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Cosmetics Manufacturing Business Plan

Introduction
NC is a company that has created a brand concept consisting of skin cares utilizing multiple channels of distribution. We are seeking recurring investment to fund the growth of the brand. The plan that follows explains our customer benefits and our market segmentation strategy. The detailed financial plans provide a clear view of our sales and profit. These plans show how NC will reach profitability in our third year of operation.

Mission
To establish NC as an important brand that represents quality in skin care. We will accomplish this using high quality manufacturing and research, a creative marketing program, and a comprehensive distribution network using retail outlets. By utilizing this approach we will be able to reach the niche market for quality personal care products rapidly and efficiently. It will allow us to develop NC as the brand for quality skin and body care products within our target market. To establish NC as an important brand that represents quality in skin care products. We will accomplish this in the following ways: 1. High quality manufacturing and research. 2. A creative marketing and PR program. 3. Development of a wholesale distribution network by the third quarter of 2008. 4. The successful launch of a NC Web presence by the first quarter of 2009.

The history and Establishment of company:


NC Company is 100% owned by Mr. Hamayoun and Mr. Abdul Jabbar, the founders. Mr. Hamayoun is the president and owns 80% of the stock while Mr. Jabbar is the vice president for product development and owns 20% of the shares. The planned future distribution of ownership will allocate a percent of shares for early investors proportionate with their commitment. In addition, 10% of shares will be set aside for 1

employee stock options and awards the board will consist of seven members: Mr. Hamayoun, one additional member of management, three outside directors appointed by Mr. Hamayoun and two representatives appointed by the major investor(s). Together Mr.Hamayoun and Mr. Abdul Jabbar have 15 years worth of combined experience in the retail industry. They have held a senior management position with major companies in this area. NC is a multi-channel concept, combining a wholesale distribution network with a retail strategy. We are working with some of the best manufacturers to develop, and bring to market, high-quality products for skin and body care. Our skin care products are testing in our laboratory properly and there is no testing of products on animals.

The Market
NC will occupy a unique market position. NC will be positioned as a quality brand. The Pakistan cosmetics market has seen large annual growth rates over the past decade. Most major companies do not produce products focused specifically on the female customer. Customers benefits: Women have an active lifestyle. They are concerned about social and environmental issues. Mind and body wellness are important to them. They belong to a health club; take yoga. The effects of aging and the maintenance of a youthful appearance are a part of their life. There are a number of new demand trends that have impacted the market and created greater opportunities. These trends include a returning to age old, time proven, natural remedies; more consumers that are looking for more holistic and healing benefits from her skin care products, and today's consumer being more informed and more informed about the benefits of her personal care products. Females are also conscious about their beauty, so our product gives the all those benefits which they want.

Financial
In order to launch its unique product line NC requires an initial outlay. Sales at NC retail stores are planned to grow rapidly from Year 1 through Year 3. During this time frame our wholesale revenues are planned to grow enormously. NC will become profitable in our third year of operation. Initial growth will be financed by a combination of equity investment and debt financing. Objectives 1. Launch NC retail by the second quarter of Year 1. 2. Launch NC wholesale by the third quarter of Year 2. 3. Generate a return on equity by end of year end 2010. Keys to Success 1. Quality product. 2. Manpower. 3. Product logistics and quality control. . Start-up plan: Start-up costs are shown in two areas. The first is in the start-up table, second is in profit and loss statement. 1. Start-up expenses: legal (incorporation and trademark registration), stationery (business cards and office supplies), etc., brochures, consultants (graphic design for logo and packaging), Research and development (architecture fees for store and trade fixture design).

2. Start-up costs expressed in year one cash flow: Funding and expenditures for first NC retail store. 3. Start-up costs included within year one P&L: brand marketing, management staff, travel costs to coordinate product development. 3

Star-up Funding
Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required Assets: Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised Cash Balance on Starting Date Total Assets

Amount
160,500 149,500 310,000

9500 70000 0 70000 149,500

Liabilities and Capital


Liabilities: Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities (interest-free) Total Liabilities Capital: Planned Investment Hamyoun Abdul Jabbar Additional Investment Requirement 60000 20000 0 60,000 0 0 0 60,000

Total Planned Investment Loss at Start-up (Start-up Expenses) Total Capital Total Capital and Liabilities Total Funding

80,000 9,500 89,500 149,500 310,000

Start-up Requirements
Start-up Expenses: Legal Stationery etc. Brochures Consultants Research and Development Expensed Equipment Other Total Start-up Expenses Start-up Assets: Cash Required Start-up Inventory Other Current Assets Long-term Assets Total Assets Total Requirements 100,000 30000 0 19,500 149,500 310,000 2,500 4,000 10,000 15,000 27,000 60,000 42,000 160,500

Profit and loss Staement:


Amounts Net Sales Direct Cost of Sales Production Payroll COGS Gross Margin or gross profit Operating Expenses Sales and Marketing Expenses Sales and Marketing Payroll Advertising/Promotion Retail Advertising/Promotion Brand Travel & Entertainment Selling Supplies Wholesale Commissions Total Sales and Marketing expense 46,124 7,832 70,000 14,192 4,703 16,940 159791 360,200 146,760 27,830 174590 534790

General and Administrative Expenses General and Administrative Payroll Depreciation Leased Equipment Utilities Insurance 122,644 12,066 14,200 1,420 1,351 1,226

Bad Debt 1,351 Office Supplies Telephone Taxes/non-income tax Payroll Taxes Other General and Administrative Expenses 1,816 6,054 29,657 10,280 20,3849

Total General and Administrative Expenses Total Operating Expenses Profit Before Interest and Taxes Interest Expense EBIT Taxes Net Income

363640
171150 7560 163590 5500

158090

Company Locations and Facilities:


The company's main office is located in Gujrat. The office is approximately 400 square feet. An additional 800 square feet of office space can be made available within the building. This should be sufficient for planned staff size within the first few years. The company has a three-year lease on the current space with an additional three-year option. Distribution in the first year will be managed from a facility in Lahore. In years two through three we plan to manage distribution through a contract resource capable of handling both wholesale distribution and retail fulfillment.

Products:
NC distributes quality personal care products. This is accomplished through a combination of company-owned retail outlets and wholesale distribution. Skin and body care products will be developed and produced in Pakistan. NC will have one product lines, skin care. Within the skin care line we will offer products including Eye makeup removers, (NC eye makeup remover) Cleansing creams, (NC cleansing cream) Body Lotions, (NC body Lotion)

Product Description:
Skin Care:
The initial launch for skin care products will be our "Water" range. The products in this range have been developed in our labs. The details of our product development will be explained in greater detail in the marketing section. In this section we intend only to define the initial product range, each products benefit. Our methodology in choosing the water range for our initial launch is based on two primary issues: 1. The benefits of thalassic treatment are just coming to light in Gujrat. 2. Our name and logo make this launch of products from the sea a natural.

The Water Range:

Biocatalyst Tonic Purpose: Finishes cleansing and leaves skin perfectly clean. Relieves, soothes and softens skin. Primary ingredients: Corallina officinalis contains trace elements of marine minerals and in excess of 300 enzymes. They promote elasticity of the dermis' structural fibers

(keratogenesis). This ingredient prepares the skin for cosmetics. Critmum maritimum extract adds purifying and regenerating properties. Rose water contributes a relaxing effect. Skin type: All Use: Spray on nightly after makeup removal and before applying night creams or during the day to relieve stress and brighten the complexion. Eye makeup remover Purpose: Removes eye makeup. Soothes and relieves sensitive skin in eye area. Fortifies eyelashes. Primary ingredients: Rhodophycea extract promotes demineralization and hydration of skin while fortifying eyelashes. Rose water to tone sensitive skin while soothing and relieving eye shadows Skin type: All Use: Soak on cotton ball lightly and gently apply on eyelids to remove make up. Cleansing cream Purpose: Soothes skin during make up removal. Gently removes impurities from the skin without damaging the epidermis film. Primary Ingredients: Crithmum maritime extract is rich in essential oils with regenerating and anti-inflammatory properties. Shea butter to nourish the skin and add suppleness. Palm oil and Groundnut oil act as cleansing agents and soothe the skin Skin types: Sensitive, delicate and mature skins--gentle enough to be suitable for use as a baby cream. Use: Apply on face and neck nightly to remove make up. Finish with Biocatalyst Tonic. Body lotion (intensive hydration) Purpose: Fights dryness, nourishes regenerates, prevents aging and improves elasticity. Protects skin from the harsh environment. Leaves the skin firm and smooth.

Primary ingredients: A powerful marine osmoregulator extracted from green seaweed and Chondrus crispus extract maintain an in-depth long-term hydration rate of the epidermis. Carraghenans work on the skins surface with the skins natural proteins to create a protective film. Vegetable oil from Karate butter increases cell regeneration and insures suppleness Skin types: All Use: Apply daily on dried skin all over the body with a soft circular motion.

Sides effect:
There is no side effect of these water range products. Our product lines are reliable.

Our values:
We believe there is only one way to be beautiful, natures way. Weve believed this now and will do work with this thinking in next years. We constantly seek out wonderful natural ingredients from all four corners of the globe, and we bring you products bursting with effectiveness to enhance your natural beauty. Whilst were doing this we always strive to protect this beautiful planet and the people who depend on it. We dont do it this way because its fashionable. We do it because, to us, its the only way.

How do we ensure that our products and their ingredients arent tested on animals?
The NC has always believed passionately that animals should not be used for cosmetic testing. We have never tested our products on animals. Similarly, we insist that all our suppliers have not tested their ingredients on animals for cosmetic purposes.

Competitive Comparison:
NC will occupy a unique market position. Only few other brand offers a specialty line that includes skin care, cosmetics. However, within each category significant brands do exist. Quality varies widely within each group. NC will be positioned as a quality brand.

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We have eliminated the drugstore and discount brands from this comparison. The commercial brands are primarily sold through department stores. They vary widely in quality. They also vary widely in price. Their major advantage is their financial strength and their department store relationships.

Market Analysis Summary:


The Pakistan cosmetics market grew by over the rate of 8.6%. Clear divisions between categories are becoming blurred. All categories experienced growth. 1999 sales (x$1,000) and growth by category broke down as follows: Sales Skin Care Cosmetics Total 4440 6000 10440 Growth 3.20% 8.90% 8.6% Market Share 60.00% 40.00% 100.00%

Market Segmentation:
For the purpose of this analysis we are focusing solely on the female market. Therefore our potential customers base (for the purpose of developing projections) does not include any statistics or provisions for male consumers. We have used the demographic report Based upon the survey is predominantly female (85%), well educated (46% attended college), and crosses income levels (26% earn less than $35,000; 32% earn between $35,000 and $74,999 and 42% earn over $75,000). Using this demographic as the basis for our methodology we developed our potential customer base with the following parameters: Women with some college between the ages of 18 and 65. We completely discounted women with no college, women between 18 and 25, women over 65.

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Market analysis:
Potential Customers Females 25-64 <$35,000 females 25-64 >$35,000 <74,999 Females 25-64 >$75,000 Total Growth 5% Year 1 228500 Year 2 268565 Year 3 236180

5%

104358

196874

132920

5% 5.00%

165838 498696

136859 602298

206896 575996

1. Lifestyle Retailers our target retailer will be lifestyle-based rather than the typical soaps and potions or natural product retailers. These retailers exist in almost every city. These retailers have developed a loyal and sophisticated customer base. They understand the concept of lifestyle.

Strategy and Implementation Summary


Our strategy is to develop NC` as a brand that represents quality and value. The tactics underneath this strategy and the programs we will put in place cover a broad range of disciplines. They are presented here in order of importance. Strategy Pyramid: 1. Products that perform: Continually develop and bring to market products that function as intended and represent an acceptable price--value proposition to the consumer.

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Skin care will be developed around two natural themes: Thalassic therapy, and Botanicals.

2. People: Locate and develop a team that is talented, committed and understands the concept of brand. Training and incentive programs will assist in inspiring our people to "walk the walk," and reward performance. Employee stock option and profit sharing programs will be available at all levels. 1. Targeted marketing programs: Print advertising will be focused on the benefits of our products, both physical and emotional. They will speak to the lifestyle our target consumer aspires to have. It will be carefully placed to insure the proper affiliation. Point of sale graphics will reinforce our message of function and quality. We will create a package of shop in shop and concession concepts for retail accounts. Develop a team of "technical representatives" to support key accounts with product and sales training. 2. Development of NC retail stores: Retail stores will be located in major shopping areas and malls. NC retail stores will bring the product and brand image to consumers in major markets. 3. Distribution through resorts: Further enhance the NC image with the consumer by targeting prestige resorts. 4. Controlled distribution at wholesale: Affiliating with retailers who have a consumer image and awareness that supports NC will reinforce our image. 13

5. Implementation of the NC website: We are provided the consumer with a reference for treating the skin. Provide a training tool for NC accredited facilities on the Web. Wholesale customers will be able to utilize the site to train their staff and to place reorders or learn about new products. Retail and wholesale customers will be able to set up automatic replenishment on the Web and we will be able to reach out and remind them when they need product, based upon average usage data and time since last purchase.

Marketing Strategy:
NC will utilize a brand building (pull) strategy as the basis for our marketing plan. We will position our print media spend in magazines that influence our target consumer and validate the brand. The publications we will utilize are: time, Jung, The news. These are the same publications retail buyers and trend analysts scour to find emerging brands or trends. Our media and PR strategy will bring the brand to the forefront for the consumer and set the stage for our image development. We will have a separate plan to market to retailers at trade shows Marketing Programs: 1. Development of product packaging: We are developed a packaging and labeling system that communicates the NC message. 2. Development of product brochures: we are created a series of brochures that will function at point of sale and at trade shows. 3. Creation of a NC video: Develop a video that explains the connection between the sea and the human body. 4. Selection of an advertising firm: Begin the selection process for an advertising agency in March of 2008. 5. Development of our print campaign: Development of this campaign will begin immediately after selecting an agency.

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Pricing Strategy:

Our pricing strategy at retail will be to create a price-to-benefits ratio that positions NC as a superior value. At wholesale we will price our products to provide the retailer with a 50% maintained margin and offer a product exchange program for current Accounts. Our wholesale prices will be derived after the appropriate retail is determined to insure that the shelf price represents a value to the consumer and the retailer has a 50% margin.

Promotion Strategy:
Our promotional strategy will cover a broad range of programs. Pricing: Our pricing strategy is to position our products with a shelf price that is in the mid to lower quadrant of high-quality products and brands. We have accomplished this by making careful market comparisons and adjusting our packaging size. We will not have price promotions in our own facilities and we will discourage our wholesale customers from reducing prices. Instead we will have a quarterly bonus week. During the bonus week consumers will receive a free gift with any NC purchase over a pre set amount. The gift sets will consist of sample size. Consumer Mailers: We will have a monthly mailer for NC customers. It will be designed to educate the consumer about the benefits of a particular product or ingredient. The mailer will be redeemable for a sample of the product. Public Relations: We will contract a top public relations firm. The objective will be to secure product placement in key publications and endorsements by opinion leaders. Print Campaign: We will have a paid placement program that includes monthly placement in regional issues of THE TIME, JUNG.

Sales Strategy:
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Our retail sales strategy consists of just two parts. First we will hire and train people who fit the NC image and lifestyle. Our training programs will insure that they have the product knowledge necessary to serve the customers needs and close the sale. Second, our commission and retention programs will insure we recognize and reward performance. Our sales people will be on a commission program that compensates for follow up sales at progressively higher rates. This will provide an incentive for consumer Follow up and the creation of repeat business. Our commission program will also insure that individual performance is monitored and recognized. Top performers will be singled out for recognition and poor performers will be given additional training or encouraged to seek a profession more suitable to their skills. Our wholesale sales program will evolve. They will be paid a 15% commission on all sales they will also handle order follow up and customer service. Their commission will be paid 50% at time of shipment and 50% at time of payment, insuring a vested interest in customer satisfaction and payment.

Management Summary:
The initial management team is very compact. Our CEO and founder is the only current (full-time) employee. Mr. Abid will be our director of retail. Mr.Zahid will join us as creative director. Mr. Amjad will be the director of product development. Ms. Sadia will join the team as administrative assistant to Mr. Amjad. In addition to our internal resources we have access to a significant pool of senior management and design talent. This resource has been detailed in the management team section. President and CEO, Mr. Hamayoun has over 30 years of retail experience. During his career he has successfully held senior management positions with several major retailers. Mr. Hamayoun sensed an opportunity to develop a quality lifestyle business that focused on personal care.

Personnel Plan:
Our support staff will grow from six to thirty-three in the period of 2008 to 2010. During this time frame our wholesale revenues are will grow almost exponentially. We will fill the following critical positions: vice president of product development, director of retail.

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In the first years of development these people will all fill multiple rolls and be instrumental in the future success of NC.

Personal plan:

Start Date Completion of Store, Completion of Product Development - Water Completion of NC Video Package and Label Design Product Brochures Registration of the Name and Logo Development of Sales Training Programs Complete Store #1 Staff Selection and Training for Store #1 Creation of 3/1/2008

End Date 5/1/2010

Budget 120,000

Manager Hamyoun

Department Marketing

6/1/2008

3/1/2010

10,000

Amjad

Marketing

10/1/2008 10/1/2008 1/2/2008

1/2/2010 3/1/2010 3/1/2010

8,000 4,000 4,000

Abid Haroon Abid

Marketing Marketing Marketing

3/1/2008

10/1/2010

1,000

Munir

Marketing

3/1/2008

6/1/2008

4,000

Waqas

Marketing

3/1/2008

6/1/2010

65,000

Munir

Marketing

4/1/2008

5/1/2008

5,000

Faisal

Marketing

4/2/2008

5/1/2008

45,000

Abid

Web 17

Launch Ad Package Totals 266000

Financial Plan:
NC will become profitable in our third year of operation. Initial growth will be financed by a combination of equity investment and debt financing. Our ratios are well within prudent limits and our growth plans are challenging, but realistic.

General Assumptions:
Our assumptions are detailed in the proceeding tables. We have planned for relatively slow but stable general economic growth and an interest rate on borrowing of 8.5%. Because our business is a combination of retail and wholesale our collection days may look somewhat optimistic. That is caused by our assumption that approximately 70% of our retail sales will be done on credit cards and debit cards.

General assumption:

Year 1 Plan Month Current Rate Interest 1 8.50% 8.00% 7.00% 2.00%`

Year 2 2 8.50% 8.00% 7.00% 2.00%

Year 3 3 8.50% 8.00% 7.00% 2.00%

Long-term Interest Rate Tax Rate Other

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Projected Balance Sheet:


The following table is our balance sheet projection through 2010.

Balance Sheet:
Assets Amount Liabilities & Capital
Current Liabilities: 1,016,216 136,642 40,140 40,000 1232998 Total Current Liabilities Long-term Liabilities: 217,862 12,164 230026 Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital 186624 0 186624 1,620,000 181356 162,244 1276400 Accounts Payable Current Borrowing Other Current Liabilities 126624 60000 0

Amount

Current Assets: Cash Accounts Receivable Inventory Other Current Assets Total Current Assets Long-term Assets: Long-term Assets Accumulated Depreciation Total Long-term Assets

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Total Assets

1463024

Total Liabilities and Capital

1463024

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