The Ridiculous Cupcake - St. Olaf College

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                BUSINESS PLAN




                Business Plan Prepared By

      Alecia Irgens, Nicholas Branjord & Genette Seske
      CEO, CFO & Marketing Specialist (respectively)

                    1520 St. Olaf Ave
                   Northfield, MN 55404

  irgens@stolaf.edu, branjord@stolaf.edu, seske@stolaf.edu

                      Date Prepared

                      December, 2010
Business Plan



                                                      Table of Contents

EXECUTIVE SUMMARY……………………………………………………………………5

MANAGEMENT AND ORGANIZATION………………………………………………….7
   Management Team......................................................................................................7
   Compensation and Ownership ....................................................................................7
   Board of Directors/Advisory Council.........................................................................8
   Infrastructure...............................................................................................................8
   Contracts and Franchise Agreements..........................................................................8
   Insurance .....................................................................................................................9
   Employee Stock Option Plan and Other Incentives....................................................9
   Organization Charts ....................................................................................................9

PRODUCT/SERVICE…………………………………………………………………………10
   Purpose of the Product/Service.................................................................................10
   Unique Features ........................................................................................................10
   Future Research and Development ...........................................................................10
   Trademarks, Patents, Copyrights, Licenses, Royalties .............................................10
   Product/Service Limitations......................................................................................10
   Product/Service Liability ..........................................................................................11
   Related Products/Services and Spin-Offs .................................................................11
   Production .................................................................................................................11
   Facilities....................................................................................................................11
   Suppliers ...................................................................................................................11
   Environmental Factors ..............................................................................................11

MARKETING PLAN…………………………………………………………………………12
   Industry Profile .........................................................................................................13
       Current Size ..................................................................................................13
       Growth Potential...........................................................................................13
       Geographic Locations...................................................................................13
       Industry Trends .............................................................................................14
       Seasonality Factors.......................................................................................14
       Basis of Competition .....................................................................................15
   Competition Profile...................................................................................................15
   Target Market Profile................................................................................................15
   Pricing Profile ...........................................................................................................16
   Gross Margin on Products/Services..........................................................................17
   Break-Even Analysis ................................................................................................17
   Market Penetration....................................................................................................17


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Business Plan



          Distribution Channels……………………………………………………………………17
       Advertising and Promotion…………………………………………………………..17
       Packaging and Labeling……………………………………………………………...18
       Trade Shows…………………………………………………………………………19

OPERATING AND CONTROL SYSTEMS………………………………………………..20
   Administrative Policies, Procedures and Controls....................................................20
      Receiving Orders ..........................................................................................20
      Billing the Customers....................................................................................20
      Paying the Suppliers .....................................................................................20
      Reporting to Management.............................................................................20
      Staff Development .........................................................................................20
      Inventory Control..........................................................................................21
      Monitoring the Company Budgets ................................................................21
      Security Systems............................................................................................21
   Planning Chart ..........................................................................................................21
      Product/Service Development.......................................................................21
      Manufacturing...............................................................................................21
      Financial Requirements ................................................................................21
      Marketing Flow Chart ..................................................................................21
      Management and Infrastructure ...................................................................22
   Risk Analysis ............................................................................................................22
   Salvaging Assets .......................................................................................................22

GROWTH PLAN.................................................................................................................... 23
   New Offerings to Market ..........................................................................................23
   Capital Requirements................................................................................................23
   Personnel Requirements............................................................................................23
   Exit Strategy..............................................................................................................23

FINANCIAL PLAN ................................................................................................................ 24
    Sales Projections .......................................................................................................24
    Income Projections....................................................................................................25
    Cash Requirements ...................................................................................................25
    Sources of Financing.................................................................................................25
    Attached Financial Projections .................................................................................26
        Cash Flow for Three Years
        Income Statement for Three Years
        Balance Sheet for Three Years
        Ratio Analysis



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Business Plan



SUPPORTING DOCUMENTS ............................................................................................. 27




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                                                           4
Business Plan



                                  EXECUTIVE SUMMARY
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The Ridiculous Cupcake was dreamt up by Alecia Irgens in 2009 shortly after she was diagnosed
with Lactose Intolerance and specialists at the University of Minnesota found inflammation in
her blood. She was told that she would have to be careful not to eat anything with milk and to
keep her gluten intake at a minimum in fear of upsetting her small intestine. Alecia loved sweets,
and almost all the sweets she loved, had milk and gluten in them. Everywhere she went, bakery
after bakery, she was surrounded by treats that she could no longer have. After doing some
research, Alecia soon realized that she was definitely not alone. One in ten people in America
suffer from lactose intolerance and one out of roughly one-hundred people suffer from Celiac
Disease. Alecia knew something had to be done; she searched for the latest trends and found that
cupcakes were the latest rage. There were four cupcakes shops in the Twin Cities area already,
but none of them offered gluten or lactose free cupcakes. Alecia saw this as a big problem, and
The Ridiculous Cupcake was created as a solution.
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The Ridiculous Cupcake is a privately owned limited liability corporation in the bakery business.
Its current stage of development includes all three partners finishing their education, gaining
more knowledge about baking gourmet cupcakes, running a successful business and working to
gather the funding necessary to operate by spring of 2013. The owners will have acquired
proprietary rights under law to protect the name and brand of the business prior to the start date.
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The Ridiculous Cupcake operates under a simple form of organization with Alecia Irgens, Nick
Branjord and Genette Sekse all being equal owners and key management personnel. All three
members have management studies concentrations from St. Olaf College and are passionate,
energetic and persistent people. In addition to key personnel, there will be a board of directors
and legal and financial advisors to support them.

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The organic food industry had grown dramatically in recent years and it will continue to keep
growing around 20% each year. US sales of organic food and beverages were $24.8 billion in
2009. There is also an increasing demand in gluten free and lactose free food. Over the past five
years the gluten free demand market has grown 230%. The voice of the customer report
indicated that 90% of participants that took the survey knew at least one person with lactose
intolerance and 70% knew at least one person affected by Celiac disease. As per the survey, there
is clearly a demand for food allergy friendly products.


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Business Plan




Nearly 50% of women indicated they want more “green” choices in the food industry. 37% are
more likely to pay attention to brands that are committed to environmental causes. The
Ridiculous Cupcake will reach their target market at their store, located in Linden Hills and
online.

The major competitors of The Ridiculous Cupcake include the four café’s located in Linden
Hills. Their strengths are that they are already established and have greater customer awareness.
However, their weaknesses are that none of these café’s offer gluten free and/or lactose free
baked goods. The Ridiculous Cupcake has a competitive advantage by being a first-mover into a
unique gap in the market.

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Financing for operations will be under a bootstrapping model. New product development will
not cost anything; marketing will start with a budget of $500 per month and will grow as
necessary. All things considered, the business will require an estimated $61,000 for operation
expenses for the first year. This liberally estimates rent expenses, accounting fees, utilities,
permits and inspections, office supplies, maintenance, shipping fees, and insurance. These
operating expenses will be used to grow the business and the budgets will increase with growth.


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The company will need $60,000 in cash for initial financing. The money will come from
personal savings of the partners – no outside investors will be required. The company currently
has $15,000 invested; money invested by Alecia Irgens, CEO.




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                                               6
Business Plan



                           MANAGEMENT AND ORGANIZATION

Management Team

Alecia Irgens will be the CEO of The Ridiculous Cupcake. As CEO she will be responsible for
overseeing the business as a whole. She will implement the strategic goals and objectives of the
business. She will enable the Board to fulfill its governance function; she will also give direction
and leadership toward the achievement of the organization's philosophy, mission, strategy, and
its annual goals and objectives. Alecia will make sure daily processes are running smoothly and
will be in charge of smoothing out any rough areas of the business and problems that arise.
Alecia will also be the pastry chef. Alecia graduated from St. Olaf with a Management
Concentration and has held multiple leadership positions throughout her lifetime from being the
director of a One-Act play to being one of five people in charge of planning and implementing
Women Venture’s 2010 Fall Leadership event with over 1,000 guests. By 2013, Alecia will have
had two internships at two different bakeries and will have finished culinary school.

Nicholas Branjord will be the CFO of The Ridiculous Cupcake. As CFO he will be responsible
directing the business’s finances. He will be responsible for keeping and maintaining the
business’s records on how money is received and how it is spent (inflow and outflow of cash).
He will also create reports about spending, balance the budget, and supervise payroll. Nick has
sufficient skills with accounting software, and has worked in the food industry for two years.

Genette Sekse will be the Head of Marketing and Public Relations. As the Head of Marketing
she will be responsible planning and executing The Ridiculous Cupcake’s marketing plans. This
role includes: project management and the testing of new products, providing strategic direction
and directing outside agencies and consultants to accomplish tasks and manage expenditures
within an approved budget. As the Head of Public Relations, Genette will develop and
implements the overall strategic public relations programs, which include media relations,
community relations and internal communications. Genette has taken Marketing at St. Olaf and
has worked in the food service industry for six years.


Compensation and Ownership

The Ridiculous Cupcake is a privately held corporation. It is registered as a state LLC
Corporation, with equal ownership shared by Alecia Irgens, Nick Branjord and Genette Sekse.




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Business Plan



Board of Directors/Advisory Council

The Board of Directors will consist of 6 individuals:

   •   Michael Erpelding (Wealth Management Advisor, Northwestern Mutual)
   •   Timothy Bohannon (Managing Partner, Northwestern Mutual)
   •   Linda Lange (Chief Officer, Northwestern Mutual)
   •   Scott Behmer (Independent Contractor, Event Planning)
   •   Christopher Watkins ( Managing Director, UBS)
   •   Danyelle Solomon (Senior Legislative Senator Counsel, Maryland)

Infrastructure

Key outside advisors are as follows:

   •   Theodore Irgens (Corporate Attorney at Wells Fargo)
   •   Timothy Johnson (Attorney, CPA)
   •   Benjamin Wheeler (Investment Advisor, CFP)
   •   Alexander Solomon (Account Executive, Venture Bank)
   •   John Fritz (Senior VP Loan Officer, Venture Bank)
   •   Michael Zynk (CEO/President, Venture Bank)

Legal advisors of the Ridiculous Cupcake have legal fees that will be waived until the 2nd year of
business establishment date. The attorney’s are family/friends of owners and agreed to give
advice per pro-bono the first year.

 Financial advisors will be compensated at the end of 3rd year when projected profitability
occurs. Written contracts for each advisor will be drawn and rates will be negotiated on an
individual bases.


Contracts and Franchise Agreements
The Ridiculous Cupcake will have numerous written contracts, composed by their corporate
attorney, Ted Irgens that are legally binding and will protect them from misunderstandings and
error.

   •   Leasing agreement
   •   Partnership Agreement
   •   Contract for purchase of equipment (UCC security)
   •   Contracts with line of credit with Venture Bank
   •   Ongoing contracts with suppliers


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Business Plan



   •   *Custom Orders of $500 or more
   •   Proprietary Rights Agreement

*Please see supporting documents for an example of a wedding cake contract agreement

Insurance

A buy-sell agreement will be established through Northwestern Mutual. Each owner will have a
1-million dollar policy that will be payable upon death of key personnel to the irrevocable
beneficiary (The Ridiculous Cupcake).


   •   DOE (Disability Overhead Insurance)
   •   Property Insurance (Equipment)
   •   Workers Compensation
   •   Disability Insurance (Short Term, 60 day)

Employee Stock Option Plan and Other Incentives

The Ridiculous Cupcake will be a privately owned, non-publically traded company with no stock
holders. However, full-time employees will have an option to take part in a SEP-IRA plan.
Employees will also have the option to take part in an HSA (Health Savings Account) and/or a
Health Insurance plan.

Organization Charts (Years 1-3)




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Business Plan



                                    PRODUCT/SERVICE

Purpose of the Product/Service

The Ridiculous Cupcake offers a wide variety of cupcakes and custom cakes, many of which are
lactose and/or gluten free. The product directly benefits the customer by giving those with food
allergies a place to indulge in a quality organic dessert without having to sacrifice taste. The
company offers a luxury item, but without such a business, those with food allergies have no
other options for baked goods.

Unique Features

All of The Ridiculous Cupcake’s desserts are made with organic ingredients, bought locally.
Each is uniquely designed as the customer wishes, when the customer orders it, so it is always
fresh. Furthermore, the customer will have the option of customizing bulk orders online before
going to the store. There are no cupcakes sitting in a case, drying out as the day goes by like
other competitors.

When a customer walks into The Ridiculous Cupcake they are not only going to pay for a
cupcake, but also an experience great for people of all ages. The customer will choose which
type of cupcake they would like, and which type of frosting they would like, and then a worker
will “finish” it right before their very eyes! They can also choose to add toppings if they want.

Future Research and Development

The Ridiculous Cupcake will need to research the most effective beverages and cupcakes and
expand the menu accordingly. Also, the inventory of given flavors will need to be determined
according to demand.

Trademarks, Patents, Copyrights, Licenses, Royalties

The company will need to obtain a trademark for the name, “The Ridiculous Cupcake”. A
domain name for the company has already been obtained: www.theridiculouscupcake.com.

Product/Service Limitations

The company will not be able to deliver any of the products; it will operate as a pick up only
location. Also, since it is a boutique small business, it will not be able to obtain an economy of
scale advantage and prices will have to be slightly higher than chain cafés and restaurants.




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Business Plan



Product/Service Liability

Liabilities at The Ridiculous Cupcake include but are not limited to the following:

   •   Dissatisfaction with products and/or services
   •   Slipping on a wet-floor
   •   Burns from hot coffee
   •   Injury in the play-room
   •   A fire could occur in the kitchen
   •   An accident during the transport of delivery
   •   Food poisoning

Related Products/Services and Spin-Offs

New organic products will be developed according to the consumer’s demand. Currently,
organic and gluten free brownies are being developed as a spin-off from the vegan cupcakes.
Also, elaborate custom wedding cakes will be available to order before the start date of the
venture.

Production

All of the production for the goods and services offered will be done internally. The staff will be
responsible for making all of the desserts and beverages. The company will subcontract out the
accounting services – a service with an estimated cost of $400 per month. Also, the company
will seek to hire third-party contractors (wedding and party planners) in an attempt to increase
bulk orders and parties catered. Such a service carries a projected budget of 5% commission per
order.

Facilities

The company will occupy a leased location in the business district of Linden Hills.The leased
building serve as the single facility and have the capabilities for production and retail, and also
have room for a single office. As the company grows, a second building may be purchased and
it too will be responsible for its own production, retail, and offices.

Suppliers

Bulk and bagged Organic KAMUT® khorasan wheat (grain and flour)

Montana Flour & Grains
2500 Chouteau Street


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Business Plan



P.O. Box 517
Fort Benton, MT 59442

info@montanaflour.com, www.montanaflour.com
Phone: 1-406-622-5436

Bulk and bagged organic sugar, from Wholesome Sugar

Wholesome Sugar
8016 Highway 90-A
Sugar Land, TX 77478

Phone: 1-800-680-1896
CS@OrganicSugars.bix

Environmental Factors

The Ridiculous Cupcake will focus on green and eco-friendly packaging. There will be in-store
recycling bins and the business will only buy from organic suppliers that grow their products
locally.




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Business Plan



                                    MARKETING PLAN

Industry Profile
Current Size

US sales of organic food and beverages have grown from $ 1 Billion in 1990 to $24.8 billion in
2009. $!"#$+,$-#()./0#1/$'2$34.56&7/&.#$(.'8#6/9$/")/$/"#$47&/#1:2.##$51%&9/.5#9$.#;#1&#9$
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Growth Potential

The “organic” food industry has grown dramatically in recent years due to an increased social
movement to eat healthier in order to live healthier.
      • The Hartman Group reports that 73% of the US. Population consumes organic food or
          beverages at least occasionally.2
      • USDA Economic Research Service reports that organic food sales have grown 17-
          20% in the last few years while conventional food sales have only grown 2-3%. 3
      • Over five years, the gluten free demand market has grown 230%.
      • It is predicted that the average consumer household in 2025 will contain at least one,
          if not many, organic products on a regular basis.
      • Younger shoppers will continue to find organic food of interest, especially as Gen
          “X” continue to pass down their belief systems.
      • Ethnic shoppers including Asian Americans and Hispanic Americans will also
          continue to be more likely to be organic shoppers4

Geographic Locations

The Ridiculous Cupcake will be located in Linden Hills, nestled between the South shores of Lake
Calhoun and the West side of Lake Harriet in Southwest Minneapolis. Linden Hills is a
neighborhood unique unto its self. Often referred to as "a small town in the City" Linden Hills
represents the ideal in urban living. This is a community that offers interesting boutique shops,
unique restaurants and a variety of parks with tennis courts, playgrounds and picnic areas. Lake
Harriet and Lake Calhoun are an easy walk from the (downtown) shopping district at 43rd &



1
  http://ezinearticles.com/?The-Greatest-US-Recession-Proof-Industry-is-the-Gluten-Free-
Market---Growing-at-37%-In-the-Last-Year&id=2502241
2
  www.hartman-group.com/hartbeat/who-buying-organic-demographics-2006
3
   www.ers.usda.gov/publications/aib777
4
  www.hartman-group.com/hartbeat/who-buying-organic-demographics-2006

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Business Plan



Upton.5




Industry Trends

In the latest edition of 2010 IBIE Magazine an analysis of the bakery industry highlights the
biggest and largest upcoming trends of the industry and what consumers are demanding. The
following list shows the major areas:

    •   Nutritious
    •   Natural/Organic
    •   Gluten Free
    •   Whole grain /Multi grain
    •   Green packaging
    •   Ethical business practices

The article also stated that companies who promote products on these lines will see increases in
sales.6

Seasonality Factors


5
  www.linden-hills.com
6
 http://webcache.googleusercontent.com/search?q=cache:KTHcGyWAv_IJ:https://www.aibonlin
e.org/resources/statistics/cake.html+cupcake+industry+growth&cd=3&hl=en&ct=clnk&gl=us&c
lient=safari

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Business Plan



The Ridiculous Cupcake is going to be affected by several seasons. Busy seasons will include:

   •   Graduation Season
   •   Summer Season
   •   Holiday Season
   •   Wedding Season

There will be a decrease in foot traffic during the winter months, resulting in a decrease in gross
sales, and an increase in the listed seasons resulting in higher gross sales.

Basis of Competition

There will not be any direct competition in Linden Hills. However, there are four café
establishments in Linden Hills that offer coffee and espresso: “Coffee and Tea”, “Café Twenty
Eight”, “Zumbro Café” and “Dunn Bros Coffee”. None of these café’s offer gluten free and/or
lactose free baked goods.

 Sebastian Joe’s Ice Cream is a potential competitor. They offer lactose free sorbet and gluten
free ice cream, however, they do not offer any baked goods.

Outside of Linden Hills in the Metropolitan area, there are four cupcake shops that will be
considered competitors: “The Sweet Retreat”, “Cake Eater Bakery”, “Cupcake” and “Sweets
Bakeshop”. None of these cupcake shops offer organic, gluten free and/or lactose free cupcakes.

Competition Profile

The Ridiculous Cupcake has a competitive advantage by being a first-mover into a unique gap in
the market. It offers not only lactose free and gluten free organic cupcakes, but also a “create
your own” experience. Customers will be able to customize their own gourmet cupcake and
watch it be “finished” by a Ridiculous Cupcake employee. There will also be a child-friendly
atmosphere with a play room, party room and a consistent accommodating and energetic staff.

Target Market Profile

The Ridiculous Cupcake target market is affluent women aged 28-45 with kids. Results from the
Voice of the Costumer Report, show that women are the most likely to visit a bakery and spend
the most money.

It is estimated that women control about $5 trillion in U.S. business and consumer spending, this
is over half of the U.S. GDP. It has been widely noted that women influence 85% of all
consumer spending and 93% when it comes to food in the United States. Additionally, middle-


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Business Plan



aged affluent women are most likely to be in the parenting stage of life: 45% have children under
18.7

22% of affluent women shop online at least once a day, and therefore The Ridiculous Cupcake
will offer products online. 92% pass along information about deals or finds to others, and are
most likely the people to spread a positive reputation about The Ridiculous Cupcake. Nearly
50% of women say they want more green choices. 37% are more likely to pay attention to brands
that are committed to environmental causes.8

Pricing Profile

High quality and creative cupcakes are extremely popular in the U.S. Individuals and companies
are willing to pay a premium for organic, quality desserts that add a special element to any party
or event. Therefore, pricing structure will not have as high of a value on costumers’ buying
points.

Prices:

Cupcakes
   • 1 cupcake $3.00
   • 1 dozen $33.00
   • 8 dozen+ (10% discount)

Ridiculous Cupcake $32.00

Custom Cakes
   • Birthday Cakes $32.00-$100.00
   • Wedding Cakes $500-$1,000
   • Anniversary Cakes $32.00-$200
   • Graduation Cakes $100-$300

Beverages
   • Organic Milk $2.25
   • Organic Chocolate Milk $2.25
   • Organic Herbal Teas $2.25
   • Soft Drinks (Pepsi Products) $2.00
   • Organic Smoothies $4.50

7
    http://she-conomy.com/report/facts-on-women/
8
    http://she-conomy.com/report/facts-on-women/


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   •   Fair Trade Organic Coffee $1.60-$2.00
   •   Espresso Shot $1.60
   •   Latte $3.00
   •   Cappuccino $3.00
   •   Macchiato $2.50
   •   Mocha $3.30


Gross Margin on Products/Services

The gross margin for The Ridiculous Cupcake in the first year is 40%. The gross margin for
second and third years is 50%.

Break-Even Analysis
The break-even point for the company is in the second month of the third year. The company
will be profitable each month after the start up date, however it will take two full years for the
company to have positive cash on hand.

Market Penetration

Distribution Channels

In-store
        •   The Ridiculous Cupcake will be located in Linden Hills.
Internet
        •  In today’s world, with online shopping markets such as Amazon and Ebay, it is
           important for companies to keep up with online shopping trends. The Ridiculous
           Cupcake will have a section of their website dedicated specifically to shopping,
           where consumers can place orders for customized cupcakes. Online customization is
           a trend that has grown significantly in the past decade and is another way that The
           Ridiculous Cupcake can make a profit. It is important for The Ridiculous Cupcake to
           appeal to busy women who do not have time to call in an order at the store.
Third party contractors
       • The Ridiculous Cupcake will work with third party contractors such as wedding
           planers and event planners to receive large orders and guaranteed sales with no left
           over inventory.




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Business Plan



Advertising and Promotion

Social Media
   • In today’s technology-driven world, social media has become a strong resource for
       information about various organizations and companies. Many people get their daily
       news and information from social media sites such as Facebook and Twitter, which make
       having a social media page imperative. The Ridiculous Cupcake is in the process of
       creating a Facebook page where they can promote their store and products. The
       Ridiculous Cupcake also is planning on extending their social media promotion to
       Twitter, where they will post feeds that are similar to those that they post on Facebook.
   • Many other companies have found ways to promote themselves on YouTube. The
       Ridiculous Cupcake will also extend themselves to YouTube by making videos that raise
       awareness and promote their product while teaching watchers and potential costumers
       different decorating techniques.



Word of mouth
   • Though word of mouth may be one of the oldest forms of advertising, it is also one of the
       most effective. Consumers constantly seek advice and recommendations about products
       from their friends and families.
Website
   • The Ridiculous Cupcake is in the process of creating a strong website. The website will
       go live on shop’s launch date of May 15th, 2013. The site will be for branding,
       stimulating interest of the business, and informational purposes. Once the shop opens,
       costumers will be able to access the product menu options for their orders.
           o Initial Features of the website will include:
                   ! About us – Mission, History, Founders and Contact Info.
                   ! How to order – Clear process and what customer can expect for the order
                       process
                   ! Products & Menu – Photos and descriptions of cupcakes and various
                       custom cakes
                   ! Catering – Pictures and examples of catering weddings, birthdays,
                       graduation etc.
                   ! Community info and events – Details of any event we are involved in and
                       any events we’re hosting in Linden Hills
Blogging
   • According to a recent study by BlogHer and Compass Partners, more than one-third
       (35%) of all women in the U.S. aged 18 to 75 participate in the blogosphere at least once
       a week. And that number increases if less-frequent visits are factored in. Of those women
       who are online any amount of time, 53% read blogs, 37% post comments to blogs and


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Business Plan



         28% write or update blogs, according to the study. The Ridiculous Cupcake will have a
         blog that customers can access through www.theridiculouscupcake.com. Included in the
         blog will be updates about new products, some recipes, trends in the cupcake industry,
         events The Ridiculous Cupcake are participating in, and “behind the scenes” at the
         bakery. With the blog, costumers will get to know the store more personally and also get
         to know the staff.9

Packaging and Labeling

Businesses that don’t take advantage of the many alternatives for greener packaging supplies and
environmentally friendly products stand to lose their market share to environment friendly
businesses that create the new generation of eco friendly alternatives and solutions.10 Therefore,
The Ridiculous Cupcake will get their entire packing and labeling inventory through Globe
Guard. Globe Guard products are carefully selected and represented as the most eco friendly
product options available. They also have the best price. They are one of the most trusted and
respected sources for green corrugated and sustainable packaging materials in the U.S with 30
years of experience. One percent of all the packaging that The Ridiculous Cupcake purchases
will be donated to “For the Planet”, an organization that brings together over 1,000 eco minded
businesses that contribute to its support of deserving, qualified environmental organizations.11

Trade Shows

There are several trade shows in the wedding and event planning industry that The Ridiculous
Cupcake will be a part of. These tradeshows are annually. Examples are as follows:

     •   Twin Cities Bridal Fair
     •   Minneapolis/St Paul Bridal Party
     •   Bridal Expo, MN
     •   Wedding Fair Exhibitors
     •   Event Planner and Supplier expo
     •   Monthly events in Linden Hills




9
  http://she-conomy.com/report/facts-on-women/
10
   http://www.naturalsourceprinting.com/green-packaging-supplies.html
11
   http://www.globeguardproducts.com/


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Business Plan



                         OPERATING AND CONTROL SYSTEMS

Administrative Policies, Procedures and Controls
Receiving Orders

The Ridiculous Cupcake will use a number of mediums to receive orders, such as: telephone, in-
store and online with a “build your own cupcake” feature. Any number of cupcakes can be
ordered through telephone and in-store, however, a minimum of one dozen customized cupcakes
can be placed online. Online order systems will be checked multiple times daily. Orders by
phone will be taken and written down on an order sheet and put in a specific folder for bakers to
tend too.

Billing the Customers

In store customers will pay at the time of purchase through the point of sales systems. Orders
placed through The Ridiculous Cupcake’s website will be paid for online via debit/credit cards.

Custom cakes will require a $50.00 deposit. A 50F$down payment is expected 2 months prior to
the wedding date. Due to RSVP’s and final guest counts –full payment must not be made prior to
the 2nd month’s date.$ Total contract price is due 2 weeks prior to the wedding date. The cake
will not be made if final payment has not been recieved.

Paying the Suppliers

Suppliers will be paid strictly based upon individual contract agreements. All payments will be
made with a specific company credit card with an established line of credit at Venture Bank.

Reporting to Management

The first years of business will include Alecia, Nick and Genette reporting daily updates to each
other and writing them down. Once employees are hired, they will be assigned which
management member to report to, depending on the task. Failure to report daily updates will
require immediate action of suspension or questioning.

Staff Development

Staff Development will take place over a one to two week period, depending on the employee’s
position in the company. Administration will deliver hand held policy books stating the nature of
the work environment, expectations, consequences, safety precautions and etc. When training
and working on development of staff, management will be constantly trying to promote integrity,
candor, trust, pride and energy.


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Business Plan




Inventory Control

Inventory will be hand-counted and recorded at the end of each day. Shortage of inventory will
include checking security cameras and face-to-face meetings with all employees who were
present. Immediate action will be taken to address dishonesty in the workplace.

Monitoring the Company Budgets

Nick Branjord, CFO, will be in charge of all budgeting and control procedures. He will perform
monthly audits on all transactions (in and out). Also, the accounting services will be outsourced
and a professional accountant will be responsible for financial statements at year-end. This will
ensure that the business is legitimate, and taxes are done according to federal and state laws.

Security Systems

There will be security cameras throughout The Ridiculous Cupcake as documentation in case
any injuries occur or inventory or cash goes missing. A fire-safety procedure will be
implemented and practiced every six months.

Planning Chart
Product/Service Development

The Ridiculous Cupcake will be ready to start providing products and services on its opening
date, May 15, 2013.

Manufacturing

Every morning, new cupcakes will be made daily to ensure that they are always fresh for the
customers. Cupcakes will also be made twice during the day until 2 pm.

Financial Requirements

All finances will need to be accumulated 6 months prior to the opening date. The venture will
require $60,000 up front for all start up costs. Each ensuing month, approximately $14,000 will
be required to purchase all inventory and ingredients.

Marketing Flow Chart

Advertising will begin by word of mouth, and it has already begun. The website will go “live”,
accepting online orders and payments the day of the store-opening.


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Business Plan




Management and Infrastructure

Additional employees will be hired when it is necessary and Alecia, Nick and Genette can no
longer manage The Ridiculous Cupcake effectively on their own. As the company grows, a
management team will be hired and trained to operate a separate location.

Risk Analysis

Risks include:
   • Waiting too long to enter the market
   • Cupcake “trend” dissipates
   • Not acquiring enough revenue to cover expenditures
   • Running out of funding and needing to find outside investors


Salvaging Assets
The equipment acquired for the start-up will be able to be sold for a slight loss depending on the
length of the venture’s life. However, such commercial bakery equipment does not depreciate
very quickly and monetary losses will be minimal.




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Business Plan



                                        GROWTH PLAN

New Offerings to Market
If the venture becomes successful and the initial offerings and distribution centers are no longer
adequate to meet consumer demands, the company will look to acquire a new location. This new
store has yet to determine a specific location, and revenues cannot be forecasted until the first
store opens for business. The new location will offer all of the same products and services.

Capital Requirements

Capital for future growth will be gained over time, as the business develops and becomes more
profitable. The financial requirements for pursuing new store locations will be fulfilled through
The Ridiculous Cupcake’s success.


Personnel Requirements

All personnel and employees will be needed to support the projected growth plan. There will be
individual goals for each employee to meet daily—and rewards if those goals are reached.

Exit Strategy

A practical exit plan will be in place to validate the business idea and keep the partners satisfied.
If the business becomes very successful, but no longer interesting or enjoyable, the owners will
exit and pursue other opportunities. If it becomes evident that the future does not hold the same
potential for similar success, the company will become available to interested parties. In the
event of an exit, the company will go to the highest bidder and the original partners will have no
further affiliation with The Ridiculous Cupcake.




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Business Plan




                                      FINANCIAL PLAN

Sales Projections

In the first year, The Ridiculous Cupcake projects to sell an estimated 200 cupcakes per day, at
three dollars per cupcake. The business will be open six days a week totaling in $3,600 of
revenue per week and $18,000 per month as a base estimation. It is projected that the business
will see a seasonal spike during the wedding season in the months of June, July, and august, then
again during the holiday season of November and December. An increase to 250 cupcakes per
day will lead to an estimated $22,500 in total revenue for listed months. These estimations have
been derived from other cupcake business sales numbers such as The Sweet Retreat in
Minneapolis, Cake Eater Bakery in Minneapolis, and Cupcake in Edina. Data from
informational interviews of these business states they all roughly sell 300 cupcakes per day as a
base level, so the sales estimations of the first year for The Ridiculous Cupcake are conservative
and reasonable.

The second year estimations are similar to the first year projections with a slight increase in
revenue but not markedly. The third year the company will be well known and estimates to sell
300 cupcakes per day similar to its competitors. The projections for cupcake sales are reasonable
because the other companies in the industry have reliable financial figures for the last several
years.

In the first year of the custom cake division of the business the company estimates to sell an
average of one custom cake per day. The company will offer a 10-inch custom cake that serves
24 people and will cost $50 to $100 per cake. This will add approximately $2,500 of sales
revenue per month. This is also a conservative estimate because the previously mentioned
companies in the industry have an average of $5,000 per month in revenue from custom cakes.

The custom cake division will grow considerably in the second and third years as the customer
base increases and more third-party contractors are obtained. The company will see a 25%
increase in sales of custom cakes for the second and third years bringing sales revenue up to
$3,100 per month for the second year and $4,000 per month for the third year.

The company estimates that in the first year an average of 250 customers per day and projects
that half of those customers will purchase a beverage with their order. The average drink cost’s
$2.50 generating projected sales revenue of $9,000 per month for beverages. The company
estimates that this number will increase at a rate of 5% per year as foot traffic increases bring
projected sales revenue up to $9,500 per month in the second year and $10,000 per month in the
third year.



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Business Plan



The three main divisions of The Ridiculous Cupcake comprise an estimated $330,800 of net
sales for the first year, $340,700 for the second year, and $364,700 for the third year. These
projections are based on actual figures from other cupcake businesses in the Twin Cites with
similar concepts. Therefore, the figures are reasonable and realistic.

Income Projections

The Ridiculous Cupcake has an estimated gross income projection of $132,320 for the first year,
and a net income of $36,301. The estimated net income for the second year is $61,891 and
$67,540 for the third year. The net income estimations for each year are taken after income taxes
of 30%. The company will be profitable in each year, but the break-even point is projected to be
in the second month of the third year. These estimations are based on the startup figures from
the previously mentioned companies.

Cash Requirements

The Ridiculous Cupcake will need estimated $60,000 cash for start-up all things considered:

     •   Commercial ovens (2) $20,000
     •   Commercial dishwasher - $5,000
     •   Ventilation system - $10,000
     •   Commercial mixer - $4,000
     •   Smaller mixers – $2,000
     •   Utensils – $2,000
     •   Furniture and fixtures - $5,000
     •   Point of sales system – $1,500
     •   Promotional advertising – $1,000
     •   Opening inventory – $4,000
     •   First month’s rent and deposit - $6,000.

Sources of Financing

The Ridiculous cupcake will be financed by personal capital. The partners of the company will
provide the cash needed for start-up, and avoid obtaining capital from outside investors to
maintain full ownership of the company. Operations and inventory will be paid for by a line of
credit through Venture Bank in St. Louis Park. The average interest rate for small business
credit cards through Venture Bank is 5.65%.




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Business Plan



FINANCIAL PLAN

Attached Financial Projections

•   Cash Flow for Three Years
•   Income Statement for Three Years
•   Balance Sheet for Three Years
•   Ratio Analysis




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Business Plan



SUPPORTING DOCUMENTS

   •   Financial Worksheets
   •   Historical Financial Statements
   •   Resumes of Key Personnel
   •   Legal Agreements
   •   Marketing Materials
   •   Insurance Documents
   •   Press Releases or Articles
   •   Market or Industry Studie




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