The multi-million pound business plan (sounds dramatic...)

My goal when starting this blog was to write down thoughts, feelings and experiences that I was desperately searching for when starting up Molzi. I would have paid a small fortune to be able to read the business plan of a similar business that grew to a multi-million valuation in 4 years. Thinking about it, maybe I should be charging you to read this. Hmm. Best read on quickly before I figure it out.

I didn't raise any funds to start my business. I also didn't need to hire anyone, or convince any doubters. Despite that fact, I would say that writing the business plan below was the most important thing I did within the whole journey. Mainly for the reason that it made me feel confident enough to bite the bullet and quit a well paid job to become a founder (another word for a low paid job!).

I'm going to share the original Molzi business plan with you, with a running commentary along the way. I wrote and re-wrote this paragraph about 20 times trying to make it sound more exciting. But alas, maybe business plans just aren't sexy. But if you have the time and desire, read on and I'll do my best!

Now, only 5 people ever read this business plan. My parents, my wife and my wife's parents. On that basis you may argue that it was a lot of work for such a small audience, but actually making sure your family are aligned with the journey you're about to set out on is far, far more important than any investors or early employees. Being a founder is the greatest job in the World (my opinion), but on paper it's technically the worst. Low/no pay, long hours, minimal security, constant highs and lows. Sharing a plan with your loved ones will mean that those expectations are firmly set from day one and avoid any awkward conversations down the line when your nice fat salary turns to dust.

The opening page of the business plan was the Molzi logo, that I lovingly created myself. I bloody loved this logo and still do, but failed to find many other people that did. Sad face.

Executive Summary

Molzi UK Ltd will launch in two stages in order to manage cash flow and grow the business organically. The initial business will be a sales agency, working with IT and consumer electronics manufacturers and distributors to sell their products successfully into the UK retail market.

The sales agency business will offer brands a low risk and low cost alternative to building their own sales teams in the UK. We will target companies that have recently launched products on crowdfunding websites such as Kickstarter and Indiegogo. These companies are mainly based outside of the UK and as start-up’s themselves, tend to focus their efforts and resources on product development rather than sales. We will give them a simple and quick route to sell their products in the UK.

As the sales agency business generates cash at good margin, it will allow us to launch the second stage of the company. We plan to capitalise on the enormous potential to sell own branded products, sourced from Asia, on the various retail marketplaces across Europe. We will seek out opportunities for product categories on these marketplaces that allow us to make high margin with low competition. The consumer electronics category on these marketplaces, for example, is saturated. However, categories such as baby clothes and accessories still has potential to sell good volumes of product at high margin.

Both the sales agency and marketplace businesses are incredibly scalable to ensure continued growth for the company. With the sales agency, we will add additional sales agents as the number of clients increases. There is also the opportunity to add agents in key European countries to be able to offer a full European service to our clients.

The marketplace business growth needs to be managed to protect cash flow as the lead time between paying for stock from Asia and selling the stock on the marketplaces can be up to 90 days. As the company grows, we will look to implement import finance to reduce the time the cash is out of the business. Initially we will launch on marketplaces around Europe such as Amazon, eBay, BOL.com and FNAC. In the future it is possible to expand this reach to Amazon in North America, India, China and Japan.

In order to keep personnel and set-up costs to a minimum, we will aim to streamline the business as much as possible. Warehousing and shipping will be handled by Amazon’s Fulfilled By Amazon service. We will take advantage of cloud based software and systems to allow us to add users and cost as the company grows.

Initially the business will be run solely by the founder Chris Mole, out of his home office. Chris has 15 years’ experience of selling brands of all sizes into global retailers. As the team grows, we will move to serviced office premises, and on to dedicated office space once it becomes a lower cost option.

We are forecasting a net profit of £481k by the end of year 4, with a net profit margin of 25%. We plan to raise £15k of start-up funding through a Start-Up Loan and do not anticipate cash flow issues. We have, however, made contingency plans to avoid issues if growth is quicker or slower than expected.

Business Details

Ownership Molzi UK Ltd is a privately held limited company owned entirely by its founder Chris Mole.

Chris has founded the company following a 15-year career in the IT and consumer electronics industry, predominantly setting up brands and managing retail

channels. In his current role as International Sales Manager for ION Audio, Chris has spotted the need for a UK based sales agency to assist new and existing brands sell their products into the UK retail channel without having to commit to an expensive sales team. This type of business is common place in the USA but not easily accessible in Europe. With the number of electronics brands launching and selling in the USA from websites such as Kickstarter and Indiegogo, there are more and more companies that will need this service.

During his time at ION Audio, Chris also witnessed the enormous growth of online retail marketplaces such as Amazon and eBay, and the potential to create brands that sell exclusively through these channels and a direct website. His experience of selling consumer electronics to these channels demonstrates the volume potential, but the margin opportunities are much higher in other product categories.

During his career to date, Chris has experienced starting up and building a new consumer electronics brand, growing a mid-sized established electronics brand and managing the largest accounts for a global blue chip brand. This experience of three stages of a successful business is invaluable when starting this company. Start-Up Summary The initial start-up costs have been kept as low as possible by starting the company in the home office of Chris Mole. The main start-up cost will be travel, which is planned as £6,000 in year 1. This is an essential element of the business, both in terms of finding clients for the sales agency and sourcing products for the own brand marketplace business in year 2. Travel will be economy class and all efforts will be made to travel as economically as possible.

In year 1, Chris Mole will work for the business but not take a salary. The business will need some external funding to cover other start-up costs and cash flow throughout the first year. The aim is to raise the funding through a Start-Up Loan of £15,000, paid back over 4 years with a 6% interest rate.

It probably seems crazy that I wrote the above bits, effectively to myself. But weirdly even just writing about my career history, to myself, helped give me that confidence that I had the skills and experience to make the business work. Similarly, writing that the business would be highly profitable within 4 years made me believe it - because it was written down.

I tried to keep everything that was client-facing as simple as possible to understand.

Sales & Marketing Strategy

Sales Agency Business The first stage of Molzi UK’s growth will come from the sales agency business. This allows Chris to start up the company with minimal start-up costs and grow the cash balance ready to begin stage two.

In the USA it is common place for large and small brands to use sales agencies to manage their retail channels and open new customers. This allows companies to expand their sales team without having to commit to large sales offices and expensive teams. Remuneration is usually a combination of fixed monthly retainer and commission on developed sales.

In the UK there are a number of independent freelance sales agents operating but it’s very difficult to find them and engage them, even as a UK company. There is a big opportunity for a company that offers this service with a clear, competitive pricing model and detailed services list. We will be a professional sales agency, that, unlike the others in this sector, is quickly visible on Google search, making it very clear why brands should engage in business with us, how they can engage in business with us, and what it will cost them.

Pricing will be transparent and competitive. Brands will have the option of paying a £1,500 monthly service charge and 3.5% commission on sales. This will be based on a 3 month rolling contract. There will also be a no risk option, with no monthly service charge, but a 10% commission on sales. For a client expecting revenue of

over £23k per month, it will be more cost effective to opt for the monthly service charge and lower commission. However, the commission model allows us to still engage with newer brands who are having to manage their own cash flow.

Success for this business will be down to selling our own service, as well as the products of our clients. We will use various channels to find clients. These are detailed below.

Kickstarter & Indiegogo Projects There are now hundreds of companies started through these sites that are focusing on product innovation and development rather than growing international sales. Most of these companies are based outside the UK and will be looking for a quick and simple way of growing their sales in Europe.

International Retailers Through a combination of viewing retailers online and visiting stores while travelling, we will identify potential clients selling in international markets that are not available currently in the UK.

Trade Shows While visiting trade shows to source products and gain insights into market trends, we will also find and contact potential client brands and explain our service offering.

Recruitment Consultants Traditionally, recruitment consultants are focused on finding permanent employees for their clients, but I will speak to some key recruiters in the consumer electronics sector to see if they will promote our service to brands that need a short term solution while waiting to find their permanent employee.

There is a huge growth potential for this business in the future. As more brands engage with us we can expand within the UK by adding additional sales agents. Further growth is possible by adding sales agents in other European markets to give clients much wider reach and increase Molzi UK commissions earned.

Marketplace Business This business takes advantage of the various online marketplaces across Europe that allow us to list a product, set the pricing and sell. The marketplace will take a commission and processing fee, usually between 7% and 20%. These commissions are far lower than the required discounts to sell to traditional retailers.

The goal for the marketplace business is to start bringing in our own branded products from Asia, which offer a high margin opportunity for our company. This will allow us to grow the marketplace business relatively quickly as the high margin reduces the negative impact on cash flow. Gross margin target is between 70% and 80%.

We will seek opportunities on the marketplaces for categories that offer high margin, low competition and strong demand. The first category that we have identified is the baby category, including clothing and accessories. We have started market research of this category starting in October 2016 in order to see the sell through opportunity during a normal sales period and also during the crucial Christmas period.

Our strategy to win on Amazon is actually quite simple, but being ignored by many brands on Amazon, whether they are small or blue chip. It is essential that the content on the Amazon page is perfect. Great lifestyle imagery, videos and product description. We will also use an Amazon review club to ensure that products launch on Amazon with multiple reviews, which again is essential to sales. Marketing spend will be focused on SEO (Search Engine Optimisation) and PPC (Pay Per Click) within Google, Facebook, Twitter and Amazon itself to quickly raise awareness of our products and brand. With PPC we only pay when a customer clicks through to our website or Amazon page, giving us high control of our marketing targeting and costs.

When we decide to launch an own brand product range in a category, this will be done under an additional new brand, with no mention of Molzi UK.

Alongside the marketplace channel for the own brand products, we will sell on our own direct site for each brand. This reduces our cost of sale as it removes the marketplace commission and therefore allows us to invest more in PPC.

There is massive growth potential for the future in this business. Adding new products and product categories where there is demand. Again we need to be wary of cash flow and not try to grow the product range too quickly.

Initially we will focus on marketplaces within Europe, but there is enormous opportunity to expand the range relatively easily to Amazon marketplaces in North America, Japan, China and India.

Even though I knew what Molzi would do and that I thought it could be successful, the process of having to write down every element forced me to pre-plan a lot of details and get them done before the business launched. Plus, writing down all of the areas that I could potentially find clients gave me further confidence that I would be able to sign enough to get the business going.

Now hold on tight, you're entering the boring section... operations.

Operations

Logistics For the marketplace business, warehousing facilities will be required to receive stock from suppliers and ship to end users. To avoid the high set-up costs and personnel requirement of our own warehouse, we will be using the FBA (Fulfilment By Amazon) service to hold all of our stocks and ship all of our orders, even if it is to a non-Amazon end customer. If a customer does buy from Amazon, they will be able to take advantage of free next day delivery if they are an Amazon Prime subscriber. This has a significant effect on sell through on Amazon marketplace.

The costs involve a small storage fee and a freight cost to ship the goods. Because of the scale of Amazon’s overall shipping operation, the freight costs are significantly cheaper than we could get direct from a local courier firm.

By using the FBA service, we can scale our warehouse space and unit shipments up and down as the business demands.

Once our stock is in Amazon’s UK warehouse, they can also ship stock to customers of marketplaces in Germany, France, Italy and Spain for a small additional cost that we can build into the Euro pricing.

Orders and returns are managed by Amazon, reducing the requirement for our own administration personnel.

Premises During the set-up period of the business, the plan is to run the company from the home of Chris Mole, to keep costs minimal and the business flexible.

As we take on our first clients and start to recruit additional team members, it will be essential to move into office space that allows us to grow as quickly as we need to. Because we will also need high quality internet access and other key business functions, we aim to take a serviced office which offers an all-in-one cost for rent, utilities, internet and reception services. Although this is an expensive option, it allows us to focus our efforts on sales and growing the business.

In year 3 once the business is established and the cost of the serviced office is equal to the cost of taking on our own suitable premises we will make the move to avoid costs increasing further.

Company Systems In the initial stages of the business, we will sign up to various services that charge monthly for vital company systems rather than large upfront costs. This will protect early stage cash flow and mean we can scale up the services as we need to. By using the right systems, we can ensure the company is efficient as possible.

SageOne Sage One is a cloud based solution from Sage that offers a full accounting and payroll solution for a small monthly fee. This system will manage invoicing, banking, cash flow, tax, VAT and payroll.

Shopify For our own brand products, it is essential that we have a strong web presence that allows customers to purchase directly whether using a computer or mobile device. To avoid large upfront investment, we will use the Shopify service that allows us to set up a fast, attractive website ourselves. The Shopify service will also handle all credit card processing and customer management for a small monthly fee and small commission on each sale.

AMZTracker This service allows us to track sales numbers, rankings and keywords of any products on any of the Amazon country websites. This gives us priceless information when we are forecasting how much stock to buy and which product categories we should be entering. In addition to the sales tracking data, we can use this service to gain reviews for new products and improve our SEO to drive organic traffic to our pages. Although Molzi UK will launch in May 2017, we have started using this service in October 2016 to track various products across multiple categories to get an insight into sales numbers in Q4, Q1 and Q2.

Product Supply The own brand products will be sourced from overseas, mainly Asia. We should expect to have to make payments upfront at time of shipping from these suppliers and we have made the necessary calculations in our cash flow forecast. These products will be sourced during trade show visits and changes made to our specifications over email and Skype conversations.

Compliances For own brand products we will need to ensure that relevant compliances are met for specific products and categories. Rather than managing this in house, we will use an external agency such as Bureau Veritas to make sure all boxes have been ticked.

Travel Travel will be a significant cost but an essential aspect to the success of the company. As we approach clients for the sales agency business it will be necessary to meet with them whether it is in the UK or internationally. In addition, sourcing trips to Asia will need to commence in year 1 to ensure that own brand product is available to sell in year 2. Steps will be taken to ensure travel costs as kept at a minimum by booking early and combining meetings into the same trips.

WAKE UP! Don't worry, the operations bit is over. Oh, but's what's this coming next, the personnel and finance plan. This doesn't get any more exciting from here. But, due to the unsexiness (spell check doesn't think that's a real word) of all these bits, it would have been VERY easy for me to ignore them and not plan for them at all. Thank you business plan for keeping me on the straight and narrow.

Personnel Plan

Roles & Remuneration In year 1 Chris Mole will be the sole employee and will not take a salary, to allow cash in the business to be used towards its ongoing growth.

At the start of year 2 Chris will take an annual salary of £40k. As the number of sales agency clients increase during year 2 we will hire an additional sales agent and a further sales agent to take over from Chris. This will free up his time to focus on growing the other aspects of the business.

During year 2 we will add someone to manage the financial activities of the company such as invoicing, accounts, managing cash flow and payroll. It will also be necessary to add a sales administration role towards the end of year 2 to manage the increasing number of marketplace orders.

Throughout years 3 and 4 the company will add sales agents and administration roles as the growth requires.

The below chart details the expected payroll costs for the first 4 years, excluding commissions.

Recruitment is absolutely key to the growth of Molzi UK in the first 4 years. Whenever employing a person for a support or administrative role, the aim will be to hire someone that can become a manager for their department as the growth permits. It will be important for the culture of the company to employ from within where possible.

As a start-up we will not always be able to compete with other local employers on salary alone. Therefore, we must ensure that we sell the potential and the culture of the company to applicants, and detail the progression opportunities available for them.

Below are the average salaries that we have budgeted for in this plan.

Sales Agent To make sure we hire sales agents with the suitable ability and experience to make our service value for money, we will be targeting candidates who are currently in National Account Manager type roles for IT or consumer electronics vendors. We will offer a basic salary of £40,000 per year (maybe split as salary and car allowance) and also an uncapped commission scheme to allow their earning to grow in line with their success. The payable commission will be 50% of the commission earned by Molzi UK for each of their accounts.

Accounts / Administration We will pay our administration staff £24,000 per year. This is high for an administration role, but we are keen for these early employees to rapidly develop into management roles within their departments. This will reduce recruitment costs further down to line.

Company Culture Molzi UK’s company culture will be vital to its success. As a sales organisation we need a positive environment with happy employees. We must create an ‘anything is possible’ mentality with the full team and empower our employees to make decisions within their departments. Regular company events will help to create a bond in the early stages when the team is small.

By offering benefits that aren’t offered by similar companies we will be able to attract the people we need without having to compete only on salary. Even more important, employees will want to stay and develop within the company, therefore reducing costs associated with re-hiring and re-training.

Free healthy snacks will be provided throughout the day in the office, work start and finish times will be flexible to fit in with individual’s family life and emails will be switched off at weekends to ensure that employees recharge their batteries without distraction.

Financial Plan

It is very important that the growth of Molzi UK is organic to protect the cash flow. The sales agency business is cash positive, but the marketplace sales require stock to be purchased in advance of the payments being received for the sales. As a result, we must restrict the growth of the marketplace business in the early stages to avoid running out of cash. The alternative is to find additional funding or investment.

The financial plans have been based on the below.

Sales agency clients paying on 30 day terms.

Payments from sales on marketplaces being received within 10 days.

Stock for own brand sales on marketplaces being purchased with cash up front and being sold within 90 days.

There are options to expedite the growth of the marketplace business such as import finance or credit terms from own brand suppliers.

Projected Profit & Loss In our P&L we have budgeted for all anticipated costs, including an accrual for freight from supplier to FBA warehouse, marketing costs, product returns, marketplace commissions and processing costs.

Projected Cash Flow Molzi UK will be VAT registered from day one, so we have had to add VAT payments and receipts to the cash flow forecast.

Large start-up costs such as IT equipment and software will be purchased on a lease basis to reduce upfront investment required.

Contingency Planning We will monitor cash flow very closely as the business business grows slower than planned, we will delay the until the cash flow allows. In addition, we will update the personnel plan based on actual sales.

If realised margin for the marketplace products is lower than planned, we will restrict the growth and adjust the cash flow forecast.

So there it is, the original Molzi business plan. That turned an initial £15,000 investment into a lot more in just 4 years. It should be noted that the accuracy of the plan reduced quickly once the business launched. We ended up dropping the marketplace business altogether and pivoting to become an Amazon only agency. I don't see that as a failure of the business plan though, but more a success of actually running the business.

What you put into the initial business plan will likely only 50% come to life, but the important thing is that it will force you to think about all elements of your future business and spot any gaps, issues or opportunities. Something about writing in sentences rather than bullet points makes you really have to understand the subject matter.

So my advice (not that anyone asked) would be to take the time to create a business plan, even if you don't need to convince anyone or raise money. Because it will ensure that you are clear of the direction, the opportunity and make sure your loved ones are aligned.

Good luck and enjoy (apart form the operations, personnel and finance sections).