Business Plan

Blends of Paradise

Blends of Paradise 6252 S. Lakeshore Dr. Shreveport, LA 71119 Phone: 318-635-4809 Fax: 318-635-4809

Confidentiality Agreement
This Business Plan and its contents are confidential and remain the sole property of Teresa Bonnett and Blends of Paradise (the Company). Its use is strictly limited to those readers authorized by the Company. Any reproduction or divulgence of the content of this Business Plan without written consent of the Company is strictly prohibited. It is acknowledged by the undersigned reader that the information provided by Teresa Bonnett or Blends of Paradise in this Business Plan is in all respects confidential in nature, other than information which is in the public domain through other means. Any disclosure or use of same by the reader may cause serious harm or damage to Teresa Bonnett and Blends of Paradise. Paradise. The undersigned reader agrees not to disclose any information without the express written permission of Teresa Bonnett and Blends of Paradise. Paradise. Upon request, this document is to be immediately returned to Teresa Bonnett and Blends of Paradise. Paradise. This Business Plan is not an offer. An offer is only valid with an approved Private Placement Memorandum. Participatory interest will only be to Accredited Investors. This Document includes forward-looking statements. All statements other than statements of historical fact within this Document, including statements regarding Blends of Paradise for its subsidiaries strategies, plans, objectives and expectations, are all forward-looking statements. Although Blends of Paradise believes that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that such expectations will prove to have been correct. Certain important factors that could cause actual results to differ materially from expectations are set forth herein. Any subsequent written and oral forward-looking statements attributable to Blends of Paradise or persons acting on its behalf are expressly qualified in this regard. ___________________ ___________________

Signature
___________________ Name (typed or printed)

Date

Table of Contents
I. Overview......................................................................................................................................5 Introduction..........................................................................................................................5 The Market and Opportunity...............................................................................................6 The Local Area....................................................................................................................7 Candles and Candle Users.................................................................................................12 Business Model..................................................................................................................13 Products and Services........................................................................................................13 II. The Company............................................................................................................................14 Mission Statement..............................................................................................................14 Organization.......................................................................................................................14 1. Legal Structure.........................................................................................................14 2. Location...................................................................................................................14 3. Intellectual Property.................................................................................................14 III. Growth Strategy.......................................................................................................................15 Business Objectives...........................................................................................................15 Target Market.....................................................................................................................15 Strategic Initiatives............................................................................................................16 Competition and Competitive Advantage..........................................................................16 Marketing Strategy.............................................................................................................16 IV. Management............................................................................................................................18 V. Financials..................................................................................................................................18 Financial Needs and Use of Funds.....................................................................................18 Projected Profit and Loss...................................................................................................20 Balance Sheet.....................................................................................................................23 Breakeven Analysis...........................................................................................................23 VI. Appendix..................................................................................................................................27 References..........................................................................................................................27

Table of Figures
Figure 1. Population Change, 1980 2000.....................................................................................9 Figure 2. Change in Ethnic Group Representation, 1990 2000.................................................10 Figure 3. Projected Annual Revenues, 2008 2012.....................................................................20 Figure 4. Net Income 2008 2012...............................................................................................21 Figure 5. Projected Profit..............................................................................................................22

Table of Tables
Table 1. Selected Statistics by Economic Sector, 2002..................................................................8 Table 2. Ethnic and Racial Composition........................................................................................9 Table 3. Area Income Changes, 1980 2000...............................................................................11 Table 4. Anticipated First-Year Sales by Quarter.........................................................................19 Table 5. Five-Year Projection.......................................................................................................23 Table 6. Cash Budget....................................................................................................................25

Blends of Paradise

I. Overview
Introduction
Blends of Paradise (Blends of Paradise or the Company) is a startup company located in Blends Shreveport, Louisiana. The initial focus of the business will be as a manufacturer, wholesaler and retailer of soy-based and palm wax candles. Future expansion plans include greatly expanding manufacturing capabilities as well as expansion into personal care items. All products will contain fragrances consistent with the principles of aromatherapy. These product lines will establish the business and make the Company known to customers in the local area, but the plan is to expand into much larger markets by means of being accepted by retailers on the order of Wal-Mart or Cracker Barrel. Though each of these large businesses operates in very different industries, each also attracts the market segments that Blends of Paradise seeks. The Companys location is in a growing and bustling area. Shreveport, Louisiana is in the upper Northwest corner of the state, less than 200 miles from Dallas and easily accessible from other large Southern cities. Shreveports location is protected from the ravages of the annual hurricane season: it is more than 200 miles inland from the nearest coastal town. Situated on Interstate 20 it is convenient either for receiving supplies or shipping finished product. Shreveport was highly dependent on the domestic oil industry in the past and suffered economic stagnation in the wake of the decline of that industry in the early 1980s (Hasten, 2005), but in recent years its industrial base has broadened significantly and it has developed a strong foundation in services. Demographic data below demonstrates that attractive growth, increasing diversity and greatly increased incomes have been characteristics of the recovery and prosperity of the Shreveport / Bossier City area. The Company expects to gain a profitable market share within a very short period of time. Determinations have been made for the size of the market, amounts of budgeted advertising and marketing dollars the Company will use. In the last six months of 2007, the Company will generate revenues of $61,400. By 2009, Blends of Paradise will achieve over $279,000 in revenues.

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Blends of Paradise

The Market and Opportunity

Candles are ubiquitous; recent information indicates that more than 70 percent of all households buy and use them (Candle sales glow, 2006). The National Candle Association reports that two thirds of candle purchasers say they use candles at least once a week, or even more often (Candle sales glow, 2006). As the $2 billion industry currently exists, the most important factors affecting candle sales are scent, color, cost and shape (Candle sales glow, 2006; p. 42). The advent of alternative waxes promises to create even greater interest in candles and their use. Virtually all of the candles currently sold today are made of a petroleum-based wax. Soy candles are made only from soy plant products. They are cleaner-burning (important in our increasingly air-tight indoor environments) and any cleanup can be accomplished with simple soap and water. Soy and palm waxes are more efficient in releasing and dispersing fragrances, which is beneficial for both the producer and consumer. Certainly more women buy candles than men, but the allure of candles is not gender-exclusive. Candle sales also can be expected to be brisk within any concentrated Hispanic community, where they are used simply to be enjoyed but also are likely to be used daily as part of religious ritual (Candles are a way of life for Hispanics, 2006). This feature of the effects of demographics is important in the local area as well as for plans to expand by virtue of seeking vendor status
Source: (Bissonnette, 2007)

with retailers such as Wal-Mart and Cracker Barrel. And all of the preceding applies only to the candle industry as it currently exists and has

existed for decades. There is a reason that old businesses succeed when opening new outlets and companies specializing in old products: people recognize the value of the product; they need the product; or they merely enjoy it. Every community needs, wants and has video stores, grocery stores, fast food restaurants, auto repair shops and similar businesses; there are more than 11,000 Starbucks locations; banks generally are easy to find. All of these are old businesses or newer companies dealing exclusively in old products. Page 6

Blends of Paradise
This is where Blends of Paradise has a decided advantage over makers of conventional candles. Until recently, beeswax was the only alternative to standard petroleum-based candles, and beeswax candles were expensive even before we recognized the decline in the bee population. A cleaner-burning and more fragrant alternative holds much promise; soy and palm wax allow Blends of Paradise to differentiate itself and its products from the many other candle manufacturers currently operating.

The Local Area

As stated, the Shreveport of the past depended heavily on a single industry, only to see that industry take a persistent downturn and take much of the good fortune of the area with it. Such is not the case today, however. In the metropolitan area of Shreveport, Bossier City and Minden, business and industry is much more diversified than in the past. Composition of the local population has changed dramatically in the past two decades as well, and continues to change along with other areas of the country. Table 1 provides information as to the types and numbers of businesses operating in the metropolitan area in 2002.

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Table 1. Selected Statistics by Economic Sector, 2002

Shreveport-Bossier City-Minden, LA Combined Statistical Area
2002 Population: 419,394 Sales, Shipments, Number of Receipts, or Revenue Establishments ($1,000) Annual Payroll ($1,000)

Industry Description

Number of Employees

Utilities Manufacturing Wholesale trade Retail trade Transportation & warehousing Information Finance & insurance Real estate & rental & leasing Professional, scientific, & technical services Administrative & support & waste management & remediation service Educational services Health care & social assistance Arts, entertainment, & recreation Accommodation & food services Other services (except public administration)

72 352 545 1,672 260 139 689 372 822 353 39 995 135 647 679

N 6,423,671 4,912,118 4,442,398 396,127 N N 272,736 462,839 344,028 17,083 2,209,388 186,381 1,361,543 291,608

70,553 632,715 243,635 408,534 106,892 132,129 169,527 53,927 161,737 189,436 5,712 949,149 30,620 333,993 86,951

1,410 15,507 7,025 21,453 3,378 4,061 4,939 2,273 5,598 12,830 371 28,754 1,890 22,032 4,443

Source: U.S. Bureau of the Census, 2002 Economic Census

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Blends of Paradise
Figure 1 and Table 2 illustrate how the nature of the local population has changed over the past 20 years. Both the number of people and the number of households have increased during each of the past two decades.

Figure 1. Population Change, 1980 2000

Source: http://www.freedemographics.com/freed_automated/AllocateOnline.dll

Table 2. Ethnic and Racial Composition

% Change 1990-2000 75.60% 56.80% 10.20% -3.10% 54.40%

1980 Am. Indian, Eskimo Asian Black White Hispanic 698 1,205 155,016 290,422 6,393

1990 1,086 2,117 159,781 282,367 5,188

2000 1,908 3,319 176,060 273,630 8,008

Source: http://www.freedemographics.com/freed_automated/AllocateOnline.dll

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Blends of Paradise
The largest groups continue to be the black and white segments of the community, but they are not the fastest growing groups. That distinction belongs to American Indians, Asians and Hispanics, as illustrated in Figure 2.

Figure 2. Change in Ethnic Group Representation, 1990 2000

Source: http://www.freedemographics.com/freed_automated/AllocateOnline.dll

Demographic, technological and social factors combine to create highly favorable conditions in the Companys external environment. Evidence can be seen in the record of increased income, illustrated in Table 3.

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Blends of Paradise Table 3. Area Income Changes, 1980 2000

% Change 1990 2000 -34.20% -15.10% -11.10% -7.00% 1.70% 25.00% 75.60% 229.20% 222.40% 236.60% 288.90% 265.80% 178.50%

Household Income $ 0 - $9,999 $ 10,000 - $14,999 $ 15,000 - $19,999 $ 20,000 - $29,999 $ 30,000 - $39,999 $ 40,000 - $49,999 $ 50,000 - $74,999 $ 75,000 + $ 75,000 - $99,999 $100,000 + $100,000 - $124,999 $125,000 - $149,999 $150,000 +

1980 55,63 9 24,98 5 21,96 5 18,16 3 21,28 2 5,254 4,999 6,148 3,669 2,480

1990 41,96 2 18,30 9 16,22 3 28,66 0 21,63 9 14,39 2 16,24 5 7,485 3,923 3,562 1,352 661 1,549

% Change 1980 1990 -24.60% -26.70% -26.10% 57.80% 1.70% 173.90% 224.90% 21.70% 6.90% 43.70%

2000 27,622 15,540 14,419 26,646 22,017 17,987 28,530 24,640 12,647 11,992 5,260 2,418 4,314

Source: http://www.freedemographics.com/freed_automated/AllocateOnline.dll

The type of economic activity present in the area also provides a favorable profile. Manufacturing and industry accounts for only one of every 8.8 jobs, with services much more highly represented in the region than either industry or agriculture. This reliance on services provides several benefits: business is less subject to the influences of changes in national and international industry, and there is much less direct effect on the physical environment of the

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area. It is in this thriving economic climate that the Company seeks to operate the first location of Blends of Paradise. Paradise

Candles and Candle Users

Stated above, 70 percent of all households in the country use candles, and most people who buy candles use them with some regularity, leading them to repurchase frequently. Companies such as Yankee Candle have been enormously successful in past years, but the fortunes of high-end companies are far less certain now than in the past. Bissonnette (2007) reports that when measured by revenues, candle sales declined in 2006 by more than 7 percent. Measured in volume i.e., unit sales however, candle sales significantly increased. The difference is that sales of candles are flowing from higher-end specialty candle-makers like the Yankee Candle Company toward cheaper alternatives: So more people are spending less money to buy more candles (Bissonnette, 2007). As example, a 22ounce Yankee Candle retails for $22.99; a 20-ounce jar candle at Wal-Mart costs only $3.99. The difference is what consumers are regarding in their purchase decisions. They can buy 5 Wal-Mart candles for the price of a candle of a similar size at Yankee Candle, and still have enough left to buy a nice bag of tea lights (Bissonnette, 2007). Harvard's Michael Porter cautions in his generic strategies that, when all other factors are similar, consumers will shop on price. Those factors do not have to be absolute, they also can be perception on the part of the consumer. It is likely that the Yankee Candle will burn longer than its Wal-Mart counterpart; its scent most likely is stronger; and its container generally is more attractive (Bissonnette, 2007). But these features are not enough to persuade the consumer that the Yankee Candle is the better choice. There are tradeoffs in every purchase decision. It is clear that candle purchasers at Wal-Mart are willing to accept a slightly inferior quality candle to gain a substantial cost savings and the ability to buy much more product for the same amount of money. Bissonnette (2007) muses that an appropriate question when evaluating a company providing inexpensive items such as candles is, Will this company be vulnerable to the WalMart effect, or will consumers be willing to more for its high quality products? The benefit Page 12

Blends of Paradise
available to Blends of Paradise is that not only does the product itself serve to differentiate it from the petroleum-based candles available everywhere, it also provides an attractive selling point to Wal-Mart and other retailers. Blends of Paradise products retail at a midrange price, significantly higher than Wal-Marts current selections but also much less than Yankee Candle products and the products of other high-end producers.

Business Model
Blends of Paradise first will target customers in the local area while expanding the companys production capabilities and beginning to serve larger retailers. At present the products are distributed through direct sales and consignment arrangements, as well as through bulk sales to other retailers. The owner seeks to establish a small retail space that also can house the business expanded production capabilities. The benefits of approaching its business in this manner are threefold: Blends of Paradise has a unique product; Close customer contact provides information the owner can use to maintain relevance to the companys customers; and The company can pursue stated strategy for the future while also remaining flexible enough to respond to market changes.

Products and Services

In addition to offering specialty soy-based candles in a variety of styles and fragrances, Blends of Paradise has expansion plans for the future. In the future the Company intends to expand to other venues as stated above; we also plan to add personal care products in the future. Long-range expansion plans include operating on a large scale.

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Blends of Paradise

II. The Company

Mission Statement
It is the mission of Blends of Paradise to offer specialty soy- and palm-wax candles, first to the local community and then to wider markets. This activity will support the business as it also seeks to promote and support the positive environmental benefits of the use of nonpetroleum candles.

Organization
1. Legal Structure Blends of Paradise currently is organized as a sole proprietorship. This structure likely will change as the business grows; we envision incorporating in the future or reorganizing as a limited liability company (LLC) in the future. For the first years, however, Blends of Paradise will operate as a sole proprietorship. 2. Location The Companys principal place of business will be in a dedicated space of 375 square feet located at the owners residence. Blends of Paradise will seek retail space as the business continues to grow to provide easy access to customers and employees. 3. Intellectual Property Blends of Paradise maintains a website to promote and sell its products, and the owner has formulated custom fragrance blends unique to Blends of Paradise products.

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Blends of Paradise

III. Growth Strategy

Business Objectives
Blends of Paradise will be and remain a profitable and growing business. To accomplish this, the Company in the next twelve months will: Expand its marketing and advertising campaign; Become known in the active shopping area of Shreveport where it is located; and Grow annual revenue to exceed $245,000. In succeeding years, Blends of Paradise will: Grow annual by an average of 25 percent each year during the first five years; Develop a reputation that will exceed competitors in every area; Achieve excellent customer loyalty; and Attain $335,000 in annual sales in 2009.

Target Market
Blends of Paradise will target the following types of persons as customers: Committed candle devotees; Casual shoppers; Those with interest in and knowledge of aromatherapy; and Those seeking to decorate their personal space with candles.

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Blends of Paradise

Strategic Initiatives
Blends of Paradise has developed the following initiatives to achieve its growth goals: Launch its marketing efforts to reach its target audience Establish an aggressive sales program to identify and secure clients Hire and train qualified staff as growth requires Provide a safe and appropriate atmosphere Provide a satisfying experience for every customer The Company believes it can reasonably achieve these goals.

Competition and Competitive Advantage

Blends of Paradise has identified many indirect competitors in the area, but no direct competitors in focus. There are many sellers of specialty candles in the area where the store will be located, but the Companys products and services remain unique among them. Soy candles are not rare, but it is still difficult to find them in most markets. Palm wax candles are extremely uncommon. Because the soy a palm media offer so many benefits over traditional petroleumbased candles, the company gains competitive advantage in the formulation of its candle waxes.

Marketing Strategy
Blends of Paradises marketing strategy will be focused on the value that is provided Paradises through its products. Marketing efforts will emphasize its unique products as well as the continued growth of interest in the use of candles in a variety of settings. The Company will closely integrate all of its marketing and sales efforts to project a consistent brand image and a consistent positioning of its services. Blends of Paradise will employ a variety of marketing activities to fuel its client acquisition process. These include:

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Website Maintain the web site to describe and promote the business and its products. The Company uses its web site to communicate to all targeted market segments.

Direct mail activities to targeted audiences. Blends of Paradise will buy lists of potential targets to send direct mail pieces (postcards, letters, etc.) to attract them as customers. The Company may purchase list sources from list vendors.

Print advertising. The Company may take out ads in local publications that are matched to its targeted audiences.

Signage and posters. Blends of Paradise will locate its retail space in a shopping center where there are other businesses that cater to the public.

Community Events The Company will sponsor and/or participate in various community events. It will partner with local organizations, particularly in instances where the organization and Blends of Paradise complement each other.

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Blends of Paradise

IV. Management
The principal, Teresa Bonnett, will provide all management and a significant portion of Bonnett necessary labor for the first year. Ms. Bonnett has more than 20 years business experience.

V. Financials

Financial Needs and Use of Funds

As can be seen in the accompanying financial statements and projections, the business plan and growth as envisioned will require $100,000. Breakeven Sales Analysis Projection reveals that this amount will be recovered when the business has reached cumulative revenues of $159,568, after 10.8 months of operation. Table 4 illustrates projected quarterly sales for the first year.

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Blends of Paradise

Table 4. Anticipated First-Year Sales by Quarter

Quarter Sales 10,400

Sales July August September October November December January February March April May June

Qtr

0 2,000 Q307 8,400 13,200 16,500 Q407 19,800 11,880 13,068 Q108 15,028 18,034 19,837 Q208 21,821

49,500

39,976

59,692

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Blends of Paradise

Projected Profit and Loss

Blends of Paradise projects significant revenue growth during its first year. The Company anticipates it can grow monthly revenues to more than $24,000 within a year. This will generate revenues of $268,000 with a gross profit of $115,352. On an annualized basis, Blends of Paradises planned operations will result in a revenue stream of $268,000 in 2008; more than Paradises $335,000 by 2009; and $735,995 by 2012. Figure 3 illustrates.

Figure 3. Projected Annual Revenues, 2008 2012

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Blends of Paradise Figure 4. Net Income 2008 2012

The profit on totals projected in Figures 3 and 4 is shown in Figure 5. These profit projections are based solely on candle business operation and does not include or consider further expansion, which in the future could include the addition of personal care products or large-scale production and distribution. Rather, Figure 5 provides a projected profit only on soy candle production and sales.

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Blends of Paradise Figure 5. Projected Profit

The preceding charts are based on the information provided in Table 5, which as mentioned above considers only the business focus discussed in this plan. It does not include revenue projections from any activity that the company may expand to in the future.

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Blends of Paradise Table 5. Five-Year Projection

2008 Sales Operations Professional Services Inventory Gross Profit Profit Margin 268,000 103,178 2,100 47,370 115,352 43% 2009 335,000 128,973 2,730 44,844 126,887 38% 2010 435,500 135,421 3,140 49,328 247,611 57% 2011 566,150 173,339 3,610 64,127 325,074 57% 2012 735,995 221,874 4,152 83,365 426,604 58%

Balance Sheet
Assets Opening Balance Sheet Cash Inventory (Plus Equipment Additions) Fixtures and Remodeling Pre-Opening Costs Liabilities and Equity Accounts Payable Notes Payable Owner's Equity Est Profit to Date 0 0 105,000 0 105,000 0 0 105,000 16,662 121,662 August 1, 2007 88,700 9,500 6,000 800 105,000 July 31, 2008 115,162 6,500 0 0 121,662

Breakeven Analysis

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Blends of Paradise

August, 2007 Through July, 2008 Estimated Fixed Expenses: Salary Payroll Taxes Rent Advertising Supplies Telephone Utilities Taxes and Licenses Insurance Legal and Accounting Estimated Annual Fixed Expenses Daily Breakeven Sales ($128,609 340 days) Estimated Breakeven Sales Required: Monthly Weekly Daily 10,717 2,473 378 38,500 6,930 11,000 7,800 2,950 1,040 2,600 52,089 3,600 2,100 128,609 378

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Table 6. Cash Budget

2007 Jul Aug Sep Oct Nov Dec 2008 Jan Feb Mar Apr May Jun Jul Totals

Sales Beg. Cash Salary Payroll Taxes (18%) Rent Advertising Supplies Telephone Utilities Taxes (permits, 34% rate) Insurance Legal and Accounting Purchases Fixturing Subtotals Month End Cumulative Month End 105,0 00 2,000 360 0 600 1,500 80 200 200

2,00 0 2,00 0 360 0 600 85 80 200 0 300 600 8,000 6,000 19,54 0 85,46 0 85,46 0 125 4,40 0 8,15 0 (6,15 0) 79,3 10

8,40 0 2,00 0 360 1,00 0 600 85 80 200 0 300 125 5,65 0 10,4 00 (2,00 0) 77,3 10

13,2 00 3,50 0 630 1,00 0 600 115 80 200 0 300 125 3,15 0 9,70 0 3,50 0 80,8 10

16,5 00 4,00 0 720 1,00 0 600 130 80 200 0 300 125 3,15 0 10,3 05 6,19 5 87,0 05

19,8 00 3,50 0 630 1,00 0 600 130 80 200 0 300 125 2,00 0 8,56 5 11,2 35 98,2 40

11,88 0

13,0 68 2,00 0 360 1,00 0 600 115 80 200 0 300 125 1,35 0 6,13 0 6,93 8 74,2 30

15,0 28 3,50 0 630 1,00 0 600 115 80 200 0 300 125 1,35 0 7,90 0 7,12 8 81,3 58

18,0 34 3,50 0 630 1,00 0 600 130 80 200 5,46 3 300 125 2,50 0 14,5 28 3,50 6 84,8 65

19,8 37 3,50 0 630 1,00 0 600 130 80 200 0 300 125 1,60 0 8,16 5 11,6 72 96,5 37

21,82 1

24,00 3

183,5 71 38,50 0 6,930 11,00 0 7,800 2,950 1,040 2,600 52,08 9 3,600 2,100 38,80 0 6,000 173,4 09 115,1 62

2,000 360 1,000 600 115 80 200 36,69 8 300 125 1,350 42,82 8 (30,9 48) 67,29 2

3,500 630 1,000 600 150 80 200 0 300 125 1,800

3,500 630 1,000 600 150 80 200 9,729 300 125 2,500 18,81 4 5,189 115,1 62

8,385 13,43 6 109,9 73

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VI. Appendix

References
Bissonnette, Zac (2007, April 2). Burnout in candle industry? Retrieved June 18, 2007 from http://www.bloggingstocks.com/2007/04/02/burnout-in-candle-industry. Candle sales glow. (2006, March 20). Drug Store News, 28(4), p. 42. Candles are a way of life for Hispanics. (2006, April 24). MMR, 23(7), p. 40. Census Trend 1980 to 2000 Summary Report. (2004). Free Demographics.com. Retrieved June 18, 2007 from http://www.freedemographics.com/freed_automated/AllocateOnline.dll. Falk, Jeff (2006, December). Inviting aromas: delivery systems in the growing home air care market must be accommodating to consumer desires and as welcoming as the scents they deliver. Global Cosmetic Industry, 174(12), p. 47. Hasten, Karl (2005). Going Up: Explosive growth from continued development predicted. City of Shreveport, Louisiana. Retrieved June 18, 2007 from http://www.ci.shreveport.la.us/BringHome/goingup.html.

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