Jump to content

sample Business plan


gousto64

Recommended Posts

Fifth Underground Vodka

Business Plan

FifthUnderground.com

5thUnderground.com

Prepared By:

M. G. Shell

April 7, 2011

Revised 4/18/11

2

TABLE OF CONTENTS

TABLE OF CONTENTS ............................................................................................ 2

EXECUTIVE SUMMARY........................................................................ 3

INTRODUCTION...................................................................................................... 5

BUSINESS DESCRIPTION........................................................................................ 6

MANAGEMENT STRUCTURE................................................................................... 7

INDUSTRY ANALYSIS.............................................................................................. 7

EXHIBIT 1...................................................................................................... 7

EXHIBIT 2...................................................................................................... 8

EXHIBIT 3.................................................................................................... 10

VISION STATEMENT................................................................................ 10

MISSION STATEMENT........................................................................................... 10

BUSINESS OBJECTIVES..................................................................................... 11

BUSINESS OPERATIONS................................................................................ 12

MARKETING........................................................................................... 12

FINANCIAL INFORMATION................................................................. 14

SUMMARY ........................................................................................... 15

Revised 4/18/11

3

EXECUTIVE SUMMARY

The purpose of this business plan is to support a request for a $750,000

equity stake investment in exchange for 20% ownership in the start-up “5th

Underground Distillery, Inc.”. The business will be co-owned by Mark Shell and

Aliaksei Pustavoitau and will be located in the state of West Virginia1. The

owners will provide a minimum of $50,000 in equity during the 2 year startup

phase in addition to the development of processes and production methodologies

to produce the 5th Underground brand of vodka.

The business will operate as a “Craft Distiller” under the classification as a

Distillery that produces distilled alcohol products in the state of West Virginia1 for

distribution in the United States. The business also retains the rights to outsource

distillery operations through contract distillation arrangements. Under the

outsource model of operations, 5th Underground Distillery, Inc. will supply mash

product and processing knowledge to the contract distillery which will produce

the distilled products for testing, bottling, inventory and distribution by the 5th

Underground Distillery Bottling Operations.

The owners will retain 100% control over all intellectual property and trade

secrets associated with ingredients, production processes and distillation

methodologies associated with the distillation of all 5th Underground distilled

products. 5th Underground Distillery, Inc. will license the distillation process from

the owners who will operate as either a Sole Proprietorship or LLC.

1 5th Underground Distillery, Inc. has chosen West Virginia as the primary production location.

However, an alternate location may be selected based off of regulatory requirements, licensing

and tax laws. Additional location selections include but are not limited to Virgin Islands, Ohio,

Virginia, Kentucky, Canada, Belarus, Russia and Ukraine.

Revised 4/18/11

4

Significant investment is required during the first year of operation in order

to establish distillation capabilities, inventory management and product

distribution. Capital expenditures will exceed $500,000 and the expected net

income is a loss of $140,000. As a result cash and cash equivalents at the end of

the first year of operation are expected to decrease from $750,000 to under

$175,000. As sales increase to a projected 90,000 bottles per year by the fifth

year, sales are projected to exceed $2,500,000, net income is projected to

exceed $150,000 and we are projecting a dividend payment of $75,000 while

maintaining cash and cash equivalents of $375,000 or more.

Over our 10 year projected operating plan, 5th Underground Distillery, Inc.

expects to reach annual sales of $7,000,000 and a net income of $736,000.

Starting in year 5 of operations and continuing through year 10 we are projecting

paying out dividends of approximately $1,000,000, while increasing cash and

cash equivalents of over $1,900,000 and projected total assets of $2,292,254.

A capital investment of $750,000 will return a projected $850,000 in

dividends and $235,000 in retained earnings. Calculated projections have not

been made past the 10 year point, however based on projected net income we

anticipate paying a dividend of $150,000 per year thereafter.

5th Underground Distillery, Inc. has two primary vodka lines which include

a sugar based craft vodka which will be priced in the Premium2 vodka category

and a grain based craft vodka priced in the Ultra Premium2 vodka category. Our

Revised 4/18/11

5

product strategy is to produce both lines of vodka under the 5th Underground

Distillery, Inc. brand name labeling the products as 5th No. 1 (sugar based) and

5th No. 7 (grain based). These “Craft Distilled” products will be hand bottled and

inspected for quality prior to distribution through licensed alcohol distributors

across the United States.

The owners, Mark Shell and Aliaksei Pustavoitau have experience in

operations management, production operations, marketing, information

technologies, financial management, and the practice of medicine. Together they

possess education which includes a Doctor of Medicine, MBA and MS in

Information Systems. The products were developed and tested with process

refinement completed in the country of Belarus under the close supervision and

control of chemical engineer Pavel Shibeko over a 15 year period. The product

was test marketed in the Belarus region of Molodechno and received positive

acceptance ratings for flavor, tasting and quality.

INTRODUCTION

People often say that nothing draws us together more than alcohol. Sitting

down and having a drink with your friends will usually lead to merriment, laughter,

and an all-around good time. The same has been true for as long as alcoholic

beverages have been around. That’s why vodka has had some huge cultural

influences throughout its history. 5th Underground Distillery, Inc. wants to improve

upon this experience by providing premium and ultra premium vodka distilled to

produce a unique flavor and drinking experience that is talked about globally.

Revised 4/18/11

6

Russia is infamous for its vodka. Depending on who you ask, you may

hear that the drink was pioneered in that country. There is a long-standing

debate between historians over which country truly invented it. One thing is

definitely true of Russia though, and that is that vodka has become quite a

national icon. Vodka consumption in Russia is greater than any other country in

the world. Our distillation processes were designed and developed in Russia

based on distillation recipes dating from the 18th century, when distillation

techniques were perfected.

BUSINESS DESCRIPTION

5th Underground Distillery, Inc. will be a craft distiller of vodka with two primary vodka’s

which include a sugar based craft vodka which will be priced in the premium

range ($30-$40) and a grain based craft vodka priced in the ultra premium range

($50-$60). 5th Underground Vodka’s are differentiated from other vodka’s through

our mash enhancement processes, MultiStill™, and hand bottling processes. Our

MultiStill™ process is a proprietary process by which the vodka is distilled in

multiple stages to ensure purity and consistency of taste. 5th Underground

Distillery, Inc. will craft distill vodka which will be hand bottled and distributed

throughout the United States. 5th Underground Distillery, Inc. will operate one

distillery located in the state of West Virginia1 which will produce vodka for

distribution within the United States. Two products will be produced, which will

include “Premium” and “Ultra Premium” versions differentiated by the MultiStill™

process utilized, filtration processes utilized and the blending processes utilized.

Revised 4/18/11

7

During the first year of operation 5th Underground Distillery, Inc. will select

and purchase a site for the distillery location, obtain all permits and licensing for

distillery operation, construct and test the distillation equipment, refine distillation

operations and begin production of distilled and bottled products with a capacity

of 500 gallons per month. The company will produce up to 5000 gallons per year

of distilled and bottled products during the first two years of operation (the

introductory stage).

MANAGEMENT STRUCTURE

INDUSTRY ANALYSIS

Competition in the Vodka Distillation industry is immense with over 500 commercially

produced product brands and production in nearly every country. Competition includes well known

names such as Absolut, Alexi, Finlandia, Grey Goose, Pirat, Patron, Skyy, Smirnoff, Stolichnaya

and Tito’s with new products being introduced each year. The good news for Vodka is that

consumption remains strong and is growing against traditional distilled spirits such as Whiskey.

EXHIBIT 1

World map showing countries by alcohol consumption per capita.

President /

CEO

Mark G. Shell

Operations

Director

TBD

Managing Director

Aliaksei

Pustavoitau

Director Product

Engineering

Pavel Shibeko

Revised 4/18/11

8

EXHIBIT 2

This is a list of the top 50 countries by alcohol consumption measured in

liter’s of pure alcohol consumed per capita a given year, according to the most

recent data from the World Health Organization. Methodology used by the WHO

counted use by persons 15 years of age or older.

Rank Country Volume

1 Uganda 19.47

2 Luxembourg 17.54

3 Czech Republic 16.21

4 Ireland 14.45

5 Moldova 13.88

6 Hungary 11.92

7 France 13.54

8 Réunion 13.39

9 Bermuda 12.92

10 Germany 12.89

11 Croatia 12.66

12 Austria 12.58

13 Portugal 12.49

14 Slovakia 12.41

15 Lithuania 12.32

16 Spain 12.25

Revised 4/18/11

9

17 Denmark 11.93

18 United Kingdom 10.39

19 Switzerland 11.53

20 Cyprus 6.67

21 Saint Lucia 10.45

22 Belgium 10.06

23 Russia 10.58

24 Nigeria 10.04

25 Finland 10.43

26 Netherlands Antilles 9.94

27 Estonia 9.85

28 New Zealand 9.79

29 Netherlands 9.74

30 Romania 7.63

31 Latvia 9.31

32 Swaziland 9.51

33 Niue

34 Burundi 9.33

35 Greece 9.30

36 Bahamas 9.21

37 Australia 9.19

38 Dominica 9.19

39 Italy 9.14

40 Bosnia and Herzegovina 8.62

41 Venezuela 8.78

42 Poland 8.68

43 United States 8.51

44 Argentina 8.55

45 Thailand 8.47

46 Haiti 6.51

47 Canada 8.26

48 Belarus 8.12

49 Gabon 7.97

50 South Korea 7.71

Revised 4/18/11

10

EXHIBIT 3

Fifth Underground Distillery, Inc. will introduce the product for distribution and sales in the

state of Maryland and will continue promotion and growth of distribution throughout 40 states across

the 10 year period. Initial growth will be in the East Coast market, moving into the Mid West around

year 6 and into the Western states around year 8.

VISION STATEMENT

In three years, 5th Underground Distillery, Inc. will become a full scale distillery with a

production capacity of 10,000 gallons per year and product distribution throughout 9 states and an

established brand name that is recognized in the US consumer market.

MISSION STATEMENT

5th Underground Distillery, Inc.’s mission is to produce and distribute craft vodka’s in the US

market and to develop international production and distribution to grow business operations

annually to achieve production and distribution levels of 250,000 bottles per year.

5th Underground Distillery, Inc., makes the following commitments:

• To establish a brand name known for flavor and quality

Revised 4/18/11

11

• To produce and distribute high quality vodka

• To ensure the safety of all products

• To provide consumer products that are valued and respected by the purchasers

• To manage ingredients and maintain records of birth history for all products

• To provide financial growth opportunities for investors

• To reward employees, product developers and management for successful

product development and sales growth

BUSINESS OBJECTIVES

5th Underground Distillery, Inc. will achieve the following objectives by the end of its third year

of operations:

1. Annual gross revenue of $1,130,000

2. Net income of $15,589

3. Cash and cash equivalents of $241,079

4. Net cash flow increase of $92,732

Revised 4/18/11

12

BUSINESS OPERATIONS

The operation of 5th Underground Distillery, Inc. will be described using

the main functions of the business: marketing, competitive analysis, legal

structure, management expertise, support personnel, and financial information.

MARKETING

Fifth Underground is poised to take advantage of social networking media

such as MicroBlogging, Tweeting, Social Networking, Streaming Video and Viral

Marketing. Fifth Underground will produce a series of short films and full length

feature films to embed product placement within eContent movies in order to

build brand name recognition as a Vodka company with a Film problem. Fifth

Underground will maintain a strong web presence utilizing Web 2.0 technologies

and developing technologies to distribute product information, marketing

information and to encourage discussion chains to distribute information globally

in an effort to establish a brand name and create product recognition and

demand.

In addition to Web 2.0 marketing, we will employ traditional marketing

techniques such as print advertising, television advertisements, radio

advertisements and promotional events to create demand for our products. We

realize that marketing is a critical success factor in creating demand for our

products and expect to invest significant financial resources into marketing efforts

during our first five years of operations.

Revised 4/18/11

13

Price

5th Underground Distilleries, Inc. will produce and distribute premium and ultra premium

vodka for sale in the United States and internationally as demand for our product

increases. Our two primary vodka’s include a sugar based craft vodka which will be

priced in the premium range ($30-$40) and a grain based craft vodka priced in

the ultra premium range ($50-$60).

Sales Strategy

5th Underground Distilleries, Inc. will partner with liquor distributors in the

Baltimore – Washington metropolitan region such as Churchill Distributors LLC,

Charmer-Sunbelt group, The Bees Distributing Company, HTR Maryland

Wholesale, Winner Distributing Company and Harford Beverage Company to

effectively distribute our products to regional retail outlet stores. Distributors will

receive invitations to sampling and promotions events intended to create an

interest in our products and to drive sales through wide scale distribution.

Place

Our products will initially be sold in the Baltimore - Washington

metropolitan area through distributors and through large corporate retail stores

such as Total Wine & More. As sales of our products increases, we will continue

to develop relationships and partnerships with distributors along the East Coast

to increase our sales and distribution.

LEGAL STRUCTURE

5th Underground Distillery, Inc. will operate as a Corporation incorporated

in the state of West Virginia1.

Revised 4/18/11

14

FINANCIAL INFORMATION

Production and Sales Estimates

Projected Income

Projected Cash Flows

Revised 4/18/11

15

Projected Balance Sheet

SUMMARY

5th Underground Distillery, Inc. will be successful. This business plan has

documented that the establishment of 5th Underground Distillery, Inc. is feasible.

All of the critical factors such as industry trends, marketing analysis, business

operations, competitive analysis, management expertise, and financial analysis

support this conclusion.

We invite you to review our website at www.5thunderground.com

www.fifthunderground.com and www.wix.com/kasart/5th-underground where you

Revised 4/18/11

16

can find out about product development and product sampling and tasting in your

area.

Revised 4/18/11

17

Supporting

http://www.wvabca.co.../Mini Distiller

y%20Licensing%20Packet.pdf

http://www.legis.sta...t.cfm?billdoc=s

b234%20intr.htm&i=234&yr=2005&sesstype=RS&btype=bill

http://www.wvsos.com...docs/175-10.pdf

§60-4-3a. Special mini-distillery license to manufacture and sell.

(a) Sales of liquor- An operator of a mini-distillery may offer liquor for retail sale to

customers from the mini-distillery for consumption off premises only. Except for

free complimentary samples offered pursuant to section one, article six of this

chapter, customers are prohibited from consuming any liquor on the premises of

the mini-distillery.

( B) Retail sales- Every licensed mini-distillery shall comply with the provisions of

sections nine, eleven, thirteen, sixteen, seventeen, eighteen, nineteen, twentytwo,

twenty-three, twenty-four, twenty-five and twenty-six of article three-a of this

chapter, and the provisions of article three and four of this chapter applicable to

liquor retailers and distillers.

© Payment of taxes and fees- The mini-distillery shall pay all taxes and fees

required of licensed retailers and meet applicable licensing provisions as

Revised 4/18/11

18

required by this chapter and by rule of the Commissioner.

(d) Payments to market zone retailers- Each mini-distillery shall submit to the

Commissioner ten percent of the gross sales price or each retail liquor sale for

the value of all sales at the mini-distillery each month. This collection shall be

distributed by the Commissioner, at least quarterly, to each market zone retailer

located in the mini-distillery's market zone, proportionate to each market zone

retailer's annual gross prior years pre-tax value sales.

(e) Limitations on licensees - No mini-distillery may sell more than three

thousand gallons of product at the mini-distillery location the initial two years of

licensure. The mini-distillery may increase sales at the mini-distillery location by

two thousand gallons following the initial twenty-four month period of licensure,

and may increase sales at the mini-distillery location each subsequent twentyfour

month period by two thousand gallons, not to exceed ten thousand gallons a

year of total sales at the mini-distillery location. No licensed mini-distillery may

produce more than twenty thousand gallons per calendar year at the minidistillery

location. No more than one mini-distillery license may be issued to a

single person or entity

Link to comment
Share on other sites

That is one ridiculous business plan. 3.75 million valuation before start up. No wonder it didn't get anywhere. Maybe they are waiting for web 3.0 to do some 3D marketing videos.

Also, I read the website as 5 thunderground. Thunderground: Thor's Vodka of Champions

THUNDERGROUND

THUNDERGROUND

Link to comment
Share on other sites

Actually, the valuation may be very realistic, in accounting terms. Valuations are determined by financing AND projected sales. In a previous venture, our valuation was placed between 1.5 and 1.85 million based on $500k investment, and modest sales (roughly 600-1000 cases/yr).

I would question the 20% ownership interest for $750k, while the remaining 80% presumably goes to the folks investing only $50k. We were offer a higher % ownership for less money, putting in more cash ourselves and still had negligible interest. I hope you guys know folks with tons of free cash, because that is almost what you are asking for.

Todd

Link to comment
Share on other sites

  • 1 year later...

I would question the 20% ownership interest for $750k, while the remaining 80% presumably goes to the folks investing only $50k. We were offer a higher % ownership for less money, putting in more cash ourselves and still had negligible interest. I hope you guys know folks with tons of free cash, because that is almost what you are asking for.

Todd

:):unsure::wacko::blink::rolleyes: business aka "russian style" BU-GA-GA

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...