Business Plan or Business Proposal

We are not a low cost, low price, mass producer, producing thousands of product lines for distribution to sales associates. All our products are handmade from the highest quality woods available with attention to detail. Many of our customers are looking for unique products to cherish and memorialize a loved one. Our employees are our most valuable asset who are wood hobbyists and who enjoy constructing unique wood projects. Employees take pride in one’s work and are given the flexibility to apply creativity to enhance our product line.

The cremation industry has had tremendous growth in the past 20 years, growing from just 28% of the funeral industry to over 48% (CANA, 2011). That growth has created a significant increase in demand for specialty urns of all types, including wood urns. As shown in the figures below, sales and profits will grow slowly in the first two years as the company focuses on sales to local funeral homes. The company’s primary objectives in the first two years are to fine tune the production process, expand the product line and develop credibility in the industry. In year three the company leaders plan to start online marketing direct sales to its primary customers in the United States, with sales expected to grow significantly with the right marketing package to direct customers to the newly created website.

ICW plans to expand its product line moving forward, to include pet urns, small furniture and other handmade wood products. These expansions are a natural addition utilizing ICWs existing experience with its employees and the credibility developed from producing quality products.

Table of Contents 1.0 Executive Summary 3 2.0 Company Description 5 2.1 Facilities and Equipment 5 3.0 Market Analysis 5 3.1 Industry Outlook 6 3.2 Target Market 7 3.3 Competitor Analysis 8 3.4 Production Costs and Pricing Strategy 9 4.0 Organization and Management 10 4.1 Ownership 10 4.2 Self Analysis 11 4.2.1 Experience and Education 11 4.2.3 Personal Development 12 5.0 Product Line 12 6.0 Marketing and Sales 13 7.0 Financial Projections 14 8.0 Final Remarks 15 References 16

ICW builds handmade wood urns to grieving families looking for a unique way to memorialize a loved one. Our idea is simple; create a beautiful and unique product that can be kept as an heirloom for generations or buried as a naturally decaying product that is environmentally friendly. Funerals and memorials provide a sense of closure to families. Our products help provide that closure as family and friends create a memory of a loved one that will last forever.

ICW serves funeral homes as distributors of our products and direct sales to our customers. Our competitive advantage lies in the owner’s knowledge and experience in woodworking and the unique relationship he has with funeral homes across the state.

ICW operations will begin in the owner’s garage. There is sufficient space to setup workstations for one laborer. Most of the equipment is already available (miter saw, table saw, router table, sander, air compressor, and paint sprayer), but some additional equipment will need to be purchased to complete each workstations. This equipment includes two additional router tables, router bits, one additional miter saw and saw blades. These items can be purchased at any tool supply store for about $2000. One workstation can produce approximately 700 units per year based on 3 hours per unit and a 40 hour workweek.

ICW will provide quality products to the funeral services merchandising industry. More specifically, ICW will build handmade wood urns for the cremation merchandise industry, a large, growing industry with huge growth potential. We will begin operations selling our merchandise directly to funeral homes, targeting cremation clients as our potential customers. ICW will expand to online sales by year three to target the online consumer, targeting customers looking for quality handmade wood urns made in the United States at affordable prices.

There are two primary types of disposal of remains in the United States: traditional burials and cremations. Tradition burials require a casket, cemetery plot, headstone, and vault (if required). Cremations require a temporary, flammable casket to store the body in for burning at a crematorium and an urn to carry the ashes and ground bone fragments. 2,472,208 people passed away in the United States in 2011. 42.23% of the deaths, 1,044,013, resulted in a cremation (CANA, 2011). Only 23.1% of all deaths in the United States resulted in a cremation in 1997. That result is expected to be 48% in 2017, with a growth rate of 1.79 % per year (CANA, 2012). The primary reasons for this increase in cremated remains include: affordability, range of burial/disposal options, reduced environmental impact, religious acceptance and transportability (CANA, 2011).

One of the primary reasons for the increase in created remains is the affordability. Traditional burials require a cemetery plot, casket, embalming, and a cement vault (sometimes optional). Depending on the additional services the family requests, costs can range from $3,000 on the lower end to well over $10,000. Cremations are significantly cheaper, usually between $1,000 and $3,000, depending on services and other products requested by the family. Another primary reason is the range of options available to the family for disposition of the remains. Families can bury the ashes like a traditional burial, spread the ashes in one or multiple locations, store the ashes in multiple urns with multiple family members, turn the ash into jewelry or other memorial keepsakes, and many other options not normally available for a traditional burial. Religious acceptance has also contributed greatly to the growth in cremations. Many religions used to have restrictions against cremation or disapproved of the practice. As cremation has become mainstream, most religions have become more tolerant of the practice, allowing religions followers to recognize cremation as an alternative option (CANA, 2011).

12,426 people passed away in Idaho in 2013, an increase of 3.9% from 2012. 6,591 of the deaths occurred in the three districts where ICW plans to open operations. Four thousand and eighty-three of the deaths, or 61.9%, resulted in a cremation. Statewide Idaho averaged 58.1% of deaths, 7,164, resulting in cremation in 2013 (Idaho Dept. of Vital Statistics, 2015). Based on these statistics there is a growing need locally, regionally and nationally for urns to meet the demands of a growing number of cremated remains.

The cremation merchandise industry is broken down into several categories, including urns, vaults, jewelry and other specialty keepsakes. The cremation urn industry itself is broken down into several sub categories including wood urns, marble or stone urns, bronze or other metal urns, ceramic urns, specialty memorabilia urns, miniature keepsake urns, urns for spreading ashes and others. Our goal is to produce handmade solid hardwood urns at prices below the average price currently available in the market.

There is a substantial market for urns that continues to grow as cremations continue to become more popular for disposition of remains. This market will continue to grow as the population grows and will be provide continuous market demand unless a new method of disposition is developed in the future. Our target customers are families who have recently experienced a death in the family who are looking to memorialize family member in a unique urn that can be kept as a keepsake piece displayed at home or buried in a traditional cemetery or columbarium.

We do not currently know the actual size of the demand for our product in the current market, but we expect there to be a fair demand with our price structure and quality both locally and online. We expect to capture up to 2.5% to 3% of the local market via the owners existing relationship with funeral homes in the area, approximately 102-122 urns a year. That number is expected to grow in future years as more models are developed and funeral homes begin to value the quality and craftsmanship of our products. We expect to begin offering our urns online by year 3 and anticipating capturing as much as .1% of the total market within 1 to 2 years, approximately 1044 urns each year. As we continue to develop new products and garner a strong reputation as an online urn retailer, we expect to build our market share over the next decade to at least .5% of the total market, or approximately 5,500 urns.

ICW’s direct competitors include large memorial service manufacturers, custom wood urn builders, other custom urn builders and online low cost distributors. Each segment is unique in its product range and scope, price structure and target distribution method.

Large memorial service manufacturers include Mathews International, Davis Whitehall Co., SinoSource International and UPD Urns/In the Light Urns. Each company manufacturers a wide array of memorial service products, including urns, jewelry, caskets, vaults, cremation equipment and other memorial equipment both nationally and internationally. All four companies market to funeral homes and online distributors of memorial products for the distribution of products. In the Light Urns is UPD Urns online direct sales distribution company. These companies produce urns on assembly lines using low cost materials to mass produce at low cost rates.

Custom wood urn producers include Bryan Wood Urns, Mood Wood, Arizona Urns, Great American Urn Co., Mabrey Handcrafted Urns and Exotic Savannah Woodworks. Each builder claims to build handcrafted and/or custom built wood urns on the website. Each also has a unique selection, ranging from one or two products to several categories of urn products. There is a wide range of styles, including etched or engraved urns, specialty woods and designs, basic box urns, keepsake box urns, custom built urns on request and others. Custom wood urn producers will provide the primary direct competition against ICW in the handmade wood urn market segment.

Online low cost distributors include Walmart, Costco, Perfect Memorials, and others. These distributors purchase products in bulk from the lowest bidder and offer the lowest cost alternatives on the market. These distributors also have the largest selection of urns of all types available, as well as the largest selection of other memorial merchandise. The weaknesses lie in the quality of the products, as low quality materials and mass production assembly line techniques tend to produce inferior quality products that look good at first, but may not hold up over time.

Production costs include direct and indirect items including materials, hardware and replacement saw blades and bits. It will take 3 board feet of materials per unit at an average cost of $7.00 per board foot. On average it will take an additional $4.00 per unit to cover the costs of nails, other hardware, glue and indirect costs including saw blade and router bit replacements. In addition to the $25.00 in materials, it will also take approximately 3 hours of labor to complete each unit assuming each unit is made in batches of 5 or more. The mean wage for woodworkers in occupation code 51-7042 in Idaho is $14.15 per hour (Bureau of Labor and Statistics, 2015). Including employer paid social security taxes (6.2%), employer paid Medicare tax (1.45%), unemployment tax (2%), and workers compensation (6.8%). The combined total is $16.47 per hour. In order to account for pay raises, insurance increases, and other labor expenses later, we will use $25.00 per hour as the base rate for calculating labor costs. The combined cost per unit is estimated at $100.00, however, labor expenses are expected to decrease as production expands and labor efficiencies improve.

Funeral home profit margins on merchandise range from 50% to 130% (Sanburn, 2013). Based on research, funeral home urn prices range from $226 to $396 (Appendix A). In order to keep funeral home profit margins within the average price range ICW will incorporate a pricing strategy markup of 50% for sales to funeral homes and 100-150% markup for internet sales. The increased markup for online sales will ensure we don’t compete directly with our funeral homes. Online prices for similar hand crafted urns range from $192 to $359. Our online pricing strategy will place our products below the average price, allowing us to beat many competitors prices for similar products.

ICW will begin as a sole proprietorship operating out of my garage. There is limited personal financial risk so there is no need for the liability protections an LLC or S-corp offer. Additionally, the sole proprietorship offers a simplistic business form suitable for the small scale production ICW will start with. ICW will change to an LLC or S-corp once the business has grown large enough to start requiring employees. The owner will be responsible for all facets of the operation, including production, shipping, marketing, accounting, etc. As the business grows, the owner will shift from production and shipping to marketing, management and accounting.

I have 3 years experience building custom wood furniture and other carpentry projects. These projects include night stands, entertainment centers, chess boards, small keepsake boxes, small rings, toy boxes, cabinetry and display racks. Some projects have been for my own personal use, but many have been for friends or family when requested. Attached in Appendix A are some pictures of previous projects and quality.

I currently have 10 years experience as a manager for the Idaho Army National Guard. As the state manager for the military funeral honors program, I have the knowledge and experience needed in management, accounting, finance and marketing. My responsibilities included personnel management, cost analysis, budget management and projections, marketing and training. I also have 14 years experience as a sergeant first class in the Idaho Army National Guard, managing a small section of Soldiers during drill and annual training. I have received significant training in the areas of leadership and training during my career. These experiences will be extremely beneficial as the business grows and my primary role in the business changes from the production to management.

I will have my Masters in Business Administration degree at the completion of this course. The knowledge gained during my studies includes financial management, accounting, marketing management, economics and online business.

4.2.2 Strengths and Weaknesses

Organization is one of my top strengths. I have a natural ability to break down processes, techniques and procedures and rearrange to improve efficiency. Time management adaptability are two additional strengths. Funeral honors is a last minute business, with requests for honors coming in between 48-72 hours prior to the event, sometimes with as little as 12-24 hours notice. That experience has allowed me to become very adept at scheduling workers and very adaptable to last minute change.

My primary weaknesses are a lack of manufacturing experience, lack of experience as a small business owner and professional experience in wood crafting. These weaknesses will diminish with time, but require a steep learning curve in the beginning to grasp all three areas successfully.

I plan to research wood production techniques and continue to experiment with new methods and techniques to enhance my wood crafting abilities and identify improved methods of production. I also plan to purchase samples of competitor products to identify quality, craftsmanship and production techniques used. This will serve a two-fold purpose of identifying competitor strengths and weaknesses and improving our product line by identifying production ideas and methods that can enhance our production.

Management classes will also be needed as the business grows so I can be fully prepared to transition from the primary labor role to the managerial role. Lastly, I plan to join the Cremation Association of North America as a tool to stay current on cremation trends as well as a marketing tool into other geographic markets.

Our urns are handmade by local woodcrafters. ICW will start with 2 models available in 3 wood varieties in order to maintain a low overhead and maximize production capabilities. Each of the 6 available combinations will be produced in batches of 5 to 10 urns to maximize labor efficiency and maintain a small supply available for immediate shipment. Models and varieties will be added as volume increases and labor efficiency makes it more cost effective for enhanced features. Specialized laser etching will be added in year two, allowing families to personalize an urn with pictures or words.

Each urn will be assembled using a lock and miter and pocket hole joinery, leaving the outside of the urn unblemished while allowing for increased productions speeds. Cedar, black walnut and hickory will be the three varieties of wood available, each with a unique texture and color suitable for small woodworking projects. Our urns will make perfect memorial pieces that can be displayed as a beautiful family heirloom for generations.

ICW will expand operations slowly over a three year period in order to maintain a constant growth, allow for lessons learned in production processes, and ensure I can meet my current employment obligations until such time that ICW can support my family (expected in year 3). For this reason I will start by marketing to the local market before expanding our products regionally and nationally.

Funeral directors are one of the primary links between our customers and our products. My primary marketing strategy in the first year is to meet with each funeral home and funeral director in the three districts I plan to serve and demonstrate the quality and durability of our hand mad urns, leaving a free sample urn, which can be used to display as a marketing tool for customers. As part of that strategy I also plan to attend and market my product at each regional funeral directors association meeting and the state funeral directors association meeting. This strategy, combined with my pre-existing relationship from my current employment will ensure my product is on one’s mind when meeting with clients. The advantage will allow ICW to capture 1.8% (75 units) of the urn market in the local area in the first year.

ICW will expand marketing to funeral homes and funeral directors across all of Idaho and southeastern Oregon in year two, capturing 2.5-3% of the total market share (177 units). In year three ICW will begin direct sales to its customers by creating a website and using a variety of advertising to create traffic to the site. I will also begin expanding ICWs regional footprint, traveling to funeral homes across the northwest, as well as attending state funeral directors association meetings in the states. We expect to achieve .05% of the national market (531 units) in our first year online while continuing to grow or sales to funeral homes.

Marketing tactics beyond year three include attending the national funeral directors association meetings, attending the Cremation Association of North America meetings, marketing through each association’s website, and developing a pet cremation urn to market to pet cremation companies. We will also expand our online marketing presence, adjusting advertising tactics to maximize our exposure and expanding our shipping options to ship to Canada, Europe and other nations as we grow.

Refer to Appendix B-D for all financial reports. Assumptions for each year are listed below the Income Statement. ICW’s price structure will be $140 per urn for distribution sales to funeral homes and $250 per urn for direct sales online. Profit margins for each type of sale are $40 and $150 respectively. Profit margins are significantly greater for online sales, however a large portion of urn sales still occurs through funeral homes as a direct contact with clients immediately following a death and have time to build trust with the client prior to a need for an urn.

Revenue will increase slowly in the first two years with net income increasing from $1,279 in the first year to $4,424 in the second year. Year three is projected to increase in net income with the addition of online sales and the increased profit margins from sales. The net income is anticipated at $68,230. The figures do not include any potential savings gained from labor efficiencies gained after the first two years of production. It is expected that the average cost per unit will decrease below 3 hours per unit. Along with increases in net profit, there are also large increases in operating and net profit margins. Both are expected to increase from 11.7% and 10.1% to 43% and 35.4% respectively. Return on equity will also increase drastically, as all equipment purchased in the first year is sufficient to maintain full production capabilities for one operator.

After further analysis, I am strongly considering adjusting the marketing strategy to start online marketing first via using Amazon, Ebay or another established online store in year one instead of waiting until year three because of the larger profit margin per unit from online sales. This strategy would allow for cash flows to build up faster, increase production faster, and allow the company to build its own website sooner. Distribution sales to funeral homes can start at any point and can always be incorporated at a later time to allow for further expansion. I still need to conduct more research on comparable online and funeral prices for similar products to ensure my price structure fits in to the existing market. I also still need to finish development of my urn prototypes to firm up the actual production costs per unit.

Future expansion opportunities include developing a line of pet urns and entering other woodworking product markets.

Basmajian, C., & Coutts, C. (2010). Planning for the Disposal of the Dead. Journal Of The American Planning Association, 76(3), 305-317. doi:10.1080/01944361003791913

Bureau of Labor and Statistics. (2015). May 2014 state occupational employment and wage estimates Idaho. Retrieved 01 July, 2015 from http://www.bls.gov/oes/current/oes_id.htm#51-0000.

CANA (2011). Annual CANA statistics report 2011. Cremation Association of North America.

Kelly, S. (2012). Dead bodies that matter: Toward a new ecology of human death in American Culture. Journal Of American Culture, 35(1), 37-51. doi:10.1111/j.1542-734X.2011.00796.x.