels in

colours totalling almost 3,800 shades. It has over 60% of Ireland‟s wood finishing

market. These products are notable for their excellent application properties, rapid

drying times, excellent durability, as well as their high quality finish and wear

resistance.

There are 45 Wood Shade colours in the Water Based Stain Range. A sample of the

stains are shown below. Based on good quality dyestuffs and pigments they exhibit

excellent appearance, application properties and light fastness in internal situations.

Stains when applied over Pine:

50

The lacquer is bought in 5 litre and 25 litre polythene containers. It can be bought

locally from most of the builder providers. It‟s described as „Granyte Wood finishes,

P/C Lacquer‟ and can be bought in mat or sheen. It could do approximately 20 sprays

of a fireplace with 5 litres.

The sealer is bought in 5 litre and 25 litre polythene containers. It can be bought

locally from most of the builder providers. They describe it as „Granyte, NL 2501,

P/C Basecoat High Build‟.

51

Solver

Link to the Solver solutions, Appendix 4.

This chapter is explaining some of the workings of Solver, its strengths and how the

partners compensated for its apparent deficiencies. Illustrations will be made with

examples from K&F Fireplaces and Par Golf Bags. But these illustrations can be

applied to the manufacture of any product.

When using Solver the following data needed to be input:

1. Amount of time (i.e. scarce resource) required by each fireplace to complete

each process.

2. Total amount of time available (i.e. scarce resource) for each process.

3. Profit contribution for each fireplace.

Students experienced difficulties with No 2 and 3 above.

No. 1 above: the amount of time required by each of the two fireplaces to complete

each process was calculated by speaking to the manufacturers of fireplaces.

Allocation of scarce resources

No. 2: when it came to calculating the total amount of time available (i.e. scarce

resource) for each process problems arose. The partners knew the total amount of

time they had at their disposal each week for all four processes. But how were they to

allocate the total time resource to each of the four processes?

If you look at the Par Golf Bag solution you were given the amount of time

for each process, 630, 600, 708, and 135 hours. You weren‟t given the total amount

of hours available each week, 2,073 hours, and told allocate them as you choose.

If you were told that there were 863 hours available in total each week for the

production of golf bags how would you go about allocating those hours for each

process?

Or if a new company was starting up and wanted to know how many hours

should be allocated to each process how would you go about that? If you attempt it

for Par Golf Bags, it should be done without making reference to the allocations

already given in the book.

That is the problem that the partners attempted to solve in SolverAssist.xls.

They input the amount of time required by each fireplace to complete each process.

Then they input the total amount of the scarce resource i.e. the total amount of time

available each month for the four processes. The final piece of information they input

was the ratio between the numbers of each fireplace they wanted produced each

month.

Input these three pieces of information into the green cells in the Excel Sheet

and the correct allocation of resources are output in the yellow cells. There was no

slack time.

The feasible region that satisfies all the constraints simultaneously can now be

drawn. When the graph was drawn all the lines met at one point since there was no

slack time. This point was one possible optimal solution point. The other two possible

optimal solution points are where two constraint lines intersect on the X axis and Y

axis nearest the 0, 0 values.

52

The criticism has been made that all the constraint lines intersect at exactly one point

leaving only three possible optimal points. The number of optimal points can easily

be increased by introducing slack time.

We will look at the example of the fireplaces again. In one case of the Solver

solutions there is 320 hours available of the scarce resource. So when they initially

used SolverAssist.xls they inserted 320 hours into the cell for the scarce resource.

This time they inserted 290 hours and the remaining 30 hours will be slack time. The

Excel Sheet will output the correct allocation of resources for 290 hours. Now, and

only now, the 30 hours of slack time can be added to any one or more of these

outputs.

When the new figures are run through Solver 30 hours of slack time will be

shown. If a graphical solution is drawn there will be more than 3 possible optimal

points.

High-Low Profit Contribution Problem for Solver

No. 3 above: the next problem arose with Solver when the profit contribution for each

product was entered. If the contribution was too high for one product and too low for

another it could mean that zero of one product was being manufactured, and the

coordinates for the optimal solution were either on the X-axis or Y-axis.

When this situation arose students found that they were getting negative

values for the amount of products to be manufactured. The problem arose because

non-negativity constraints were not defined in the mathematical modelling of the

problem in Solver. There are two solutions offered to this problem.

Solution 1:

When you open the Solver dialog box click the button labelled „Add‟. It will

bring you into Add Constraint dialog box. This is where you can now add a new

constraint to the mathematical definition of the problem. What you need to define is

that the number of each product to be manufactured will be either equal to or greater

than zero. We want these values to remain non-negative. Or to put it another way,

when it is being modelled graphically it has to remain in the positive quadrant of the

X-Y graph.

In the „Cell Reference‟ dialog box put in the reference to the Changing Cells

or adjustable cells i.e. the number of each product that is to be manufactured. Change

the default sign to „>=‟. In the Constraint cell input „=0‟. Finally, click „Add‟ and it

will be included in the mathematical model.

Solution 2:

When you open the Solver dialog box click the button labelled „Options‟. It

will bring you into Solver Options dialog box. There is a check box that needs to be

ticked in front of the label, „Assume Non-Negative‟.

This causes Solver to give a lower limit of 0 (zero) for all adjustable cells for

which a lower limit has not been set in the Constraint box in the Add Constraint

dialog box. In linear programming we are dealing with non-negativity constraints

which need to be specified in all linear program definitions.

This Solution is recommended because it is quicker, no danger of human error

creeping into the calculations, and all adjustable cells are covered by the non-

negativity clause. For understanding purposes Solution 1 would be recommended.

The user will need to know what he is doing and why he is doing it.

53

High-Low Profit Contribution Problem for Students

There was a second problem that arose when the contribution was very high for one

product and very low for another. This could mean that only one product was being

manufactured. This was a situation the young entrepreneurs did not want. The

differential between the profit contributions for the two products had to be correct so

that both products were going to be manufactured.

Solver was no great help with this problem. A person could enter profit

contributions speculatively and continue repeatedly running Solver until the right

answer was output. This random work is not satisfactory for young scientists. The

sensitivity analysis could be used here but it involves pen and paper for each analysis.

This is repetitive and slow when the operation has to be done many times, and is also

prone to human error.

Since the students are on a computer course they felt that the computer should

be rigged up to do the work for them. Initially, this meant coming up with a

mathematical formula and then installing it in MS Excel. Once this was achieved then

the cognitive demands on the students was dramatically reduced for evermore.

What was required was a mathematical formula that could solve the problem

mathematically. This is what follows.

Problem: arrange the profit contributions for each product so that the optimal point

would not be on the X-axis or Y-axis.

Px – profit contribution on Product X, DeLux bag.

Py – profit contribution on Product Y, Standard bag.

When this problem is examined more closely it is asking: if you are given a

profit contribution for one product what is the maximum and minimum profit

contribution that the second product can have, so that the optimal point would not be

on the X-axis or Y-axis.

What this required was to take each of the optimal points that were not on the

X-axis or Y-axis. Then find the range of optimality for each of these points.

They have chosen the Par Golf bags to illustrate their work in this field

because of everybody‟s familiarity with it. Then they will apply it to K&F Fireplaces.

There are two optimal points that are not on the X-axis or Y-axis in Par Golf.

Firstly, they will find the range of optimality for the optimal point with the

coordinates 540, 252.

They began by accepting that Px is given i.e. profit contribution on the DeLux

bag. What, then, is the maximum profit contribution Py can have, so that the optimal

solution would remain on this point?

54

d * Px + a * Py => b * Py + 0 * Px

d * Px + a * Py => b * Py

d * Px => b * Py – a * Py

d * Px => (b – a) * Py

Py * (b – a) <= d * Px

ab

PdP x

y

*

Again, by accepting that Px is given, what is the minimum profit contribution Py can

have, so that the optimal solution would remain on this point?

(c * Px) – (d * Px) <= a * Py

(c – d) * Px <= a * Py

a * Py => (c – d) * Px

a

PdcP x

y

*)(

This can be viewed working in ProfitFix.xls/ParGolf1. The same worksheet shows

the minimum and maximum profit contribution for Px when Py is a given.

55

Now, they will find the range of optimality for the optimal point with the coordinates

420, 300.

They began by accepting that Px is given i.e. profit contribution on the DeLux

bag, what is the maximum profit contribution Py can have, so that the optimal

solution would remain on this point?

ab

PdP x

y

*

Again, by accepting that Px is given, what is the minimum profit contribution Py can

have, so that the optimal solution would remain on this point?

a

PdcP x

y

*)(

This can be viewed working in ProfitFix.xls/ParGolf2. The same worksheet shows

the minimum and maximum profit contribution for Px when Py is a given.

56

When the above mathematical formulas are applied to K&F Fireplaces these are the

results that it produces. When the profit contribution on the Liberty is set at €225, the

Thomond can have a minimum profit contribution of €202.50 and a maximum profit

contribution of €604.99. This means that the coordinates for the optimal solution

remain the same and are not on the X-axis and Y-axis.

When the profit contribution on the Thomond is set at €250, the Liberty can

have a minimum profit contribution of €92.98 and a maximum profit contribution of

€277.78. This means that the coordinates for the optimal solution remain the same

and are not on the X-axis and Y-axis.

This can be viewed working in ProfitFix.xls/K&F.

Solver outputting all the optimal points

Solver has been criticised for not outputting all the possible optimal points. Solver

can be manipulated to do such a task. Enter 0 to the number of each product to be

manufactured. Then in the profit contribution cells enter a 0 for one product and 1 for

the other product. Then run Solver and save the results.

Next switch the profit contribution for each of the products i.e. 1 where the 0

is, and a 0 where the 1 is. Then click the button labelled „Options‟. It will bring you

into Solver Options dialog box. There is a check box that needs to be ticked in front

of the label, „Show Iteration Results‟. Finally, click Ok and then run Solver. After

each iteration, it will bring you from one axis through all the optimal points

sequentially to the other axis, but outputting each of the optimal points after each

iteration. It has been tested with the Par Golf bags and has worked satisfactorily.

Further tests may need to be done.

57

Calculating coordinates for X & Y axis

There is an MS Excel sheet (named CalculateXY.xls.) programmed to calculate the

coordinates on the X-axis and Y-axis for each of the constraint lines. There is a

second formula for calculating the coordinates of lines that intersect. It is useful for

speed and accuracy.

Conclusion

Solver has been criticised for not offering help with the allocation of scarce resources

for each process in the manufacturing of products but a solution has been offered to

that problem in SolverAssist.xls.

Secondly, there were problems with Solver when the profit contribution was

very high for one product and very low for another product. Two solutions to that

problem have been offered for use with Solver.

Thirdly, when students wanted to know the range of optimality for each

possible optimal point so they would be manufacturing each product and not just one

product, a mathematical formula was devised and installed in MS Excel. It can be

viewed at work in ProfitFix.xls. Solver didn‟t help except for verification of the

results.

Finally, Solver has been criticised for not outputting all the possible optimal

points. It can be manipulated to do such a task as is shown above.

58

Production

Each of the two fireplaces that K&F Fireplaces will initially produce will comprise of

a number of components, which differ between both products. However, the

production times for each fireplace is essentially the same apart from the fact that the

more expensive Thomond contains a labour intensive mahogany surround.

Liberty Fireplace

Thomond Fireplace

Producing a Fireplace

Timber Surround

The production of the timber surround begins with the cutting of the timber, followed

by sanding, woodturning, routing, and assembly. In addition to the timber, brackets,

screws, staples, pins, and glue are also required. Finally, spraying involves applying

three coats of lacquer, sanding it twice, and then applying one coat of sealer. Taking

all of these processes into account, a timber surround takes four to five labour hours

to produce, in addition to a further two hours drying time. A completed surround

consists of a mantle piece (130 cm wide, 14.5 cm deep and 2.25 cm thick), a top

transept which fits in below the mantle piece, and two side strings or legs, each of

which is 94 cm high, 10.5 cm wide, and 2.25 cm thick. A timber surround is held

together by supporting brackets and screws. When staining the timber the following

steps are taken:

PREPARATION: - Prepare the timber by pre-sanding in stages up to 120, 150 or 180

grit. The degree of timber preparation will affect the strike and final shade achieved

when the stain is applied. Ensure that any glue or other surface contaminant is

removed before staining. Failure to prepare the timber correctly will lead to an

uneven or patchy appearance. Good preparation is important when using water stains

to reduce grain raising.

59

APPLICATION STIR WELL AND CHECK SHADE BEFORE USE:

The stain should be applied directly onto the timber.

Application can be carried out by spray, or dip.

Excess stain is normally removed by wiping within one to two minutes of application

but if required it is possible to spray and leave to achieve a more even, bland

appearance.

DRYING: Allow one hour drying before recoating under normal drying conditions

(20°C). The stain must be thoroughly dry before applying the finishing lacquer.

60

Hearth and insert

In order to produce the hearth and insert, sheets of marble or granite are firstly cut to

the required size. For example, six feet of granite or marble can be cut in about thirty

seconds.

To manufacture the hearth, a slab is laid on a table (lollipop sticks can be used for

levelling, if required) polished side facing down, with the front and side risers

positioned on it using Tenax stone glue and granite gussets. The open side is blocked

using a plank of wood to prevent the contents from pouring out (see photo).

It is then filled with a special compound: Ciment Fondu Lafarge (UK) (1 part) mixed

with sand (3 parts) and small chips (1 part), and steel reinforcement (3 x ¼ inch rods

six inches apart). The hearth would take 2 hours of labour to produce and then

overnight to dry. A similar job was done for the marble insert with a fire trim inserted

around the opening to the fireplace. The insert would take 3 labour hours to produce

and overnight to dry. When completed they are packaged by wrapping them in

newspaper.

This rectangular space is then filled with the following compound:

Ciment Fondu Lafarge (1 part)

Sand (3 parts)

Small chips for strength (1 part)

61

Steel reinforcement (3 x ¼ inch rods six inches apart).

A hearth takes two hours of labour to produce and then overnight to dry. A similar

process is followed for the marble insert with a fire trim inserted around the opening

to the fireplace. The insert takes three labour hours to produce and, like a hearth,

takes overnight to dry. When completed, both are packaged by wrapping them in

newspaper.

One tonne of sand will produce twenty hearths or inserts. Four men can produce eight

hearts and eight inserts per day.

The hearth and insert can be made either from marble or granite. Granite would be

recommended for the hearth as it is nonporous, unlike the insert. The cast iron insert

is recommended as it will last much longer.

Granite is more expensive than marble. What increases the value of the hearth or

insert is whether it is granite instead of marble, the quantity thereof, and the amount

of cutting required. With the surrounds it is the quality of the timber used, and the

amount of labour used in cutting it, sanding, woodturning, routing, and assembling it

that results in the variation in prices between the two offerings.

62

The following table gives a breakdown of the main processes involved in the

production of both the Thomond and the Liberty fireplaces, in addition to the time

required for each process.

Cost of Producing each Fireplace

Materials - Liberty Quantity Cost

€

Resin tiles for hearth & insert 13 110.00

Granite tile for hot plate 6 x 20 inches 8.00

Gold trim insert 1 12.00

Sand for hearth 25 Kg 1.00

Chippings for hearth 6.5 Kg 0.25

Fondu Cement for hearth 6.5 Kg 4.40


Chippings for insert 6.5 Kg 0.25

Fondu Cement for insert 6.5 Kg 4.40

Steel reinforcing rods for hearth 3 2.34

Steel reinforcing rods for insert 3 2.34

Tenax for hearth 50 ml 3.00

Tenax for insert 50 ml 3.00

Pine Shelf 72 x 1 x 5 inches 20.87

Sealers 0.15 litre 0.25

Lacquer 0.5 litre 1.30

Brackets 2 0.16

Total €174.56

Materials - Thomond Quantity Cost

Granite for hearth 6.25 sq feet 125.00

Marble for insert 5.75 sq feet 75.00

Gold trim insert 1 24.00


Chippings for hearth 6.5 Kg 0.25

Fondu Cement for hearth 6.5 Kg 4.40


Chippings for insert 6.5 Kg 0.25

Fondu Cement for insert 6.5 Kg 4.40

Steel reinforcing rods for hearth 3 2.34

Steel reinforcing rods for insert 3 2.34

Tenax for hearth 50 ml 3.00

Tenax for insert 50 ml 3.00

Mahogany 72 x 1 x 5 inches 100.00

Sealers 0.15 litre 0.60

Lacquer 0.5 litre 3.30

Brackets 2 0.16

Total €350.04

63

Staff16

The two cogs on which business revolves are capital and labour. To evolve and

develop a business needs to manage both astutely. In this section the partners will

outline their management of staff in K&F Fireplaces.

Division of labour

The firm is divided into three departments for the purposes of management.

Production deals with the creation of fireplaces and the purchasing of raw materials.

JJ is heading that department. Marketing will examine market research and sale of the

fireplaces and Brian is taking responsibility for it. Finance and administration

overlooks the obtaining and expending of funds, and human resource management. JJ

will head up this department. It is an umbrella department for what is not covered in

the former two departments. In a larger enterprise this could make up two

departments.

Initially, JJ and Brian will work as the only two tradesmen manufacturing the

fireplaces. They can both do all the jobs that are required in production. JJ has a

special interest in the timber routing, turning, and spraying.

Since J. J. is responsible for management of human resources he will be overlooking

the following:

Employment Education

and

training

Wages Industrial

relations

Health and

safety

Welfare

services

Recruitment

Termination

Induction

Training

Policy

Job

evaluation

Grievance

procedures

Information

Implementing

new laws and

regulations

Pensions

Recruitment, Induction & Training

The aim of this partnership is to expand in the medium term. It will be J. J.‟s task to

recruit the right person with the right skills at the right time. In Ireland all through the

1990s unemployment rates have dropped as the graph below shows:

64

When recruiting for production the employees would need to be qualified as

machinists, and spray painters. It would be unlikely to find one person with both

those qualifications. FAS are continually training these people. They would need to

have a driving licence for delivery purposes. They would be employed on the

condition that they would accept training in the building of marble/granite inserts and

hearths which wouldn‟t take long to achieve. It is the least skilled of all the jobs in

fireplace production. The woodwork demands the most training.

FAS says that these people are readily available but it could take up to 3 months to

find the suitable employee. They cost about €450 a week. FAS will provide general

workers at short notice. They pointed out that even though unemployment levels are

low there is a large migrant workforce in the enlarged EU prepared to travel to

Ireland for work. Whenever there are unemployment shortages people will travel to

Ireland from the employment black spots of Europe.

With a full time staff of 2 there will need to be a part-time staff of 1 to fill in for

absenteeism.

When a new employee is taken on induction should cover:

1. Exposition on the company, its products, and place in the fireplace industry.

2. Rules of working and safety and health regulations.

3. Human resource policy regarding discipline, training, holidays, and date of

payment of wages.

4. Introduction to staff colleagues.

Wages & Work

Apart from the moral obligation to pay an employee the capitalist society has its own

objectives for remunerating its workers:

1. To attract staff of the required calibre to meet the firm‟s objectives.

2. To retain them because the cost of replacement is sizeable.

3. To provide staff with incentives for better work.

When deciding on an adequate wage it cannot be done in isolation from what similar

staff in other organisations are earning, and what the partnership can afford. National

inflation and national wage increases need to be taken into account each year when

deciding on increases.

65

Job design (job content and work methods) enhances the quality of the worklife,

makes more effective use of the potential of the worker and thereby improves worker

performance. It should include the following principles:

1. A variety of tasks sufficient not to lead to boredom.

2. A work cycle of just the right length bearing in mind physical demands of this

manual labour.

3. Provision to allow the individual to set quality standards above the minimum

required; this can then be coupled with feedback by management on personal

results to keep motivation strong.

With six machines for manipulating the timber, a sprayer, and machine for cutting

marble, cement mixer, and van deliveries, there is plenty of variety in the workplace

which protects against monotony and weariness. As the business evolves staff will

grow to like and specialise in different aspects of the production which will improve

throughput. Setting and acknowledgement of standards is crucial to staff wellbeing

and productivity.

Employment may be terminated in a number of ways. The employee may be given

notice, may be sacked on the spot, or may be made redundant. Many of the legal rules

governing these different situations are covered in the Unfair Dismissals Act 1977.

JJ will endeavour to ensure the physical well-being of employees especially with the

risks associated in operating high speed machines in the plant.

External agents

The following people have been selected for their services in these four areas when

the need arises:

o Solicitor – Geraldine Thornton.

o Accountant – Liam Judge.

o Van repairs and maintenance – O‟Mara Motors.

o Machine repairs and maintenance – Hopkins Machinery.

Department of Social, Community and Family Affairs

This department has a raft of literature governing full-time employee‟s entitlements:

1. A written contract of employment within one month of employment.

2. Minimum wages i.e. €5.59 per hour.

3. Equal pay for equal work

4. Protection against discrimination

5. Holidays and rest periods

6. Maternity, adoptive and parental leave

7. Trade union membership

8. Minimum notice on termination of employment

9. Protection against unfair dismissal

10. Protection against redundancy, and minimum payments if it should occur

66

The following laws govern the employment of staff:

1. The National Minimum Wage Act, 2000 states that experienced adult workers

(those over 18, more than two years employed and not a trainee) must be paid an

average hourly rate of not less than €5.59.

2. The Parental Leave Act, 1998 permits the taking of leave for family reasons

usually around the birth of a child.

3. The Organisation of Working Time Act, 1997 requires that employees work no

more than a 48 hour week, have rest breaks while at work, have 11 hours rest in

each 24 hour period, have one period of 24 hours rest per week.

4. The Worker Protection Act, 1991 extends the benefits of fulltime workers to

regular part-time workers.

5. The Industrial Relations Act, 1990 governs union activities, disputes and their

conduct.

6. The Employment Equality Act, 1977 bans discrimination on the basis of sex or

marital status.

7. The Unfair Dismissals Act, 1977.

8. The Minimum Notice to Terminate Employment Act, 1973.

67

Finance17

Now the partners will explain how they will finance their business. They use two

sources of finance, external sources and internal sources.

The external source of finance is divided between long term which would be in the

form of a loan, and short term which would be in the form of a bank overdraft.

Loan

When they were getting their loan of €100,000 from William Bennett of Permanent

TSB, William Street, Limerick, the following items were raised in the interview:

1. The period of the loan.

2. Nature of the security being offered - collateral for the borrowings advanced

e.g. title deeds of the hay barn, farm, or house.

3. Personal savings amounting to 25% of the borrowings to be invested in the

business.

4. Purpose for which the loan will be used.

5. Business plan showing the intended market and current competitors.

6. Accountants projected income and expenditure for the business.

7. Financial track record of the partners.

8. Planning permission for the premises.

9. Grants received, if any.

10. Partners‟ CVs showing firsthand experience of this type of business.

William made the remark, “As a rule of thumb banks will double the projected break-

even time, and half the projected sales.” That focused and concentrated their mind

and efforts more thoroughly. After verifying the above and showing a good

understanding of the business environment that they were entering he agreed to give

them the loan and opened a current account for them.

Both sides entered into a contract in which the:

1. Rate of interest was a variable rate set at 2.5% above the Current European

Rate (2.5% in November, 2003). This interest on the loan is allowable against

profits for taxation.

2. Dates of interest payments and capital repayments were on the 7th

of each

month.

3. Security for the loan was a real estate property owned by J J Keane valued by

John DeCourcey of DeCourcey Auctioneers at €250,000.

In the event that the interest payments or capital repayments are not made on the due

dates, PTSB has the right, under the terms of the contract, to seize the property on

which the loan is secured and sell it to repay the amount outstanding. He preferred to

have a fixed charge on this property than a floating charge on the whole of the

company‟s assets.

68

Overdraft

When William Bennett opened a current account for the partners they sought

overdraft facilities as a short-term source of borrowing. He responded by saying that

he would require a forecast cash-flow statement to see when the overdraft will be

repaid and how much finance is required. If the amount advanced is substantial then

some form of security may be required. This is always the case for young businesses.

But he said that when their creditworthiness is established an overdraft could be

arranged by a telephone call to him. He prefers granting overdrafts that are self-

liquidating i.e. the funds will result in cash inflows that will extinguish the overdraft

balance. One potential drawback with this form of finance is that it is repayable on

demand. Inability for the business to do so could have serious consequences.

Internal sources of finance

In addition to external sources of finance, there are certain internal sources that the

partners will consciously use to generate finance. The major long-term source of

internal finance is the profits which are retained rather than taken out by the partners.

The major short-term sources of internal finance involve reducing the levels of

debtors and stocks and increasing the level of creditors.

Offering credit has benefits and costs. The partners need to offer it to foster customer

goodwill and increase sales. On the other hand, giving too much credit could cause

cash-flow problems, huge loss if bad debts occur, and at least the need for short-term

borrowings. The partners will have to calculate how much of their funds they can

afford to have tied up with trade creditors. This will have to be done in the context of

customer needs and the credit policies of rival companies. Whatever credit controls

are adopted they should be rigorously implemented. Retailers required 30 days credit

and builders required 60 days credit.

Maintaining reduced stock levels is an internal source of funds. The partners have

observed that Dell Computers have no stock rooms. The articulated trucks reverse

into a port at one side of their factory and the contents are moved onto the conveyor

belt for use in production. At the other end of the conveyor belt there is another fleet

of trucks ready to ship the finished product to the customer. This will save on

borrowings or allow finance to be put to other use.

The partners will adopt a similar policy especially when deliveries of raw materials

can be made within 72 hours of placing an order. When big orders for fireplaces are

made stock levels will increase and the finished products stored until the required

date.

Finally, by delaying payment to creditors, funds are retained within the business for

other purposes, or borrowings reduced. The consequences of these delays are poor

customer care or even loss of credit. The partnership is currently not being offered

any credit.

69

Grants

Michael Cantwell of Limerick County Enterprise Board (LCEB) gives financial

support in the form of a capital grant, employment grant, and a feasibility grant. It

also offers training support, management development courses, and mentoring. He

said that they would not qualify for a grant because they would be classed as a

replacement business.

ISME (Irish Small and Medium Sized Enterprises) told the partners, “Cash flow is the

lifeblood of any small business and it is imperative to have a realistic and adequate

cash flow within a business for both the day-to-day running of the company and to

cope with fluctuating requirements.”

In August 2003 they reported that only 13% of companies are being paid within 30

days. Big business continues to put the squeeze on smaller suppliers.18

With this hard

reality the partners sought to be cash rich. It needs to have sufficient cash before

commencing production.

70

Training, Mentoring & Assistance

Challenges arise in business. However good the planning some of them will be

unknown. That is why outside support and intervention is essential especially in the

early days of a business. The following areas is where the partnership will need

assistance:

1. Knowledge of what‟s impacting on the K&F Fireplace business.

2. Managerial training.

3. Improved production skills.

The people that can help are:

1. Joe Kemmy, retired manufacturer of fireplaces.

2. Accountant - Liam Judge.

3. Solicitor - Geraldine Thornton.

4. Limerick County Enterprise Board

The partners can acquaint themselves with research from the following bodies:

1. Central Statistics Office

2. The Economic And Social Research Institute

3. Pricewaterhousecoopers

4. Organisaiton For Economic Co-Operation & Developme

5. Fas Training & Employment Authority

6. Limerick County Council

7. Construction Industry Federation

8. Enterprise Ireland

9. Department of Enterprise, Trade & Employment

10. Department of Social, Community & Family Affairs

The partnership could also subscribe to business magazines:

1. Fires and Fireplaces.

The partners could become a member of the following organisations and attend some

of the courses that they arrange:

1. Irish Small & Medium Enterprises Association

2. Irish Business And Employers Confederation

3. Limerick County Enterprise Board Ltd

4. Fireplace Association of Ireland

For example, the following help is offered by ISME:

1. Guide to Employers' Obligations & Practices

2. Guide to Government Sponsored Grant Programmes

3. ISME Guide to Revenue Audits

4. Management Training & Development in SMEs

5. Wages and Conditions

71

By availing of outside help it will give the partnership information, knowledge and

expertise in a specific area, offer an independent view, give a second opinion, and

save time. This is a must in today‟s rapidly changing world.

72

Conclusion

Stokes Kennedy Crowley (1987)19

lists the nine most common reasons why a start-up

venture might fail to attract finance and these are useful pointers to remember when

preparing and presenting a proposal:

1. Weakness in management (lack of motivation, no financial expertise, no feel

for the market, no track record)

2. Inadequate personal finance

3. Poorly presented proposals

4. Inadequate security offered

5. Too many risks inherent in the venture

6. Over-ambitiousness

7. Lack of detail as to how to finance will be repaid

8. Product or service weakness

9. Insufficient market research

The partners have looked at these 9 criteria and believe that they have answered the

demands of each. They have invested time and talent in answering the call to be

entrepreneurs. In a time span less than 12 weeks, and among the demands of other

pursuits, they have responded well to this challenge, a challenge that has pushed them

to making a presentation and producing this book.

They find inspiration from the growth of Kilkenny Mantelpieces which was formed

in 1983 by brothers John and George Murphy, who still run the company today. It is

from this strong bond between brothers that saw the initial premises of 800 sq. feet

grow into a 40,000 sq. foot premises, combining the latest technology with the very

best in craftsmanship to give you only top quality mantelpieces.

From the very start brothers John and George accepted only the best, both from their

suppliers and their employees. When they choose their materials, they choose only

the best and their employees have always been master craftsmen who use their

knowledge and their skill to produce what you deserve when you buy your fireplace.

It is these time-honoured traditions combined with today‟s technology that has seen

Kilkenny Mantelpieces develop the Rio brand. Rio is now the leading brand of

mantelpieces in Ireland and the UK and has won numerous Industry design awards.

George Murphy said, “it‟s not just our products, it‟s also our loyal staff who have

been there from the very beginning and we are proud to say that they are part of this

tradition that has become the Kilkenny Mantelpieces of today.”

K&F Fireplaces can have a similar story in another 20 years.

Ask not what your country can do for you,

ask rather what you can do for your country.

John F Kennedy.

73

Appendix 1 - Questionnaires

Retailer’s Questionnaire

This aims to get a breakdown of the interviewee‟s shop sales which reached a total of

6,000 fireplaces in 2002? There are also some ancillary questions to this principal

issue.

Retailer’s Questionnaire

1. For each of the following items you sold during 2003 fill in the boxes:

Item Quantity Reason Size Dark/Bright

Hearth

Granite

Resin, stone-effect

Natural Marble

Stone

Limestone

Slate

Tiles

Insert

Granite

Resin, stone-effect

Natural Marble

Stone

Limestone

Slate

Tiles

Cast iron

Surround

Granite

Resin, stone-effect

Natural Marble

Stone

Limestone

Slate

Tiles

Mahogany, Teak

Cherry, oak

Pine

Maple

Cast iron

Medite

74

Comment

2. Enter the percentage of fireplaces you sold at the prices indicated below:

€800-€999 €1000-€1199 €1200-€1399

€1400-€1599 €1600-€1799 €1800 +

3. When buying a fireplace, what, in your opinion are the most important factors for

the consumer. Out of a total of 100 points how many would you allot to each of the

following 3 items?

Style …………… Price ……………… Reputable trader ……….

4. What percentage of your sales were made during the following seasons:

Winter Spring Summer Autumn

75

Builder’s Questionnaire

This aims to find out what is currently the most popular type of fireplace bought by

builders who made purchases of 300 fireplaces in 2002? There are also some

ancillary questions to this principal issue.

Builder’s Questionnaire

1. For each item you bought during 2003 fill in the boxes:

Item Quantity Reason Size Dark/Bright

Hearth

Granite

Resin, stone-effect

Natural Marble

Stone

Limestone

Slate

Tiles

Insert

Granite

Resin, stone-effect

Natural Marble

Stone

Limestone

Slate

Tiles

Cast iron

Surround

Granite

Resin, stone-effect

Natural Marble

Stone

Limestone

Slate

Tiles

Mahogany, Teak

Cherry, oak

Pine

Maple

Cast iron

Medite

Comment

76

2. Enter the percentage of fireplaces you sold at the prices indicated below:

€800-€999 €1000-€1199 €1200-€1399

€1400-€1599 €1600-€1799 €1800 +

3. When buying a fireplace, what, in your opinion are the most important factors for

the consumer. Out of a total of 100 points how many would you allot to each of the

following 3 items?

Style …………… Price ……………… Reputable trader ……….

4. What percentage of your sales were made during the following seasons:


77

Appendix 2 – Survey Results

To read the Retailer‟s Questionnaire you may go to the appendices or click here.

Results from retailers’ questionnaire

Question 1: of the 6,000 fireplaces that were sold by the ten interviewees the

customers fell into two broad categories, traditional and contemporary. The

traditionalist could be buying for a new house but invariably they were replacing an

old fireplace. Their most popular choice was a dark coloured hearth, dark timber

surround usually dark mahogany, and a light coloured insert. The contemporary

choice would generally be light colours in everything. If they intended using coal for

their fire they would choose the dark granite hearth.

Tiles were seen as old fashioned by the consumer and are not bought anymore. Resin

(factory made marble) is bought when the budget is small. The biggest buyer is the

builder of new houses. Slate was generally used in old houses because it is dark, hard

wearing, and more in keeping with the surrounds than the glossy granite.

Both limestone, and light coloured stone and natural marble had appeal to the

younger customer buying a new house or refurbishing a modern house. These are

new products in the fireplace market. For that reason they buy them, yuppie item, but

also because they are light coloured and in keeping with their modern décor. They

don‟t need them to be hardwearing because fires will not be used. The most they will

be used for is gas or electric heaters which are clean and do not emit great heat.

Black Granite is the best seller because it is the hardest wearing of all the products on

offer. It is non-porous meaning that it will not soak liquids unlike all the others. It

doesn‟t mark easily and won‟t stain. Because of its current popularity the price of

granite has come down and is only marginally dearer than the other products.

About 80% of the hearths were 54 x 18 inches in size and the standard 2½ to 3 inches

off the floor.

78

The comments attributed to the sales for hearths above can also be ascribed to the sale

of inserts with a few qualifications. Firstly, there is the sale of cast iron inserts

because of their perpetual ability to endure intense heat with no adverse effects.

Secondly, the sale of granite drops and the sale of light coloured natural marble rises.

The reason for this is that inserts do not need to be as hard wearing as hearths, so

marble will suffice. The second reason has to do with the fact that hard carving and

machine engraving is primarily done on marble. Thirdly, marble offers much more

variety than granite. When there is no carving involved marble offers as many

varieties of colour as granite and is cheaper.

What is noticeable in this graph is the swing towards timber, the hardwoods. There is

a 60:40 divide between the dark woods and light coloured woods. Even though the

sales of medite (factory made timber) are high the trend is moving away from it and

2000 1960

600420

180

840

0

Hearth sales for 2002

1000

1960

800

420180

840

0

800

0

500

1000

1500

2000

2500

Insert Sales for 2002

79

towards the natural woods. This also holds true of fibreglass, stone effect fireplaces

that are being sold in England but have not won appeal with the Irish consumer. Even

though these factory made materials are cheaper they are unsightly looking when they

are marked. The factory made inner material contrasts badly with the outer veneer.

The sale of granite drops remarkably. The sale of marble has also dropped but still

holds a large slice of the market.

Question 2: The most popular price for a fireplace was between €1,000 and €1199.

People received an item with high quality items in it for that price. From that price

upwards fireplaces got more expensive, not because of the materials in them which

had a marginal impact on the price, but because of the man hours spent on the inserts

or surrounds.

300

140

900

420

180

640

0

1450

220

500

350300

600

0

200

400

600

800

1000

1200

1400

1600

Surround Sales for 2002

80

Question 3: Customers choose the style of the fireplace as having the greatest impact

on them when purchasing with the retailers reputation being of least importance.

Question 4: The sale of fireplaces varies throughout the seasons as this graph shows.

600

2220

1200

900

600480

0

500

1000

1500

2000

2500

€800-€999 €1000-€1199

€1200-€1399

€1400-€1599

€1600-€1799

€1800 +

Number of Fireplaces sold at what Prices

43

34

23

0

5

10

15

20

25

30

35

40

45

50

Style Price Reputable dealer

Points alotted out of 100 points

81

To read the Builder‟s Questionnaire you may go to the appendices or click here.

Results from builder’s questionnaire

Question 1: the standard hearth on offer by the builder was resin with a growing

number turning to natural marble. A significant number of house buyers would

upgrade to granite.

Resin inserts were standard by most builders but again there is a swing towards

natural marble. House purchasers upgraded to both the hardwearing granite and cast

iron.

1920

1500

960

1620

0

500

1000

1500

2000

2500


Seasonal Sales for 2002

60

140

100

0 0 0 00

20

40

60

80

100

120

140

160

Hearth Sales for 2002

82

The young purchaser turns towards the timber surrounds and then towards the light

coloured woods particularly pine. It has very similar features to the other light

coloured timbers but is the cheapest. This trend has continued to grow over the years.

72

108

78

0 0 0 0

42

0

20

40

60

80

100

120

Insert Sales for 2002

68

0

28

0 0 0 0

42

18

75

39

0

30

0

10

20

30

40

50

60

70

80

Surround Sales for 2002

83

Most house buyers in the lower range because of financial constraints. The people

that sought upgrades moved into the higher range brackets.

When the builders were asked how they view priorities when deciding on what

fireplace to choose they prioritised them on the following basis:

Weather greatly influences the level of building that occurs in Ireland. Since most of

the building is done in the drier seasons then most of the fireplaces will be bought in

those seasons as the graph below shows:

134

95

3828

5 00

20

40

60

80

100

120

140

160

€800-€999 €1000-€1199

€1200-€1399

€1400-€1599

€1600-€1799

€1800 +

Number of Fireplaces sold at what Prices

53

39

8

0

10

20

30

40

50

60

Style Price Reputable dealer

Pointes alotted out of 100 points

84

Results of the Survey

From studying these results the partnership decided to produce two styles of fireplace.

They were to be known as the Liberty and the Thomond. The Liberty was prepared

for the builder. The standard Liberty style has a resin hearth, insert, and pine

mantelpiece. Below are the dimensions:

MANTELPIECE C

Overall height

D Shelf

length

E Shelf depth

F Base width

G Shelf

thickness

Liberty 40 inches 72 inches 5 inches 64 inches 1 inch

42

88

104

66

0

20

40

60

80

100

120


Seasonal Sales for 2002

85

In addition to the standard design there are upgrades offered. The hearth and insert

can be styled in natural marble or granite. The mantelpiece offers other timbers

besides pine, cherry, maple, red and white oak, teak, and mahogany.

86

Appendix 3 - Brochure

For the

Comfort and Warmth

You Deserve

Liberty Fireplace

Specifications Height 44 inches

Width 50 inches

Shelf length 54 inches

Colour Dark burnished pine

Material Solid pine

Accompanied

by

Emerald Pearl Resin

insert and hearth.

Thomond Fireplace

Specifications Height 50 inches

Width 50 inches

Shelf length 54 inches

Colour Light burnished pine

Material Mahogany

Accompanied

by

Vicenze Actico

marble insert and

granite hearth

Alterations can be made to the standard sizes of the fireplaces.

Design your own fireplace from the huge

variety of different

marbles, granites, resins, and timbers

shown below.

This brochure offers you the chance

to make your dream fireplace

become a reality.

87

Details can be viewed on our website: www.k&ffireplaces.com

Talk to your local agent for personal assistance

http://www.k&ffireplaces.com/

88

Granite

Amerillo Brazil

Baltic Brown Bianco Luna Pearl

Blue Pearl

Eagle Black Emerald Pearl

Eucalyptus

Multicolour New Baltic Green

New Dakota

Pure Black Red Venga

Rosso Porrino

Sapphire Blue Ubatuba

89

Venetian Gold

Verde Gloria Verde Star

Marble

Bianco

Carrara

Statuario

Statuario

Venato

Calacatta

Oro

Statuario

Lightly

Veined

Arabescato

Cervaiole

Calacatta

Carrara

Arabescato

Vagli

Port'Oro Marquinia

Bardiglio

Carrara

Bardiglio

Imperiale

Crema

Valencia

Giallo di

Siena

Broccatello

di Siena

Moca Cream

- Fine

Moca Cream

- Rustic

Vicenza

Antico

Pietra

Vicenza

Breccia

Antica di

Siena

Rosa

Portugal

Chiaro

Rosa

Portugal

Venato

Rosa

Portugal

Salmon

Trani

Verde Alpe

Rosso

Alicante

Rosso

Francia

Rosso

Verona

Rosso

Vidraco

Verde

Guatemala

90

Finished Timbers

Light Mahogany Light Burnished

Mahogany

Traditional

Mahogany

Scandinavian

Pine

Teak

Mahogany

Antique Brown

Mahogany

Old Style Pine

water based

Light Pine

Golden Pine Waxed Pine Cottage Pine

water based

Light Oak

Medium Oak Traditional Oak Light Maple Light Cherry

Champagne White

Stone Finish

Semi Matt

Black

Magnolia Jade Wash

On Pine

91

Selection of the shades

Selection of the shades they offer to you.

If you want it to match what‟s in your home

just bring us a sample for they have 3,800 shades to choose from.

92

Private to the supplier of our fireplaces to the public:

K&F Fireplaces, Cahernarry, Ballysimon, Co. Limerick.

Phone: J J at 087-6174874, or Brian at 087-9674343 at any time.

Fax: 061-332245.

You will receive favourable credit terms. Initially you will receive a free fireplace for

display purposes. As you place orders with us you will receive 30 days credit from

delivery of fireplace.

You are welcome to visit our premises to view our production facility

and examine firsthand the quality of our fireplaces

crafted by man and machinery of international repute

using world class products.

Appendix 4 – Linear Programming

Liberty Thomond

Monthly Profit € 5,824 Number 12 13

Annual Profit € 69,890 Contribution € 225 € 250

Resource Available Used Slack Liberty Thomond

Assembling marble 46.4 46.4 0.0 2.0 1.8

Mixing/Pouring 16.1 16.0 0.1 0.6 0.7

Cutting/Moulding 65.3 61.7 3.6 1.4 3.6

Spraying timber 32.2 32.2 0.0 0.9 1.7

Totals 160.0 156.2 4.9 7.8

Using Solver for

160 hour month

94

Liberty Thomond





Mixing/Pouring 20.2 20.0 0.2 0.6 0.7


Spraying timber 40.5 40.5 0.0 0.9 1.7

Totals 200.0 196.3 4.9 7.8

Using Solver for

200 hour month

95

Liberty Thomond





Mixing/Pouring 26.1 26.1 0.0 0.6 0.7


Spraying timber 55.0 53.5 1.5 0.9 1.7

Totals 260.0 258.2 4.9 7.8

Using Solver for

200 hour month

96

Liberty Thomond





Mixing/Pouring 32.2 32.2 0.0 0.6 0.7


Spraying timber 66.5 66.5 0.0 0.9 1.7

Totals 320.0 320.0 4.9 7.8

Using Solver for

320 hour month

98

Liberty Thomond




Assembling marble 117 117.0 0.0 2.0 1.8

Mixing/Pouring 44 40.3 3.7 0.6 0.7

Cutting/Moulding 157 157.0 0.0 1.4 3.6

Spraying timber 82 81.8 0.2 0.9 1.7

Totals 400.0 396.1 4.9 7.8

Using Solver for

400 hour month

99

Liberty Thomond





Mixing/Pouring 47.71 47.5 0.2 0.6 0.7


Spraying timber 99.41 99.4 0.0 0.9 1.7

Totals 480.0 476.3 4.9 7.8

Using Solver for 480 hour month

Appendix 5 – Financial Costings

Cost of Renovations, Breakdown of Capital Expenditure, Depreciation

Totals Excl Vat VAT

€ € €

Renovating the Plant and Office 15,000 13,216 1,784

Machinery =>

Cement mixer 800 661 139

Angle grinder 150 124 26

Panel saw 4,840 4,000 840

Band saw 3,872 3,200 672

Overhead router 6,050 5,000 1,050

Spindle router 4,235 3,500 735

Copying lathe 8,470 7,000 1,470

Eight foot sander 14,200 11,736 2,464

Production table 1,000 826 174

Wet saw for cutting stone 1,800 1,488 312

Spraying machine 4,000 3,306 694

Parts & Blades 2,000 1,653 347

2.4 Litre Hiace Toyota Van 20,200 16,694 3,506

Totals 71,617 59,188 12,429

Depreciation on Machinery 2004 14,323.40 Depreciation on Machinery 2005 11,458.72

Depreciation on Machinery 2006 9,166.98

Renovations, & Capital Expenditure in 2004.

Depreciation in 2004, 2005, 2006.

101

Cost of Wages

This is a break down of what the partners will pay themselves over each of the three

years. JJ will not be on a salary for the first 12 months. In return Brian will give him

10% of the business when it becomes profitable. From Jan 2005 both will be on a

salary.

Weekly

What Wages Cost





Monthly

Employee Receives € 375.68 € 1,502.72

Revenue Receives € 108.32 € 433.28

Costs Employer € 484.00 € 1,936.00

This is a break down of what the skilled labourer/driver will be earning when he takes

up employment in August 2005.

Weekly

What Wages Cost





Monthly

Employee Receives € 334.98 € 1,339.92

Revenue Receives € 88.52 € 354.08

Costs Employer € 423.50 € 1,694.00

102

Appendix 6 – Projections for cash flow plan

Sales Forecast for 2004

These sales forecast include a graph and a table showing the number of each fireplace

estimated to be sold in 2004. This includes a breakdown of which sales are cash, one

month‟s credit, or two months credit, and when the payments are made.

The next table shows the VAT that is owed to the Revenue Commissioners on them

in a monthly basis and quarterly basis.

This is finally followed by the Accounts, the cash-flow statement, trading and profit

& loss account, and balance sheet.

A similar scenario is done for the years 2005, and 2006.

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Liberty Thomond Cash 1 mth Cr 2 mth Cr Sales Sales Sales Payments Payments Payments Total Payment

Jan-04 3 5 2 3 3 € 2,000 € 1,800 € 1,200 € 2,000 € 0 € 0 € 2,000

Feb-04 4 6 2 4 4 € 2,000 € 2,400 € 1,600 € 2,000 € 1,800.00 € 0 € 3,800

Mar-04 6 8 3 5 6 € 3,000 € 3,000 € 2,400 € 3,000 € 2,400.00 € 1,200.00 € 6,600

Apr-04 7 10 2 8 7 € 2,000 € 4,800 € 2,800 € 2,000 € 3,000.00 € 1,600.00 € 6,600

May-04 8 11 2 9 8 € 2,000 € 5,400 € 3,200 € 2,000 € 4,800.00 € 2,400.00 € 9,200

Jun-04 10 11 1 10 10 € 1,000 € 6,000 € 4,000 € 1,000 € 5,400.00 € 2,800.00 € 9,200

Jul-04 10 12 2 10 10 € 2,000 € 6,000 € 4,000 € 2,000 € 6,000.00 € 3,200.00 € 11,200

Aug-04 11 13 3 10 11 € 3,000 € 6,000 € 4,400 € 3,000 € 6,000.00 € 4,000.00 € 13,000

Sep-04 14 19 3 16 14 € 3,000 € 9,600 € 5,600 € 3,000 € 6,000.00 € 4,000.00 € 13,000

Oct-04 15 23 2 21 15 € 2,000 € 12,600 € 6,000 € 2,000 € 9,600.00 € 4,400.00 € 16,000

Nov-04 17 25 3 22 17 € 3,000 € 13,200 € 6,800 € 3,000 € 12,600.00 € 5,600.00 € 21,200

Dec-04 21 28 0 28 21 € 0 € 16,800 € 8,400 € 0 € 13,200.00 € 6,000.00 € 19,200

Jan-05 € 16,800.00 € 6,800.00

Feb-05 € 8,400.00

Sales for 2004

105

Payments Payments Payments Total Payment Monthly Vat Quarterly Vat

Jan-04 € 2,000 € 0 € 0 € 2,000 € 347.11

Feb-04 € 2,000 € 1,800.00 € 0 € 3,800 € 659.50

Mar-04 € 3,000 € 2,400.00 € 1,200.00 € 6,600 € 1,145.45 € 1,006.61

Apr-04 € 2,000 € 3,000.00 € 1,600.00 € 6,600 € 1,145.45

May-04 € 2,000 € 4,800.00 € 2,400.00 € 9,200 € 1,596.69 € 2,290.91

Jun-04 € 1,000 € 5,400.00 € 2,800.00 € 9,200 € 1,596.69

Jul-04 € 2,000 € 6,000.00 € 3,200.00 € 11,200 € 1,943.80 € 3,193.39

Aug-04 € 3,000 € 6,000.00 € 4,000.00 € 13,000 € 2,256.20

Sep-04 € 3,000 € 6,000.00 € 4,000.00 € 13,000 € 2,256.20 € 4,200.00

Oct-04 € 2,000 € 9,600.00 € 4,400.00 € 16,000 € 2,776.86

Nov-04 € 3,000 € 12,600.00 € 5,600.00 € 21,200 € 3,679.34 € 5,033.06

Dec-04 € 0 € 13,200.00 € 6,000.00 € 19,200 € 3,332.23

Payments refers to payments made by customers to K&F Fireplaces.

Vat on Sales received for 2004

106

Liberty Thomond Purchases Purchases Payments Payments Total Payment Monthly Vat Quarterly Vat

Jan-04 3 5 € 2,274 € 0 € 2,274 € 0 € 2,274 € 394.64

Feb-04 4 6 € 2,798 € 0 € 2,798 € 0 € 2,798 € 485.69

Mar-04 6 8 € 3,848 € 0 € 3,848 € 0 € 3,848 € 667.78 € 880.33

Apr-04 7 10 € 4,722 € 0 € 4,722 € 0 € 4,722 € 819.58

May-04 8 11 € 5,247 € 0 € 5,247 € 0 € 5,247 € 910.62 € 1,487.36

Jun-04 10 11 € 5,596 € 0 € 5,596 € 0 € 5,596 € 971.21

Jul-04 10 12 € 0 € 5,946 € 0 € 0 € 0 € 0.00 € 1,881.84

Aug-04 11 13 € 0 € 6,471 € 0 € 5,946 € 5,946 € 1,031.96

Sep-04 14 19 € 0 € 9,095 € 0 € 6,471 € 6,471 € 1,123.01 € 1,031.96

Oct-04 15 23 € 0 € 10,669 € 0 € 9,095 € 9,095 € 1,578.40

Nov-04 17 25 € 0 € 11,719 € 0 € 10,669 € 10,669 € 1,851.70 € 2,701.41

Dec-04 21 28 € 0 € 13,467 € 0 € 11,719 € 11,719 € 2,033.79

Jan-05 € 13,467

Raw material purchases in 2004

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Nov-04 € 6,800 € 3,000 € 12,600.00 € 5,600.00 € 21,200

Dec-04 € 16,800 € 8,400 € 0 € 13,200.00 € 6,000.00 € 19,200

Jan-05 21 28 1 27 21 € 1,000 € 16,200 € 8,400 € 1,000 € 16,800.00 € 6,800.00 € 24,600

Feb-05 21 25 2 23 21 € 2,000 € 13,800 € 8,400 € 2,000 € 16,200.00 € 8,400.00 € 26,600

Mar-05 20 24 1 23 20 € 1,000 € 13,800 € 8,000 € 1,000 € 13,800.00 € 8,400.00 € 23,200

Apr-05 19 24 1 23 19 € 1,000 € 13,800 € 7,600 € 1,000 € 13,800.00 € 8,400.00 € 23,200

May-05 18 24 2 22 18 € 2,000 € 13,200 € 7,200 € 2,000 € 13,800.00 € 8,000.00 € 23,800

Jun-05 18 25 3 22 18 € 3,000 € 13,200 € 7,200 € 3,000 € 13,200.00 € 7,600.00 € 23,800

Jul-05 20 25 3 22 20 € 3,000 € 13,200 € 8,000 € 3,000 € 13,200.00 € 7,200.00 € 23,400

Aug-05 23 26 1 25 23 € 1,000 € 15,000 € 9,200 € 1,000 € 13,200.00 € 7,200.00 € 21,400

Sep-05 25 26 2 24 25 € 2,000 € 14,400 € 10,000 € 2,000 € 15,000.00 € 8,000.00 € 25,000

Oct-05 28 30 2 28 28 € 2,000 € 16,800 € 11,200 € 2,000 € 14,400.00 € 9,200.00 € 25,600

Nov-05 29 33 1 32 29 € 1,000 € 19,200 € 11,600 € 1,000 € 16,800.00 € 10,000.00 € 27,800

Dec-05 29 33 3 30 29 € 3,000 € 18,000 € 11,600 € 3,000 € 19,200.00 € 11,200.00 € 33,400

€ 311,000

Jan-06 € 18,000.00 € 11,600.00

Feb-06 € 11,600.00

Sales for 2005

109


Nov-04 € 3,000 € 12,600.00 € 5,600.00 € 21,200 € 3,679.34

Dec-04 € 0 € 13,200.00 € 6,000.00 € 19,200 € 3,332.23

Jan-05 € 1,000 € 16,800.00 € 6,800.00 € 24,600 € 4,269.42 € 7,011.57

Feb-05 € 2,000 € 16,200.00 € 8,400.00 € 26,600 € 4,616.53

Mar-05 € 1,000 € 13,800.00 € 8,400.00 € 23,200 € 4,026.45 € 8,885.95

Apr-05 € 1,000 € 13,800.00 € 8,400.00 € 23,200 € 4,026.45

May-05 € 2,000 € 13,800.00 € 8,000.00 € 23,800 € 4,130.58 € 8,052.89

Jun-05 € 3,000 € 13,200.00 € 7,600.00 € 23,800 € 4,130.58

Jul-05 € 3,000 € 13,200.00 € 7,200.00 € 23,400 € 4,061.16 € 8,261.16

Aug-05 € 1,000 € 13,200.00 € 7,200.00 € 21,400 € 3,714.05

Sep-05 € 2,000 € 15,000.00 € 8,000.00 € 25,000 € 4,338.84 € 7,775.21

Oct-05 € 2,000 € 14,400.00 € 9,200.00 € 25,600 € 4,442.98

Nov-05 € 1,000 € 16,800.00 € 10,000.00 € 27,800 € 4,824.79 € 8,781.82

Dec-05 € 3,000 € 19,200.00 € 11,200.00 € 33,400 € 5,796.69


110

Liberty Thomond Purchases Purchases Payments Payments Total Payment Monthly Vat Quarterly Vat

Nov-04 € 10,669 € 10,669 € 1,851.64

Dec-04 € 13,467 € 11,791 € 11,791 € 2,046.37

Jan-05 21 28 € 0 € 13,467 € 0 € 13,467 € 13,467 € 2,337.25 € 3,898.02

Feb-05 21 25 € 0 € 12,417 € 0 € 13,467 € 13,467 € 2,337.23

Mar-05 20 24 € 0 € 11,892 € 0 € 12,417 € 12,417 € 2,154.97 € 4,674.48

Apr-05 19 24 € 0 € 11,718 € 0 € 11,892 € 11,892 € 2,063.93

May-05 18 24 € 0 € 11,543 € 0 € 11,718 € 11,718 € 2,033.63 € 4,218.90

Jun-05 18 25 € 0 € 11,893 € 0 € 11,543 € 11,543 € 2,003.34

Jul-05 20 25 € 0 € 12,242 € 0 € 11,893 € 11,893 € 2,064.09 € 4,036.97

Aug-05 23 26 € 0 € 13,116 € 0 € 12,242 € 12,242 € 2,124.68

Sep-05 25 26 € 0 € 13,465 € 0 € 13,116 € 13,116 € 2,276.32 € 4,188.77

Oct-05 28 30 € 0 € 15,389 € 0 € 13,465 € 13,465 € 2,336.91

Nov-05 29 33 € 0 € 16,614 € 0 € 15,389 € 15,389 € 2,670.80 € 4,613.22

Dec-05 29 33 € 0 € 16,614 € 0 € 16,614 € 16,614 € 2,883.35

Jan-06 € 16,614 € 16,614 € 5,554.14


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Nov-05 € 11,600 € 1,000 € 16,800.00 € 10,000.00 € 27,800

Dec-05 € 18,000 € 11,600 € 3,000 € 19,200.00 € 11,200.00 € 33,400

Jan-06 25 27 1 26 25 € 1,000 € 15,600 € 10,000 € 1,000 € 18,000.00 € 11,600.00 € 30,600

Feb-06 23 26 3 23 23 € 3,000 € 13,800 € 9,200 € 3,000 € 15,600.00 € 11,600.00 € 30,200

Mar-06 23 26 3 23 23 € 3,000 € 13,800 € 9,200 € 3,000 € 13,800.00 € 10,000.00 € 26,800

Apr-06 23 26 1 25 23 € 1,000 € 15,000 € 9,200 € 1,000 € 13,800.00 € 9,200.00 € 24,000

May-06 24 26 1 25 24 € 1,000 € 15,000 € 9,600 € 1,000 € 15,000.00 € 9,200.00 € 25,200

Jun-06 24 28 3 25 24 € 3,000 € 15,000 € 9,600 € 3,000 € 15,000.00 € 9,200.00 € 27,200

Jul-06 25 29 1 28 25 € 1,000 € 16,800 € 10,000 € 1,000 € 15,000.00 € 9,600.00 € 25,600

Aug-06 27 29 1 28 27 € 1,000 € 16,800 € 10,800 € 1,000 € 16,800.00 € 9,600.00 € 27,400

Sep-06 28 30 1 29 28 € 1,000 € 17,400 € 11,200 € 1,000 € 16,800.00 € 10,000.00 € 27,800

Oct-06 29 33 2 31 29 € 2,000 € 18,600 € 11,600 € 2,000 € 17,400.00 € 10,800.00 € 30,200

Nov-06 29 33 2 31 29 € 2,000 € 18,600 € 11,600 € 2,000 € 18,600.00 € 11,200.00 € 31,800

Dec-06 29 33 3 29 30 € 3,000 € 17,400 € 12,000 € 3,000 € 18,600.00 € 11,600.00 € 33,200

Sales for 2006

113


Nov-05 € 1,000 € 16,800.00 € 10,000.00 € 27,800 € 4,824.79

Dec-05 € 3,000 € 19,200.00 € 11,200.00 € 33,400 € 5,796.69

Jan-06 € 1,000 € 18,000.00 € 11,600.00 € 30,600 € 5,310.74 € 10,621.49

Feb-06 € 3,000 € 15,600.00 € 11,600.00 € 30,200 € 5,241.32

Mar-06 € 3,000 € 13,800.00 € 10,000.00 € 26,800 € 4,651.24 € 10,552.07

Apr-06 € 1,000 € 13,800.00 € 9,200.00 € 24,000 € 4,165.29

May-06 € 1,000 € 15,000.00 € 9,200.00 € 25,200 € 4,373.55 € 8,816.53

Jun-06 € 3,000 € 15,000.00 € 9,200.00 € 27,200 € 4,720.66

Jul-06 € 1,000 € 15,000.00 € 9,600.00 € 25,600 € 4,442.98 € 9,094.21

Aug-06 € 1,000 € 16,800.00 € 9,600.00 € 27,400 € 4,755.37

Sep-06 € 1,000 € 16,800.00 € 10,000.00 € 27,800 € 4,824.79 € 9,198.35

Oct-06 € 2,000 € 17,400.00 € 10,800.00 € 30,200 € 5,241.32

Nov-06 € 2,000 € 18,600.00 € 11,200.00 € 31,800 € 5,519.01 € 10,066.12

Dec-06 € 3,000 € 18,600.00 € 11,600.00 € 33,200 € 340,000 € 5,761.98


114

Liberty Thomond Purchases Purchases Cash Payments Payments Total Payment Monthly Vat Quarterly Vat

Nov-05 € 0 € 15,389 € 15,389 € 2,670.82

Dec-05 € 16,614 € 0 € 16,614 € 16,614 € 2,883.42

Jan-06 25 27 € 0 € 13,815 € 0 € 16,614 € 16,614 € 2,883.42 € 5,554.24

Feb-06 23 26 € 0 € 13,116 € 0 € 13,815 € 13,815 € 2,397.66

Mar-06 23 26 € 0 € 13,116 € 0 € 13,116 € 13,116 € 2,276.32 € 5,281.08

Apr-06 23 26 € 0 € 13,116 € 0 € 13,116 € 13,116 € 2,276.32

May-06 24 26 € 0 € 13,290 € 0 € 13,116 € 13,116 € 2,276.32 € 4,552.63

Jun-06 24 28 € 0 € 13,991 € 0 € 13,290 € 13,290 € 2,306.61

Jul-06 25 29 € 0 € 14,515 € 0 € 13,991 € 13,991 € 2,428.11 € 4,582.93

Aug-06 27 29 € 0 € 14,864 € 0 € 14,515 € 14,515 € 2,519.16

Sep-06 28 30 € 0 € 15,389 € 0 € 14,864 € 14,864 € 2,579.75 € 4,947.27

Oct-06 29 33 € 0 € 16,614 € 0 € 15,389 € 15,389 € 2,670.80

Nov-06 29 33 € 0 € 16,614 € 0 € 16,614 € 16,614 € 2,883.35 € 5,250.55

Dec-06 29 33 € 0 € 16,614 € 0 € 16,614 € 16,614 € 2,883.35


115

Appendix 7 – Accounts for 2004

January February March April May June July August September October November December Total

RECEIPTS € € € € € € € € € € € € €

Cash Sales 2,000 2,000 3,000 2,000 2,000 1,000 2,000 3,000 3,000 2,000 3,000 0 25,000

From Debtors 1,800 3,600 4,600 7,200 8,200 9,200 10,000 10,000 14,000 18,200 19,200 106,000

Term Loans 50,000 50,000

Personal Funds 65,000 65,000

Vat Refunds 16,111 16,111

A: TOTAL RECEIPTS 117,000 3,800 22,711 6,600 9,200 9,200 11,200 13,000 13,000 16,000 21,200 19,200 262,111

PAYMENTS

Cash purchases 2,118 2,274 2,798 3,848 4,722 5,247 5,596 0 0 0 0 0 26,603

To creditors 5,946 6,471 9,095 10,669 11,719 43,900

Wages & salaries 1,503 1,503 1,503 1,503 1,503 1,503 1,503 1,503 1,503 1,503 1,503 1,503 18,036

Insurance 7,000 7,000

Rates 1,500 1,500 3,000

Rent 200 200 200 200 200 200 200 200 200 200 200 200 2,400

Light,heat and power 200 300 500 600 700 800 3,100

Telephone, & stationery 200 200 200 200 200 200 200 200 300 300 300 300 2,800

Transport 1,870 200 500 200 200 500 200 200 500 200 200 500 5,270

Promotion 2,000 2,000

Loan repayments 833 833 833 833 833 833 858 837 837 837 837 837 10,041

Financial charges/interest 250 250 250 250 250 250 225 245 245 245 245 245 2,950

VAT 562 1034 2926 1985 6,507

PAYE, PRSI 433 433 433 433 433 433 433 433 433 433 433 433 5,196

Capital Expenditure 71,617 71,617

Renovations 15,000 15,000

Other payments 1,144 1,144

B: TOTAL PAYMENTS 104,168 6,093 6,717 7,767 8,903 9,666 11,749 10,164 13,415 13,513 16,372 18,037 226,564

C: NET CASH FLOW (A-B) 12,833 -2,293 15,994 -1,167 297 -466 -549 2,836 -415 2,487 4,828 1,163 35,548

OPENING BALANCE 0 12,833 10,540 26,534 25,367 25,664 25,198 24,649 27,485 27,070 29,557 34,385

CLOSING BALANCE 12,833 10,540 26,534 25,367 25,664 25,198 24,649 27,485 27,070 29,557 34,385 35,548

Cash Flow Statement

116

Sub-totals Totals

€ € €

Sales 163,000

LESS

Purchases 83,970

Trading Profit 79,031

LESS

EXPENSES

Wages & salaries 18,036

Insurance 7,000

Rates 3,000

Rent 2400

Light,heat and power 3100

Telephone, post and stationery 2,800

Transport 5,270

Promotion 2000

Financial charges/interest 2,950

VAT 2,825

PAYE, PRSI 5,196

Renovations 15,000

Other payments 1,144

TOTAL EXPENSES 70,721

PROFIT/(Loss) 8,310

Trading and P&L Account

117

Notes Sub-totals Totals

FIXED ASSETS € € €

Land & Buildings 0

Plant & Equipment 1 59,188

TOTAL FIXED ASSETS => 59,188

CURRENT ASSETS

Debtors 32,000

Cash 35,548

TOTAL CURRENT ASSETS => 67,548

LESS

CURRENT LIABILITIES

Creditors 13,467

Loans Outstanding 2 39,959

TOTAL CURRENT LIABILITIES => 53,426

NET CURRENT ASSETS 14,122

TOTAL ASSETS 73,310

FINANCED BY

Profit 8,310

Owners Equity 65,000 73,310 73,310

Balance Sheet

118



RECEIPTS € € € € € € € € € € € € €

Cash Sales 1,000 2,000 1,000 1,000 2,000 3,000 3,000 1,000 2,000 2,000 1,000 3,000 22,000

From Debtors 23,600 24,600 22,200 22,200 21,800 20,800 20,400 20,400 23,000 23,600 26,800 30,400 279,800

Term Loans 0

Personal Funds 0

Vat Refunds 0

A: TOTAL RECEIPTS 24,600 26,600 23,200 23,200 23,800 23,800 23,400 21,400 25,000 25,600 27,800 33,400 301,800

PAYMENTS

Cash purchases 0 0 0 0 0 0 0 0 0 0 0 0 0

To creditors 13,467 13,467 12,417 11,892 11,718 11,543 11,893 12,242 13,116 13,465 15,389 16,614 157,223

Wages & salaries 3,002 3,002 3,002 3,002 3,002 3,002 4,346 4,346 4,346 4,346 4,346 4,346 44,088


Rates 1,600 1,600 3,200

Rent 200 200 200 200 200 200 200 200 200 200 200 200 2,400

Light,heat and power 700 750 800 900 1,000 1,100 5,250


Transport 2,170 400 750 400 400 750 400 400 750 400 400 750 7,970


Loan repayments 880 880 880 880 880 880 897 897 897 897 897 897 10,662


VAT 2,762 1,649 3,400 3,920 3,170 3,656 18,557

PAYE, PRSI 867 867 867 867 867 867 1,221 1,221 1,221 1,221 1,221 1,221 12,524

Capital Expenditure 0


B: TOTAL PAYMENTS 36,347 20,015 20,264 18,490 20,966 18,541 24,950 20,779 24,273 22,102 26,682 27,301 280,706

C: NET CASH FLOW (A-B) -11,747 6,585 2,936 4,710 2,834 5,259 -1,550 621 727 3,498 1,118 6,099 21,094

OPENING BALANCE 35,548 23,801 30,387 33,323 38,034 40,868 46,128 44,578 45,199 45,926 49,425 50,543 35,548

CLOSING BALANCE 23,801 30,387 33,323 38,034 40,868 46,128 44,578 45,199 45,926 49,425 50,543 56,642 56,642

Cash Flow Statement

119

Sub-totals Totals

€ € €

Sales 311,000

LESS

Purchases 160,370


LESS

EXPENSES


Insurance 8,000

Rates 3,200

Rent 2400



Transport 7,970

Promotion 3000


VAT 18,557

PAYE, PRSI 12,524



Profit from 2004 8,310

PROFIT/(Loss) 46,119


120

Sub-totals Totals


Land & Buildings 0

Plant & Equipment 1 59,188


CURRENT ASSETS

Debtors 41,200

Cash 56,642


LESS

CURRENT LIABILITIES

Creditors 16,614

Loans Outstanding 2 29,297



TOTAL ASSETS 111,119

FINANCED BY

Opening Balance

Profit 46,119

Owners Equity 65,000 111,119 111,119

Balance Sheet

121



RECEIPTS € € € € € € € € € € € € €

Cash Sales 1,000 3,000 3,000 1,000 1,000 3,000 1,000 1,000 1,000 2,000 2,000 3,000 22,000

From Debtors 29,600 27,200 23,800 23,000 24,200 24,200 24,600 26,400 26,800 28,200 29,800 30,200 318,000

Term Loans 0

Profits 2005 0 0

Personal Funds 0

Vat Refunds 0

A: TOTAL RECEIPTS 30,600 30,200 26,800 24,000 25,200 27,200 25,600 27,400 27,800 30,200 31,800 33,200 340,000

PAYMENTS

Cash purchases 0 0 0 0 0 0 0 0 0 0 0 0 0

To creditors 16,614 13,815 13,116 13,116 13,116 13,209 13,991 14,515 14,864 15,389 16,614 16,614 174,973

Wages & salaries 4,346 4,346 4,346 4,346 4,346 4,346 4,346 4,346 4,346 4,346 4,346 4,346 52,152


Rates 1,700 1,700 3,400

Rent 200 200 200 200 200 200 200 200 200 200 200 200 2,400

Light,heat and power 1,000 1,050 1,100 1,150 1,200 1,200 6,700


Transport 2,320 450 825 450 450 825 450 450 825 450 450 825 8,770


Loan repayments 908 908 908 908 908 908 910 910 910 910 910 910 10,908


VAT 4,364 2,198 3,687 3,925 3,656 4,212 22,042

PAYE, PRSI 1,221 1,221 1,221 1,221 1,221 1,221 1,221 1,221 1,221 1,221 1,221 1,221 14,652

Capital Expenditure 0


B: TOTAL PAYMENTS 45,619 22,586 23,460 21,937 24,574 22,455 27,362 23,411 26,641 24,335 28,572 27,635 318,587

C: NET CASH FLOW (A-B) -15,019 7,614 3,340 2,063 626 4,745 -1,762 3,989 1,159 5,865 3,228 5,565 21,413

OPENING BALANCE 56,642 41,623 49,237 52,577 54,640 55,266 60,011 58,249 62,238 63,397 69,262 72,490 56,642

CLOSING BALANCE 41,623 49,237 52,577 54,640 55,266 60,011 58,249 62,238 63,397 69,262 72,490 78,055 78,055

Cash Flow Statement

122

Sub-totals Totals

€ € €

Sales 339,800

LESS

Purchases 174,973


LESS

EXPENSES


Insurance 9,000

Rates 3,400

Rent 2400



Transport 8,770

Promotion 4000


VAT 22,042

PAYE, PRSI 14,652



Profit from 2005 46,119

PROFIT/(Loss) 78,240


123

Sub-totals Totals


Land & Buildings 0

Plant & Equipment 59,188


CURRENT ASSETS

Debtors 41,000

Cash 78,055


LESS

CURRENT LIABILITIES

Creditors 16,614

Loans Outstanding 18,389



TOTAL ASSETS 143,240

FINANCED BY

Profit 78,240

Owners Equity 65,000 143,240 143,240

Balance Sheet

Appendix 10 - Database – K&F Fireplaces

K&F Fireplaces.mdb

The K&F Fireplaces Database comprises of:

1. Tables.

2. Forms.

3. Reports.

4. Macros.

There are seven tables in this database:

1. Prospective customers

2. Products made

3. Orders for products

4. Payments received

5. Materials needed

6. Suppliers of materials

7. Payments made out for materials

These tables are the fundamental structure in an Access Database because they store all the essential data

the partnership will be utilising. Within the tables, the data is organised into fields (columns) and records

(rows). The user of this database application will not be able to interface directly with the tables.

Forms will be the first means the user will have of interfacing with the tables. They will enable the user to

display data selectively from the tables. Data can also be entered into the tables in a convenient format

that resembles „fill-in-the-blanks‟ forms. The „Main Menu‟ is the initial form that the user will interface

with in this database. From there all the other interfaces can be accessed. The following are the list of

forms:

1. Main menu

2. Add New Customer

3. Add New Products or Product details

4. Orders for Products

5. Payments made

6. Materials

7. Add New Suppliers

8. Payments made out

Reports allow the user to preview or print data from the tables in a useful format. There are three detailed

reports that are available to be viewed in this database:

1. List of customers

2. Manufactured products

3. Suppliers of materials

This database contains a number of Macros:

1. Open Main Menu

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Appendix 11 – List of Materials Needed

Materials ID Product Name Product Description Supplier ID Unit Price LeadTimeHrs

32 Bracket - angle 19 x 19 mm steel 12 €0.08 24

33 Bracket - angle 40 x 40 mm steel 12 €0.12 24

13 Cement - Fondu 25 Kg UK - Dineen 11 €17.55 72

19 Cement -Chinese 25 Kg - Dineen 11 €13.31 72

5 Cherry wood 2.0 x 5.0 inch x 10 feet 17 €65.76 24

2 Chippings - BY Tonne - 10 ton loads 9 €190.00 6

22 Chippings - SA Tonne - 1 ton bags 10 24

9 Fire trim Blackwater Crafts 6 €23.05 24

18 Fireback 18 x 22 inch - Dineen 11 €23.57 72

21 Fireback 16 x 22 inch - Dineen 11 €21.44 72

12 Fireback 16 x 22 inch - GMP 5 €30.25 24

11 Front GMP 5 €12.10 24

28 Fronts 16 inch Black 6 €53.77 24

31 Glue 5 Lt Evo Stik Resin W 17 €57.33 24

36 Glue 350 ml Evogrip 17 €3.95 24

3 Glue 5 Lt Evo Stik Wood Adhesive 12 €22.00

4 Granite 60 x 18 inches, GMP 5 €108.90 24

10 Grate GMP 5 €12.10 24

27 Grates 16 inch Black 6 €84.50 24

7 Insert - cast iron GMP 5 €121.00 24

53 Iroko - teak 2.0 x 5.0 inch x 10 feet 17 €32.19 24

16 Lacquers 5 Lt,P/C Lacquer 12 €33.64 24

8 Mahogany 19 x 140 mm x 2.4m 12 €20.09 24

57 Maple kiln dried 2.0 x 5.0 inch x 10 feet 17 €54.00 24

6 Marble 12 x 24 inch 2 €36.30 24

20 Perlite aggregate 9.5 Kg - Dineen 11 €12.21 72

47 Pine 1.0 x 6 inch x 14 feet 17 €13.14 24

48 Pine 1.0 x 4 inch x 14 feet 17 €10.44 24

29 Pine - red deal 19 x 140 mm x 2.4m 12 €14.52 24

58 Pine-southern yel 2.0 x 6.0 inch x 10 feet 17 €21.27 24

56 Red Oak 2.0 x 5.0 inch x 10 feet 17 €40.87 24

59 Resin 12 x 24 inch 2 €18.15 24

24 Rollback 18 x 22 inch - Dineen 11 €32.50 72

25 Rollback 16 x 22 inch - Dineen 11 €29.95 72

1 Sand - BY Tonne - 10 ton loads 9 €18.99 6

23 Sand - SA Tonne - 1 ton bags 10 24

26 Sand&Chips- BY Tonne - 10 ton loads 9 €18.99 6

55 Sapele-mahogany 2.0 x 5.0 inch x 10 feet 17 €27.20 24

34 Screws 200 brass timber to timber 17 €3.39 24

35 Screws 200 brass insert to wall 17 €5.60 24

17 Sealers 5 Lt,P/C Basecoat High Build 12 €38.08 24

15 Steel - 3 rods GMP reinforcing 5 €2.34 24

30 Tenax 1 Litre stone glue 5 €30.00 24

44 White Oak 2.0 x 5.0 inch x 10 feet 17 €44.72 24

127

Appendix 12 – List of Suppliers

ID Suppliers Contact Address Address County Phone Number

1 Comet Marble Rathmullen Rd Drogheda Co. Louth 041-983 2937

2 Marble Granite Supplies Ltd Malahide Rd Indl Park Malahide Rd Dublin 17 01-8671077

3 Stonefacings Ltd Lynn Industrial Est Mullingar Co. Westmeath 044-40202

4 Stephen Tripp 2 Renmore Business Pk Kilcoole Co. Wicklow 01-2870444

5 Gerard Murray Products Ltd Michael Kinchella Cast Iron Specialists 112 Ashbourne Co. Meath 01-835 1471

6 Blackwater Crafts Ltd Denis O’Mahoney Old Creamery & Stores Doneraile Co. Cork 022-24333

7 Hopkins Machinery 33 Seafield Crescent Blackrock Co. Dublin 01-260 1292

8 Tenax Via I Maggio 226 - 37020 Volargne Italy

9 Brick Yard Builders Providers 19 Creagh Ave Kileely Limerick 061-327276

10 Stone Age Crecora Co. Limerick 061-301177

11 Dineen Refractories Ltd Annette Dineen Wolfhill Athy Co. Laois 059-8635557

12 Heiton Buckley Builders Con O’Connell Ballysimon Road Ballysimon Limerick 061-416844

13 O'Mara Motors Ltd Adrian Hopkins Toyota Main Dealer Ennis Road Limerick 061-451611

14 Mr Binman John Shanney 4 St John's Square Limerick 061-440474

15 Hibernian Insurance Denis Mahon Hibernian House Henry Street Liimerick 061-312266

16 Chadwicks Pat Kilcoyle Childer's Road Limerick 061-313766

17 James McMahon Don Madigan Dock Road Limerick 061-315388

18 Heiton McMahon Ltd Seamus Flynn Dock Road Limerick 061-227444

19 Granyte Surface Coatings (Ireland) Ltd 6/7 Great Ship Street Dublin 8 01-4782699

20 High Tech Machinery Ltd Gerry Doherty Ballymount Road Nass Road Dublin 22 01-464 1880

21 United Kingdom Lafarge Aluminates Ltd 730 London Road Grays Essex RM20 3NJ

128

Appendix 13 – List of Customers

ID Company Name First Name Surname Address Address County Phone Number

204 Singland Homes Craguan Fr Russell Road Limerick 061-225111

205 Thomas Slattery Cloonaduff Patrickswell Co. Limerick 061-355041

206 Dick Smyth Ltd Dick Smyth Caherdavin Ennis Road Limerick 061-452506

207 Sunnyside Construction 20 Southkey Newcastle West Co. Limerick 069-77622

208 Tatloon Construction Ltd Boreen Ballinacurra Limerick 061-301040

209 Frank Travers & Sons Frank Travers Clarecastle Ennis Co. Clare 065-6828430

210 Union Construction Harveys Quay Limerick 061-216112

211 W.D.K Construction Dromineer Nenagh Co. Tipperary 067-24113

212 Michael Weldon Ballyvalley Killaloe Co. Clare 061-376399

213 Wellingford Construction Ltd Ballina Killaloe Co. Clare 061-361092

214 John Whelan Ltd John Whelan Unit 5 Steamboat Quay Dock Road Limerick 061-314449

215 Noel Whelan Larchill Ennis Co. Clare 065-6840680

216 Windrush Grove Ltd Oldtown Hospital Road Limerick 016-383038

217 Elm Fireplaces Loughill Foynes Co. Limerick 069-65360

218 Limerick Fireplaces O'Connell Avenue Limerick 061-317777

219 Designer Fireplaces Ltd Mill Road Ennis Co. Clare 065-6828400

220 Europa Tile Market Ltd Kilrush Road Ennis Co. Clare 065-6845764

221 Fineline Furniture Ltd Ruanard Clonlara Co. Clare 061-354455

222 Galtee Fireplaces Ltd Fair Green Tipperary Town Tipperary 062-51550

223 Marble City Unit 2 Eastway Business Park Limerick 061-423916

224 Mid West Fireplaces Mill Road Ennis Co. Clare 065-6823991

225 Midwest Mantel & Design Ltd Raheen Ind Estate Limerick 061-301666

226 Munster Fireplace Ltd Ballysimon Road Limerick 061-313299

227 Naughtons Fireplaces Ballyclough Rosbrien Limerick 061-229142

228 Shanid Fireplaces Old Mill Newcastle West Co. Limerick 069-61766

229 Treaty Fireplaces Joe Kemmy John Street Limerick 061-413000

230 Ger Coffey Ger Coffey Mulgrave Street Limerick 061-356833

231 Tipperary Fireplaces Main Street Tipperary 054-839649

232 Tintean Fireplaces Market Street Nenagh Co, Tipperary 0504-364729

129

Endnotes

1 Irish Economy Overview, www.esri.ie The Economic and Social Institute, 2003.

2 Doing business and investing in Ireland, PriceWaterhouseCoopers team of investment specialists in

Ireland, February 2003. 3 Central Statistics Office, www.cso.ie/text/principalstats/pristat10a.html.

4 The Economic and Social Institute, Medium-Term Review 2003 - 2010, number 9; Adele Bergin, Joe

Cullen, David Duffy, John FitzGerald, Ide Kearney, and Danny McCoy, published 18 July 2003. 5 Construction Industry Federation website: www.cif.ie

6 Economic developments in Ireland, No. 73 - OECD Economic Outlook, June 2003, vol. 2003, no. 1,

pp. 255-265 (11 pages) Authors: OECD Organisation for Economic Co-operation and Development. 7 ISME, Press Release. Thursday 11

th September 2003.

8 Dibb, S., Simkin, L., Pride, W. and Ferrell, O., Marketing: Concepts and Strategies, Houghton

Mifflin, Boston. 1994, p74. 9 Tiernan, Siobhán and Morley, Michael and Foley,Edel, Modern Management, Gill & Macmillan Ltd,

Dublin 8, 1996, pp 249-275. 10

Appleby, Robert C., Modern Business Administration, 6th ed., Pitman Publishing, London, 1994, p.

262. 11

McCarthy, E. J., and Perreault, W. D., Basic Marketing, Irwin, Homewood, Illinois, 1990, p.258. 12

Nilson, T., Value Added Marketing, McGraw-Hill, London, 1992, p.183. 13

Kirby, David A., Entrepreneurship, McGraw-Hill Education (UK) Limited, Berkshire, 2003, p. 240. 14

Starting in Business Guide, Revenue Commissioners, www.revenue.ie 15

Self-Assessment for the Self-Employed, an explanatory booklet (IT10) from the Revenue

Commissioners. 16

Appleby, Robert C., Modern Business Administration, 6th ed., Pitman Publishing, London, 1994, pp.

359-427. 17

McLaney, Eddie and Atrill, Peter, Accounting, An Introduction. Pearson Education Ltd, Essex, 2002,

pp. 474-502. 18

Press Release, ISME. Wednesday 6th

August 2003. 19

Stokes, Kennedy, Crowley, Running Your Own Business, second Edition, SKC, Dublin 1987.

Business Plan

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