Wooden Furniture Manufacturer and Supplier

EXECUTIVE SUMMARY

MARKET ANALYSIS

CUSTOMERS

COMPETITION

OPERATIONS

PRODUCTS & SERVICES

SALES & MARKETING

NASHVILLE FURNITURE

61 Main St.
Nashville, Indiana 47448

Gerald Rekve

Nashville Furniture strives to be the best manufacturer of fine furniture, partnering with our craftsmen and making them a key component to our business. The owners will build state-of-the-art furniture for the local, as well as national, market in the United States. All the craftsmen that will be hired to build this furniture will be at the top of their field, allowing us to be the best provider of furniture in America.

EXECUTIVE SUMMARY

Business Strategy

Nashville Furniture will be formed as a furniture company that focuses on fine workmanship for home owners who want the best in handcrafted products. The owners have extensive experience in the furniture industry. Nashville Furniture will be a part of the Nashville Furnishing Group and operate as its own division.

With the baby boomer generation maturing, the growth in the fine furniture is exploding. To take advantage of this new opportunity, Nashville Furniture is going to expand into this area. In doing so, we will require extra staff, equipment and facilities to run this business.

Objectives

• To be a top fine furniture supplier to home owners both locally and nationally
• To become a top ten supplier
• To hire the best craftsmen for fine furniture construction
• To buy the best wood from every country that sells it
• To buy the rights to rebuild like furniture from the Chippendale collection

Mission

Nashville Furniture strives to be the best manufacturer of fine furniture, partnering with our craftsmen and making them a key component to our business. We want to give our customer base the best quality on the market today.

MARKET ANALYSIS

Start-up Summary

Nashville Furniture will build their client base by targeting the retail stores that sell high-end furniture; this will allow Nashville to quickly get a foothold in the market with already established distribution channels.

International Marketplace

In 1999, the world production of furniture amounted to $62.4 billion dollars. The top of the list of leading producers includes: Italy and Germany, closely followed by the United States, Japan, the United Kingdom, France, Sweden, Canada and other Asian countries near the Pacific.

China can be considered by itself-it is estimated that by the end of the 21st century, China will become the second leading producer of furniture in the world. Furthermore, the People's Republic of China is currently one of the five most desired markets.

World sales in furniture amount to about $3 billion US dollars. On the other hand, the market is somewhat varied, with consumers preferring a wide variety of styles, designs, quality and prices. In terms of consumption, the most important market is surely the United States, representing 27 percent of the market, followed by Japan with 15 percent and Germany with 11 percent.

Import/ Export

Italy and Germany are the biggest furniture exporters in the world. However, some Asian countries, such as China and Taiwan, are beginning to take advantage of low labor costs, which translates to strong growth prospects.

The furniture sector in the United States has been able to reap the benefits of the boom in the economy in the last few years. The statistics indicate that sales dropped in the early 1990s, while they picked up in the second half of the decade.

China

Furniture sales in China in the last six years have increased by 8.5 percent. This increase is the result of several factors, including: low cost, unrecognized brands, and buyers being unaware of where the product was made.

In 1996, the Chinese purchased furniture totaling $8.2 billion US dollars. Three percent of this figure included products that were imported and 90 percent accounts for low-quality furniture made by local craftsmen. Only 7 percent of purchases were local industrial production. China seems to be a market that has yet to be discovered!

Target Market Segment

Nashville Furniture will be focusing on securing the distribution channel from high-end retailers, some of whom are national chains like Sears.

Across the United States there are a number of high-end furniture retailers who specialize in the sale of quality furniture. We know it will take time to build relationships with all the retailers, so we will focus on small retailers to begin with, while getting our systems and processes in place. By the time we are able to break in to the larger retail store business, we will have all the bugs worked out and will be ready to tackle the increased production demands.

Industry Snapshot

The wholesale distribution of the furniture industry is subdivided into two categories: establishments engaged primarily in the sale of household and lawn furniture, and establishments primarily engaged in the sale of office and business furniture. According to statistics compiled by the U.S. Census Bureau, 29,920 establishments were listed in this classification in 2001. Combined sales totaled $23.1 billion in 2003. There were 278,231 people employed within this industry, with an annual payroll of $7.5 million. The average establishment generated $2.7 million in sales. California, Florida, and New York controlled 32 percent of the market.

CUSTOMERS

This industry is affected by interest rates and the housing market. When these economic indicators are stable and strong, the furniture industry generally has higher retail sales. Barron's reported that the furniture industry experienced a slump from 1988 until mid-1992 when a ''stop-and-start'' recovery process began. Conditions within the furniture industry reflected the nation's general economy as consumers postponed purchases. As a result, when the economy began to improve, there was a pent-up demand for industry products, and the American Furniture Manufacturers Association (AFMA) predicted an increase in furniture shipments.

Following a slump in the early 1990s, the International Wholesale Furniture Association found more than 90 percent of survey respondents reported their sales increased in 1993. Sales continued to climb in 1994 and 1995. Throughout 1995, monthly sales for furniture and home furnishings were between $3.1 and $3.4 million. AFMA also predicted an increase in the value of shipments of 7.6 percent in 1999, and a smaller increase of 2.1 percent for 2000. Consumer demand was expected to increase by 5.5 percent and 4.5 percent for 1999 and 2000, respectively.

Housing starts were forecasted to increase by 2.9 percent in 1999, followed by only 0.3 percent in 2000. In the late 1990s, much of this industry's strength came from the industrial (offices, hotels, restaurants) side of the market. The office furniture market was estimated at $12 billion. Some analysts predicted that 50 million families were to occupy a home office.

Current Conditions

The largest type of customer-furniture stores-represented 69.4 percent of sales. Other types of customers included rental dealers with 19.2 percent of sales, manufactured homes with 4.9 percent, specialty stores with 2.5 percent, interior designers with 1.4 percent and institutional buyers with 0.5 percent. The two largest product categories-living room/upholstered and bedroom-accounted for half of the sales.

Customary distribution channels within the industry, however, have changed. To reduce costs and improve efficiency, many manufacturers have increased their direct sales to retailers and rental dealers. As a result, wholesalers faced a shrinking number of traditional customers, and innovative wholesale concepts, such as warehouse clubs and electronic shopping networks, emerged. Wholesalers are also being threatened by large discount department stores.

The Business and Institutional Furniture Manufacturers Association (BIFMA) International announced that furniture shipments climbed 5.6 percent in 2004, up from a 4.7 percent drop in 2003. Office furniture also declined 20 percent nationally in 2002. However, according to Furniture Today, furniture spending would increase 23 percent by 2011.

COMPETITION

There are a few main types of furniture suppliers in the industry, including:

• High volume manufactures who skimp on quality in order to get volume. You can see these easily by looking at the product-for example, they have molded patterns where the ancient masters would have hand-carved them.
• Low volume manufactures who build great furniture but have low sales volume because they cannot produce enough product for increased sales.

Nashville Furniture has put together an assembly line product system that will be unmatched in the industry. We will be able to turn out complete products in about 35 percent of the time it would take a master woodworker to do the same. This means we will be able to produce enough of these units to make a great profit and have a lot of happy clients.

At the moment, there is no one in the market that can produce these furniture items in the time it takes us to produce them. This means we will be a leader in the market.

In the late 1990s, industry leaders included Value City Furniture Division of Ohio, Office Depot Incorporated Business Services Division of California, and TAB Products Company, also of California. In 2003, industry leaders were Furniture Brands International Inc. of St. Louis, Missouri, La-Z-Boy Inc. of Monroe, MI, and Hon Industries, Inc. In the second half of 2003, demand for commercial furniture began to stabilize and, in December, both shipments and orders grew for the first time in three years.

OPERATIONS

Our sales strategy is to sell our products to retailers in the United States. These retailers already have a client base, so all we will be doing is putting our products in their stores. This will reduce any costs we have in marketing and sales.

Production Facilities

We will manufacture all of our furniture from a 10,000 square foot production facility located just 20 minutes north of downtown Nashville. This warehouse was used to produce other tangibles products, so all the mechanical needs are already in place. We will only need to do some small upgrades and some wiring moves to handle the 240 volt equipment we will be installing in the building.

All the equipment will be installed about four weeks prior to us having our staff in place, so we will be able to train once we bring in the staff.

Management Summary

Tory Toseat will act as President. Tory has 24 years of manufacturing experience, from auto making to plastics, as well four years with the largest medium-price furniture manufacturer in the United States.

Harriet Wallace will serve as Vice President. Harriet has 19 years of experience in the area of accounting and finance. Most of her career has been spent as an accountant and finance manager in a variety of different business sectors.

While both career paths are unique, they add an extremely strong experience background for the company which will be very helpful as the company grows or runs into issues later on.

We have already hired a foreman to manage our production of our furniture. He has over 15 years experience in the same role with a large furniture manufacturer. He will be able to hire the top quality tradespeople we will require in order to operate our business.

Some of the traits these craftsmen will require are listed below.

• Eye for detail
• Skills with all shop tools
• Easy going personality
• Enjoys the business
• Always wants to learn, never stops
• Must have good references or samples of work
• May do a test build on site at our plant

We will pay these furniture makers anywhere from $25 to $50 per hour. There will also be bonuses in place for our furniture makers; this will help keep them motivated and will insure they work harder.

Some of the performance bonuses we will offer are as follows:

• $25.00 bonus for each unit that is produced on budget
• $50.00 weekly bonus if the department makes their weekly units-produced goal
• $200.00 if department makes budget for monthly units-produced
• $20.00 bonus for each percentage over budget we are in number of units produced
• $25.00 reduction for each unit that fails to make inspection for quality

This table shows salaries for the entire company. Salary increases are kept to a minimum to help ensure the growth of the company. An administrative assistant will be hired later in the year.

Financial Analysis

Initial financial goals

• Obtain an operating line of credit from a financial institution.
• Finance growth through retained earnings.
• Operate on a 25-30 percent gross margin.

Annual sales goals

• Year one-$900,000
• Year two-$1,200,000
• Year three-$1,500,000

PRODUCTS & SERVICES

Production Process

We will use the blueprints provided to us by Chippendale which include the all the original designs.

Our furniture will be built by highly-trained craftsmen. We realize that the time it takes to make a quality hand-built piece of furniture is about three times longer than to make a mass produced piece.

Because the price range for our furniture pieces will vary from $500 up to $40,000 each, a large portion of the population will not be interested in our products. This will result in a small piece of the overall market.

Some of the items we will be manufacturing are:

• Kitchen tables
• End tables
• Hutches
• Bedroom sets
• Dressers
• Armoires
• Couches
• Rocking chairs
• Coffee tables

Materials and woods we will be using include:

• Amboyna Burl #1 Grade
• Amboyna Burl #2 Grade
• Banksia Pods/Nuts
• Beefwood
• Birch Burl (eyes)
• Box Elder Burl (pink)
• Buckeye Burl
• Camphor
• Chechen Burl
• Curly Maple 'A'
• Curly Maple 'AA'
• Curly Maple 'AAA'
• English Walnut
• Figured She Oak
• Firelace She Oak
• Golden Amboyna Burl
• Goldfield Burls ''SALE''
• Grass Tree Root
• Jarrah Burl
• Jarrah, Figured
• Jarrah, Plain
• Jarrah, Table tops
• Madrone Burl
• Magnolia
• Mallee Chunks
• Mallee Root
• Manzanita
• Maple Burl
• Maple Burl, Big Leaf
• Maple Burl, Premium
• Maple, Quilted
• Marri
• Mesquite, Texas
• Myrtle Burl
• Narra
• PNG Walnut
• Ramone Burl
• Redwood Burl
• Rosewood, Brazilian
• She Oak
• Sumac Logs-dry
• Thuya Burl #1 Grade
• Thuya Burl #2 Grade
• Walnut Burl/Stump
• Walnut, Claro figured
• Willow Burl

SALES & MARKETING

We will hire two full-time sales consultants whose job it will be to secure contracts with various retailers across the United States and Canada with the goal to sell our products in these stores. At the beginning of our business venture we will not use the traditional distribution network to sell our products. The reason for this is simple-we need to get feedback about our products, and better know the clients' likes and dislikes regarding our furniture.

Each sales consultant will be assigned to either the western or eastern half of the United States. They will both travel to all the tradeshows for furniture retailers and assist in managing the booth at these trade shows. Management will also work these booths because we will need as much feedback as possible in order for us to build a very strong company.

As we are building our client list, we will also focus on training of our sales staff. It will be very important for our sales staff to completely understand our products, so when they are being challenged by competitors, they can respond to our clients knowing that what they are saying is accurate and realistic. In the end, this will help our sales staff win more contracts.

We are going to pay our sales staff with a combination of salary and commission. We realize that when sales staff members are dependent solely on commission and not producing well, they will say almost anything to win the contract. In understanding this, we do not want to be in a position where a client is promised something we cannot deliver. Therefore we will give our sales staff a salary as a base. This salary will be about 70 percent of the average for sales reps in similar fields. The commission plan will add approximately another 70 percent to the potential the sales rep can make. In total, the average our sales consultants can make is going to be around $150,000 to $200,000 per year. This is about $75,000 higher than the average representative makes now. We are very confident this will attract top notch sales staff.