Make a part of organizational plan
Complete
contingency plan
!! According to the file I uploaded!
And you can refere to the textbook pages 31-42
1-2 pages are enough
craft Guitars
Established 2015
Company History:
Craft Guitars (CG) manufacturers musical instruments and was founded in 2015 by
Mary Garcia
. Ms. Garcia has an extensive background in music, her father and mother are both performers in local bands, and she has been a guitar player since age 4. She graduated from California State University San Bernardino with a BA in marketing in 2004 and was hired by Gibson Brands in Nashville, Tennessee to work in their marketing department. Gibson manufactures guitars and other instruments including the iconic Gibson Les Paul guitar. In 2009 she moved to Guild Guitars (owned by Fender Electric Instrument Manufacturing Company) in Scottsdale Arizona as the VP of marketing and promotions. In 2014 Fender sold Guild Guitars to Cordoba Music Group in Santa Monica, California and Ms. Garcia remained with Cordoba during the transition but left at the end of 2014 and launched CG the following year. In 2019 Ms. Garcia received a Master of Science in Entrepreneurship & Innovation degree from CSUSB.
CG manufacturers guitars including custom orders, acoustic, and electric models. Custom models are designed for and by the customer with prices from $2,500 to $10,000 depending on material, with the average being $5,400. Standard models are priced from $800 to $2,000, with an average of $1,300. The company currently leases a 15,030 square foot production facility in San Bernardino, California and employs 78 workers.
CG was started with an investment of $200,000 from Ms. Garcia and a $300,000 private stock sale to family and senior management. Sales increased rapidly in the first six-years of operations, but growth has begun to trend slower. The company has successfully been able to maintain margins despite the rapid growth. Management meets weekly to discuss production, suppliers, labor issues, and review financial results.
A few weeks ago, the owner of the building CG is leasing offered to sell the property. After negotiating a sale price of $3,450,000 the company began working on a business plan to request a loan of $2,760,000 (80% LTV) from their bank.
Products:
CG began as a custom design shop and has built a reputation for innovative and unique creations. The company’s big break came when noted guitarist and Black Keys front-man Dan Auerbach was photographed with his custom CG guitar for the cover of Guitar World Magazine. In 2018 influential guitarist Nita Strauss ordered a custom acoustic model from CG. Strauss, who had previously never owned an acoustic guitar, has a signature Ibanez electric guitar. The CG brand quickly became a sensation in the music industry after Strauss used the guitar for a video and song on her solo album “Controlled Chaos”.
The custom shop continues to produce creative models using exotic woods and the highest quality workmanship. At least six unique designs are introduced each year and production is strictly limited to no more than 25 guitars per design. These guitars are typically sold out before they are manufactured despite having a significant cost (up to $10,000). The typical buyer is a guitar collector, and CG’s customer base includes people that have purchased multiple limited production models.
Some custom CG models are made-to-order with customers using the company website to design their guitar. The website is highly interactive allowing the user to create whatever instrument they want. It will even allow uploading of pictures or hand drawn images. The customer can choose the wood and other materials and see a rendering of what the finished product will look like. Once a design has been completed the customer can discuss the guitar with an experienced craftsman to complete the order. This is typically the employee that will craft the guitar. These one-of-a-kind guitars are the most expensive with an elevated level of customer service and interaction. Features can include having a name imbedded in the finger board, length and shape of the body, location and number of pick-ups, uniquely designed tuning keys, etc. The customer can even choose to have the entire production process recorded (for an additional fee). The finished guitar is delivered in a custom CG case.
Beginning in 2017 CG began producing a line of standard guitars (both electric and acoustic) to appeal to a broader base. These models still feature excellent workmanship but use less expensive woods and have a more traditional look. The CG standard line is priced lower than the custom models and sold at various retail music stores as well as the company website. CG’s sales growth has been primarily through this line of products which increased from 1,835 units sold in 2018 ($1,835,000) to 2,132 units in 2020 ($2,771,600).
Next 5-years:
The company is focused on continued brand development, improving their website and social media presence. The workforce will see a modest increase over the next 5-years and CG will continue to add efficiency improving equipment to the factory. The company is discussing hiring a full-time sales force (4 people) to make personal calls on smaller music stores to promote their line of standard guitars. The company is also exploring development of a bass guitar model, both electric and acoustic. Other projects may include a branded clothing line (t-shirts and hats), instrument cleaning products, stands, cases, and other accessories.
Exit Strategy:
The company estimates annual sales will reach $25,000,000 in 12-years at which time they will seek a buyer. Senior management is hopeful that CG will be purchased by a larger company that will retain the employees and continue to utilize the production facility. Ms. Garcia and her officers have extensive contacts in the music industry and are confident their company will be an attractive acquisition, allowing them to negotiate an acceptable sale, with a goal of 5 – 7x EBITDA (between $22 to $31 million). Additionally, the company will have the commercial property that will add value and another $3 to $4 million to the sale price.
Marketing:
The company has primarily used traditional print media to advertise the website and products. CG runs a half-page or quarter-page ad in Guitar World Magazine, Premier Guitar, and Acoustic Guitar Magazine a few times a year. The company also has a limited budget for advertisement in on-line publications including Guitar World Magazine, Rolling Stone, and Billboard.
A few amateur guitar players have posted videos using CG models to YouTube, TikTok, Facebook and other platforms. Despite this the company is just beginning to explore expansion into social media. The marketing team is developing a series of instructional videos and a factory tour video showing how a guitar is built.
CG is a member of the National Association of Music Merchants (NAMM) and has attended their trade shows over the years. The company has a custom booth that they use for this and other similar events including concerts, fairs, and conventions.
The company website is a featured sales tool and allows users to design a custom guitar, interact with company craftsman, and follow the production of their guitar. Virtually all custom-made guitar orders start with a website visit. Orders for standard models also use the website.
The marketing budget will be $180,000 in 2021, $225,000 in 2022, and $280,000 in 2023. CG has additional money for IT and maintenance of the website.
CG has the following management organizational structure:
The management committee meets weekly to review plans, sales orders, supplies, production, and marketing.
Board of Directors:
Mary Garcia – Board Chair
Ms. Garcia is the founder of Craft Guitars.
Michael Stull, PhD
Dr. Stull is the Director of the School of Entrepreneurship at CSUSB and the Director of the Inland Empire Center for Entrepreneurship. He has over 30-years of entrepreneurship experience. Dr. Stull received his BA/MBA from CSUSB and an EDM from Case Western.
Connie Liu, CPA
Ms. Liu is a partner with the accounting firm of Anderson, Turk & Smith, LLP in San Bernardino and has over 25-years of public accounting experience. Ms. Lie has a BA from UCR and an MBA in accounting from CSUSB.
Don Edwards, Esq.
Mr. Edwards is a partner with the law firm of Edwards, Charles, Lewis & Tork in Redlands. He has over 30-years of experience in corporate law. He has a BA from UCLA and a JD from Stanford University.
Susan Rodriguez
Ms. Rodriguez is the owner of SSR Manufacturing, Inc. in Fontana, which she founded in 1983. SSR manufacturers wood furniture and had sales over $240 million in 2020. Ms. Rodriguez has an BA from CSUSB and an executive MBA from USC Marshall School of Business.
Sheri Moore
Ms. Moore is the President and CEO of San Bernardino Assist, a nonprofit dedicated to providing services to the homeless. Ms. Moore has a BA from CSUSB.
The board meets monthly to review financial information, approve projections, assist in resource management, provide feedback on products and production.
Need:
CG is seeking a commercial real estate loan of $2,760,000 or 80% of the purchase price ($3,450,000) to buy a 15,030 SF building in San Bernardino, California. The building sits on 0.80 acres and has 2,760 SF of dedicated office space, 4 loading docks, and is zoned industrial. The concrete tilt-up construction was completed in 1988 and the building has a newer (1-year old) roof.
Shareholders are contributing $150,000 (stock purchase) and the remaining $540,000 of the down payment will come from the company, along with the estimated $62,000 in closing costs.
Historic Financial Statements
Balance Sheet
2018
2019
2020
Cash
$ 50,000
2.1%
$ 80,000
2.6%
$ 70,000
1.9%
Marketable Securities
$ 80,000
3.3%
$ 162,000
5.2%
$ 375,000
10.1%
Accounts
Receivable
$ 340,000
14.1%
$ 405,000
13.1%
$ 485,000
13.1%
Inventory
$ 415,000
17.2%
$ 488,000
15.7%
$ 590,000
15.9%
Other Current Assets
$ 95,000
3.9%
$ 102,700
3.3%
$ 32,000
0.9%
Total Current Assets
$ 980,000
40.6%
$ 1,237,700
39.9%
$ 1,552,000
41.8%
Machinery
$ 1,060,000
43.9%
$ 1,310,000
42.3%
$ 1,590,000
42.8%
Vehicles
$ 225,000
9.3%
$ 210,000
6.8%
$ 240,000
6.5%
Other Long-Term Assets
$ 150,000
6.2%
$ 342,100
11.0%
$ 329,150
8.9%
Total Long-Term Assets
$ 1,435,000
59.4%
$ 1,862,100
60.1%
$ 2,159,150
58.2%
Total Assets
$ 2,415,000
100.0%
$ 3,099,800
100.0%
$ 3,711,150
100.0%
CPLTD
$ 120,000
5.0%
$ 143,000
4.6%
$ 211,000
5.7%
Accounts Payable
$ 190,000
7.9%
$ 220,000
7.1%
$ 310,000
8.4%
Wages Payable
$ 108,000
4.5%
$ 145,000
4.7%
$ 124,000
3.3%
Other Payables
$ 250,000
10.4%
$ 317,000
10.2%
$ 320,000
8.6%
Total Current Liabilities
$ 668,000
27.7%
$ 825,000
26.6%
$ 965,000
26.0%
Notes Payable
$ 1,077,000
44.6%
$ 1,125,830
36.3%
$ 1,181,924
31.8%
Deferred Income Taxes
$ 40,000
1.7%
$ 98,900
3.2%
$ 22,000
0.6%
Total Long-Term Liabilities
$ 1,117,000
46.3%
$ 1,224,730
39.5%
$ 1,203,924
32.4%
Total Liabilities
$ 1,785,000
73.9%
$ 2,049,730
66.1%
$ 2,168,924
58.4%
Common Stock
$ 500,000
20.7%
$ 500,000
16.1%
$ 500,000
13.5%
Retained Earnings
$ 130,000
5.4%
$ 550,070
17.7%
$ 1,042,226
28.1%
Total Equity
$ 630,000
26.1%
$ 1,050,070
33.9%
$ 1,542,226
41.6%
Total Liabilities and Equity
$ 2,415,000
100.0%
$ 3,099,800
100.0%
$ 3,711,150
100.0%
Historic Financial Statements
Income Statement
2018
2019
2020
Sales
$ 4,135,000
$ 4,893,600
$ 5,678,600
Cost of Goods Sold
$ 2,514,000
60.8%
$ 2,999,000
61.3%
$ 3,492,000
61.5%
Gross Profit
$ 1,621,000
39.2%
$ 1,894,600
38.7%
$ 2,186,600
38.5%
SGA
$ 723,720
17.5%
$ 865,000
17.7%
$ 1,080,000
19.0%
Rent – Loan Payment
$ 135,000
3.3%
$ 135,000
2.8%
$ 135,000
2.4%
Net Operating Expenses
$ 858,720
20.8%
$ 1,000,000
20.4%
$ 1,215,000
21.4%
Operating Income
$ 762,280
18.4%
$ 894,600
18.3%
$ 971,600
17.1%
Depreciation
$ 250,000
6.0%
$ 287,000
5.9%
$ 372,420
6.6%
Taxes
$ 92,210
2.2%
$ 115,444
2.4%
$ 113,844
2.0%
Net Income
$ 420,070
10.2%
$ 492,156
11.9%
$ 485,336
11.7%
Ratios
2018
2019
2020
Sales Growth
21.5%
18.3%
16.0%
GPM
39.2%
38.7%
38.5%
tax rate
18%
19%
19%
ROI
17.4%
15.9%
13.1%
Net Working Capital
$ 312,000
$ 412,700
$ 587,000
Current Ratio
1.47
1.50
1.61
Quick Ratio
0.85
0.91
1.00
Debt to Worth
2.8
2.0
1.4
Accounts Receivable Turnover
12.2
12.1
11.7
Accounts Receivable Days
30.0
30.2
31.2
Inventory Turnover
6.1
6.1
5.9
Inventory Days
60.3
59.4
61.7
Accounts Payable Turnover
13.2
13.6
11.3
Accounts Payable Days
27.6
26.8
32.4
Projected Financial Statements
Balance Sheet
2021
2022
2023
Cash
$ 50,000
0.7%
$ 60,000
0.8%
$ 120,000
1.5%
Marketable Securities
$ 90,000
1.3%
$ 120,000
1.6%
$ 200,000
2.4%
Accounts Receivable
$ 580,000
8.2%
$ 643,000
8.7%
$ 740,000
9.0%
Inventory
$ 714,000
10.1%
$ 835,000
11.3%
$ 950,000
11.5%
Other Current Assets
$ 12,537
0.2%
$ 199,911
2.7%
$ 336,386
4.1%
Total Current Assets
$ 1,446,537
20.4%
$ 1,857,911
25.2%
$ 2,346,386
28.4%
Machinery
$ 1,640,000
23.1%
$ 1,700,000
23.0%
$ 1,951,000
23.6%
Vehicles
$ 300,000
4.2%
$ 300,000
4.1%
$ 390,000
4.7%
Land
$ 900,000
12.7%
$ 900,000
12.2%
$ 900,000
10.9%
Building
$ 2,462,069
34.7%
$ 2,374,138
32.1%
$ 2,286,207
27.7%
Other Long-Term Assets
$ 342,171
4.8%
$ 255,000
3.5%
$ 390,000
4.7%
Total Long-Term Assets
$ 5,644,240
79.6%
$ 5,529,138
74.8%
$ 5,917,207
71.6%
Total Assets
$ 7,090,777
100.0%
$ 7,387,049
100.0%
$ 8,263,593
100.0%
CPLTD
$ 283,000
4.0%
$ 320,000
4.3%
$ 350,000
4.2%
Accounts Payable
$ 380,000
5.4%
$ 411,000
5.6%
$ 463,000
5.6%
Wages Payable
$ 90,000
1.3%
$ 148,000
2.0%
$ 201,000
2.4%
Other Payables
$ 280,000
3.9%
$ 478,000
6.5%
$ 622,200
7.5%
Total Current Liabilities
$ 1,033,000
14.6%
$ 1,357,000
18.4%
$ 1,636,200
19.8%
Notes Payable
$ 1,190,245
16.8%
$ 792,573
10.7%
$ 960,786
11.6%
Real Estate Loan
$ 2,662,971
37.6%
$ 2,562,490
34.7%
$ 2,458,436
29.8%
Deferred Income Taxes
$ 27,000
0.4%
$ 60,000
0.8%
$ 100,000
1.2%
Total Long-Term Liabilities
$ 3,880,216
54.7%
$ 3,415,063
46.2%
$ 3,519,222
42.6%
Total Liabilities
$ 4,913,216
69.3%
$ 4,772,063
64.6%
$ 5,155,422
62.4%
Common Stock
$ 650,000
9.2%
$ 650,000
8.8%
$ 650,000
7.9%
Retained Earnings
$ 1,527,561
21.5%
$ 1,964,985
26.6%
$ 2,458,170
29.7%
Total Equity
$ 2,177,561
30.7%
$ 2,614,985
35.4%
$ 3,108,170
37.6%
Total Liabilities and Equity
$ 7,090,777
100.0%
$ 7,387,049
100.0%
$ 8,263,592
100.0%
Projected Financial Statements
Income Statement
2021
2022
2023
Sales
$ 6,568,800
$ 7,534,500
$ 8,562,000
Cost of Goods Sold
$ 4,040,000
61.5%
$ 4,641,000
61.6%
$ 5,274,000
61.6%
Gross Profit
$ 2,528,800
38.5%
$ 2,893,500
38.4%
$ 3,288,000
38.4%
SGA
$ 1,250,000
19.0%
$ 1,450,000
19.2%
$ 1,650,000
19.3%
Rent – Loan Payment
$ 193,000
2.9%
$ 193,000
2.6%
$ 193,000
2.3%
Net Operating Expenses
$ 1,443,000
22.0%
$ 1,643,000
21.8%
$ 1,843,000
21.5%
Operating Income
$ 1,085,800
16.5%
$ 1,250,500
16.6%
$ 1,445,000
16.9%
Depreciation
$ 525,000
8.0%
$ 610,000
8.1%
$ 650,000
7.6%
Taxes
$ 123,376
1.9%
$ 147,315
2.0%
$ 182,850
2.1%
Net Income
$ 437,424
10.6%
$ 493,185
11.9%
$ 612,150
14.8%
Ratios
2021
2022
2023
Sales Growth
15.7%
14.7%
13.6%
GPM
38.5%
38.4%
38.4%
Net Income Growth
tax rate
22%
23%
23%
ROI
6.2%
6.7%
7.4%
Net Working Capital
$ 413,537
$ 500,911
$ 710,186
Current Ratio
1.40
1.37
1.43
Quick Ratio
0.71
0.75
0.85
Debt to Worth
2.3
1.8
1.7
Accounts Receivable Turnover
11.3
11.7
11.6
Accounts Receivable Days
32.2
31.1
31.5
Inventory Turnover
5.7
5.6
5.6
Inventory Days
64.5
65.7
65.7
Accounts Payable Turnover
10.6
11.3
11.4
Accounts Payable Days
34.3
32.3
32.0
Other Financial Information:
2020 Cash Flow Statement
2020
Jan
Feb
Mar
Apr
Beginning Cash Balance
$ 242,000
$ 384,639
$ 479,756
$ 540,896
Cash Receipts
% of Sales
8.2%
8.3%
7.9%
7.5%
Sales
$ 465,645
$ 471,324
$ 448,609
$ 425,895
Receivables
$ 530,233
$ 486,203
$ 461,027
$ 437,139
Interest Income
0
0
0
0
Sale of LT Asset
0
0
0
0
Total Cash Available
$ 772,233
$ 870,842
$ 940,783
$ 978,034
Cash Payments
Purchases
$ 57,269
$ 57,967
$ 55,174
$ 52,380
Material
$ 143,172
$ 144,918
$ 137,934
$ 130,950
Labor
$ 85,903
$ 86,951
$ 82,760
$ 78,570
Total Cost of Goods
$ 286,344
$ 289,836
$ 275,868
$ 261,900
Expenses
SG&A
$ 90,000
$ 90,000
$ 90,000
$ 90,000
Rent
$ 11,250
$ 11,250
$ 11,250
$ 11,250
Taxes
$ –
$ –
$ 22,769
$ –
Total Expenses
$ 101,250
$ 101,250
$ 124,019
$ 101,250
Real Estate Downpayment
Cash Paid Out
$ 387,594
$ 391,086
$ 399,887
$ 363,150
Ending Cash Balance
$ 384,639
$ 479,756
$ 540,896
$ 614,884
2020
May
Jun
Jul
Aug
Beginning Cash Balance
$ 614,884
$ 680,779
$ 713,371
$ 760,470
Cash Receipts
% of Sales
7.0%
6.7%
7.2%
6.4%
Sales
$ 397,502
$ 380,466
$ 408,859
$ 363,430
Receivables
$ 411,585
$ 390,574
$ 399,773
$ 379,103
Interest Income
0
0
0
0
Sale of LT Asset
0
0
0
0
Total Cash Available
$ 1,026,469
$ 1,071,354
$ 1,113,144
$ 1,139,573
Cash Payments
Purchases
$ 48,888
$ 46,793
$ 50,285
$ 44,698
Material
$ 122,220
$ 116,982
$ 125,712
$ 111,744
Labor
$ 73,332
$ 70,189
$ 75,427
$ 67,046
Total Cost of Goods
$ 244,440
$ 233,964
$ 251,424
$ 223,488
Expenses
SG&A
$ 90,000
$ 90,000
$ 90,000
$ 90,000
Rent
$ 11,250
$ 11,250
$ 11,250
$ 11,250
Taxes
$ –
$ 22,769
$ –
$ –
Total Expenses
$ 101,250
$ 124,019
$ 101,250
$ 101,250
Real Estate Downpayment
Cash Paid Out
$ 345,690
$ 357,983
$ 352,674
$ 324,738
Ending Cash Balance
$ 680,779
$ 713,371
$ 760,470
$ 814,835
2020
Sep
Oct
Nov
Dec
Beginning Cash Balance
$ 814,835
$ 834,395
$ 878,265
$ 965,894
Cash Receipts
% of Sales
6.8%
9.4%
11.1%
13.5%
Sales
$ 386,145
$ 533,788
$ 630,325
$ 766,611
Receivables
$ 381,034
$ 473,368
$ 576,491
$ 699,490
Interest Income
0
0
0
0
Sale of LT Asset
0
0
0
0
Total Cash Available
$ 1,195,870
$ 1,307,763
$ 1,454,756
$ 1,665,384
Cash Payments
Purchases
$ 47,491
$ 65,650
$ 77,522
$ 94,284
Material
$ 118,728
$ 164,124
$ 193,806
$ 235,710
Labor
$ 71,237
$ 98,474
$ 116,284
$ 141,426
Total Cost of Goods
$ 237,456
$ 328,248
$ 387,612
$ 471,420
Expenses
SG&A
$ 90,000
$ 90,000
$ 90,000
$ 90,000
Rent
$ 11,250
$ 11,250
$ 11,250
$ 11,250
Taxes
$ 22,769
$ –
$ –
$ 45,538
Total Expenses
$ 124,019
$ 101,250
$ 101,250
$ 146,788
Real Estate Downpayment
$ 602,000
Cash Paid Out
$ 361,475
$ 429,498
$ 488,862
$ 1,220,208
Ending Cash Balance
$ 834,395
$ 878,265
$ 965,894
$ 445,177
Other Financial Information:
2026 Projected Cash Flow Statement
2026
Jan
Feb
Mar
Apr
Beginning Cash Balance
$ 445,000
$ 666,418
$ 810,204
$ 898,947
Cash Receipts
% of Sales
8.2%
8.3%
7.9%
7.5%
Sales
$ 702,084
$ 710,646
$ 676,398
$ 642,150
Receivables
$ 807,469
$ 735,112
$ 695,542
$ 659,103
Interest Income
0
0
0
0
Sale of LT Asset
0
0
0
0
Total Cash Available
$ 1,252,469
$ 1,401,530
$ 1,505,747
$ 1,558,050
Cash Payments
Purchases
$ 86,494
$ 87,548
$ 83,329
$ 79,110
Material
$ 216,234
$ 218,871
$ 208,323
$ 197,775
Labor
$ 129,740
$ 131,323
$ 124,994
$ 118,665
Total Cost of Goods
$ 432,468
$ 437,742
$ 416,646
$ 395,550
Expenses
SG&A
$ 137,500
$ 137,500
$ 137,500
$ 137,500
Loan Payment
$ 16,083
$ 16,083
$ 16,083
$ 16,083
Taxes
$ –
$ –
$ 36,570
$ –
Total Expenses
$ 153,583
$ 153,583
$ 190,153
$ 153,583
Cash Paid Out
$ 586,051
$ 591,325
$ 606,799
$ 549,133
Ending Cash Balance
$ 666,418
$ 810,204
$ 898,947
$ 1,008,917
2026
May
Jun
Jul
Aug
Beginning Cash Balance
$ 1,008,917
$ 1,106,727
$ 1,152,110
$ 1,221,564
Cash Receipts
% of Sales
7.0%
6.7%
7.2%
6.4%
Sales
$ 599,340
$ 573,654
$ 616,464
$ 547,968
Receivables
$ 620,574
$ 588,894
$ 602,765
$ 571,599
Interest Income
0
0
0
0
Sale of LT Asset
0
0
0
0
Total Cash Available
$ 1,629,491
$ 1,695,622
$ 1,754,875
$ 1,793,163
Cash Payments
Purchases
$ 73,836
$ 70,672
$ 75,946
$ 67,507
Material
$ 184,590
$ 176,679
$ 189,864
$ 168,768
Labor
$ 110,754
$ 106,007
$ 113,918
$ 101,261
Total Cost of Goods
$ 369,180
$ 353,358
$ 379,728
$ 337,536
Expenses
SG&A
$ 137,500
$ 137,500
$ 137,500
$ 137,500
Loan Payment
$ 16,083
$ 16,083
$ 16,083
$ 16,083
Taxes
$ –
$ 36,570
$ –
$ –
Total Expenses
$ 153,583
$ 190,153
$ 153,583
$ 153,583
Cash Paid Out
$ 522,763
$ 543,511
$ 533,311
$ 491,119
Ending Cash Balance
$ 1,106,727
$ 1,152,110
$ 1,221,564
$ 1,302,043
2026
Sep
Oct
Nov
Dec
Beginning Cash Balance
$ 1,302,043
$ 1,327,768
$ 1,392,157
$ 1,522,374
Cash Receipts
% of Sales
6.8%
9.4%
11.1%
13.5%
Sales
$ 582,216
$ 804,828
$ 950,382
$ 1,155,870
Receivables
$ 574,510
$ 713,728
$ 869,214
$ 1,054,667
Interest Income
0
0
0
0
Sale of LT Asset
0
0
0
0
Total Cash Available
$ 1,876,554
$ 2,041,497
$ 2,261,372
$ 2,577,041
Cash Payments
Purchases
$ 71,726
$ 99,151
$ 117,083
$ 142,398
Material
$ 179,316
$ 247,878
$ 292,707
$ 355,995
Labor
$ 107,590
$ 148,727
$ 175,624
$ 213,597
Total Cost of Goods
$ 358,632
$ 495,756
$ 585,414
$ 711,990
Expenses
SG&A
$ 137,500
$ 137,500
$ 137,500
$ 137,500
Loan Payment
$ 16,083
$ 16,083
$ 16,083
$ 16,083
Taxes
$ 36,570
$ –
$ –
$ 73,140
Total Expenses
$ 190,153
$ 153,583
$ 153,583
$ 226,723
Cash Paid Out
$ 548,785
$ 649,339
$ 738,997
$ 938,713
Ending Cash Balance
$ 1,327,768
$ 1,392,157
$ 1,522,374
$ 1,638,328
Other Financial Information:
Breakeven
Mary Garcia
CEO and President
COO
CFO
CMO
Production
Manager
Supply Manager
Marketing Manager
Accounts
Manager
IT Manager
2020 Breakeven
$4,418,183
Fixed Costs 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 1701264.2 1701264.2 1701264.2 1701264.2 1701264 .2 1701264.2 1701264.2 1701264.2 Variable Costs 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 0 614940.302187159 1229880.60437432 1844820.90656148 2459761.20874863 3074701.51093579 3689641.81312295 4304582.11531011 Total Costs 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 1701264.2 2316204.50218716 2931144.80437432 3546085.10656148 4161025.40874864 4775965.71093579 5390906.01312295 6005846.31531011 Sales 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000
2023 Breakeven
$6,967,952
Fixed Costs 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000 9000000 2675850 2675850 2675850 2675850 2675850 2675850 2675850 2675850 2675850 2675850 Variable Costs 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000 9000000 0 615977.575332866 1231955.15066573 1847932.7259986 2463910.30133146 3079887.87666433 3695865.4519972 4311843.02733006 4927820.60266293 5543798.1779958 Total Costs 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000 9000000 2675850 3291827.57533287 3907805.15066573 4523782.7259986 5139760.30133146 5755737.87666433 6371715.4519972 6987693.02733006 7603670.60266293 8219648.1779958 Sales 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000 9000000 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000 9000000
Craft Guitars
Company address: N/A
Company phone number: N/A
Website: N/A
Plan prepared February, 2021
by
Emily Hinckley
Linh Dinh
Madeline Juarez
Yayun Dong
Robert Corona
Organizational Plan
● Summary Description of Business
Craft Guitars was created by Mary Garcia in 2015. The manufactory is famous for
producing personalized and highest quality guitars. The products CG plans to sell are
custom orders, acoustic, and electric models. The CG continues to produce creative
models using exotic woods and the highest quality. And customers can also choose the
pictures or hand drawn images on the guitar, they can also choose the Materials used to
make guitars. CG sells through the “make-to-order” module. The order service and post
sales service are a part of CG sales.
● SWOT analysis
Strengths
➢ Experienced key officials.
➢ A member of the National Association of
Music Merchants → build reputation.
➢ Innovative and unique creations → build
reputation.
➢ Good customer segmentation strategy:
○ Highest quality workmanship and
multiple suppliers of exotic woods for
producing limited high-end designs
→ attract high-income customer
segments.
○ Production of standard guitars →
appeal to broader base of customers
➢ Make-to-order improves the
specialization of guitars → offer efficient
customer service.
➢ Good financial management, especially a
high payable turnover ratio and a
relatively stable current ratio → attractive
to lenders/ creditors/ investors.
Weaknesses
➢ Marketing strategy need improving:
○ Depends much on traditional
marketing channels.
○ Digital marketing and social media
uses are still limited.
➢ High cost of goods sold and general and
administrative expenses (about 60% and
20% of sales respectively).
➢ A high inventory day ratio of about 60
days indicates that 2 months are needed
to sell goods → high inventory cost.
Opportunities
➢ Future trends in custom guitar would be
more and more popular.
➢ Standard guitar production line with
affordable prices → attract potential
customers
Threats
➢ Not many physical stores and people can
not find it easily.
➢ More competitors enter the market.→
more competitive
● Products & Services
○ Standard, custom-designed & limited unique guitars
○ Extensive customer service and customer interaction
■ Self-design services
■ Direct design discussion between customers and craftsmen.
■ Guitar production watch.
○ Expansion will include:
■ Developing a bass guitar model
■ Connecting with smaller music stores to sell CG standard model guitars
■ Branding lines for clothing (Shirts/hats), instrument cleaning products and
other music accessories
● Customers:
○ Customers are segmented based on their income levels and purposes of buying,
which then determine which types of guitars purchased.
○ Craft Guitars sells to multiple channels such as music stores, guitar centers, and is
still growing.
● Administration Plan
○ Legal Structure
■ To handle legal affairs, we contract with Blank Rome LLP, a firm that is
ranked National Tier 1 in corporate law. We have been contracting with
them for two years now with no problems.
○ Capital structure
○ Management
➢ Projects of producing other related
products (clothing, cleaning tools, cases,
accessories, …) → expand markets.
➢ It is a luxury goods sales company, and
can be easily affected by economic
fluctuations.
Income level Buying purpose Product type
High income Collection (guitar collectors) Limited unique guitars
Mid income Collection (guitar collectors) or
play (guitarists)
Custom-designed
guitars or standard
guitars
Mid-low income Play (guitarists) Standard guitars
marketing Manager
Marketing M
○ Personnel
■ Board of Directors:
● Mary Garcia – Board Chair
● Michael Stull, PhD
● Connie Liu, CPA
● Don Edwards, Esq.
● Susan Rodriguez
● Sheri Moore
■ Recently, employed 78 workers in the San Bernardino production facility.
■ Expectedly, employ 4 full-time sales employees.
○ Legal & Accounting
■ For accounting, we have our own accounting department that our CFO-
Miss. Connie Liu takes control over it
■ For auditing, we contract with Deloitte Touche Tohmatsu Limited, which
is one of the Big Four accounting organizations reputable for its
accounting and auditing services.
○ Insurance:
■ Craft Guitars is insured by Farmers Insurance Group. This insurance
company has headquarters in California and is an insurer group for
automobiles, homes, and small businesses.
○ Security:
– Since Craft Guitars has an online presence, their website is possibly
threatened by hackers. To mitigate this threat, Craft Guitar is protected by
a company called Duo Security. This company is in the cloud security and
network security industry that is located in Ann Arbor, Michigan. Duo
Security protects Craft Guitar and other businesses by preventing data
breaches, and credential theft among many other attacks.