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Lukat Group LLCBusiness Plan 2017 to 2021WHO WE ARECOMPANY SUMMARYLukat Group, LLC is a family business founded on 2010 after 2 years of experience on eCommerce, and specifically eBay. Throughout the years, we have increased our presence under the name of TFSbeauty. Today, we specialize in beauty products from a variety of USA brand names, offering a variety of over 1,200 beauty products throughout the most important marketplaces, such as eBay, Amazon US, Amazon Canada, Amazon UK, Amazon Deutschland, Amazon France, Newegg, Rakuten (former ), Sears, , MercadoLibre Mexico, MercadoLibre Brazil, TradeMe New Zealand and our own website -. In addition, we have opened our doors worldwide, offering our fantastic products and amazing service to over 125 countries. By 2016, TFSbeauty is one of the most important beauty stores on these marketplaces with over 200,000 orders fulfilled and a 99.9% customer satisfaction ratio.MISSIONWe have created a culture where our biggest priority is to offer a great work environment to our TFSbeauty Family which, with great enthusiasm, offer an outstanding customer experience and help us giving back to the community.VISIONWe thrive to be the #1 stop for woman around the world who are looking for those hard to find & discontinued beauty products at affordable price. We are obsessed in providing our customers with an extraordinary shopping experience by constantly delivering OUTSTANDING value and going the extra mile for PANY OWNERSHIPEduardo Baez 50%Bernardo Baez 50%MANAGEMENT TEAMLukat Group is equally owned by Eduardo Baez and Bernardo Baez, which among German Baez, founded this company on 2010. Our family migrated from Venezuela in 2005 looking for the so called “American Dream”.German Baez graduated from the University of Florida with a Bachelor in Business Administration with a Major in Finance. He also has a master in General Management from Universidad Metropolitana in Caracas, Venezuela. He was Vice President in planning & budgeting for Banco Latino SA (the second largest bank in Venezuela at the time). He was also CEO of Inversiones Gremar CA for 17 years. Altogether, he has over 29 years of experience managing businesses. German has very strong skills in business planning modeling, cost analysis and business budgeting, and the ability to transfer complex business financial and management concepts to anyone in the company. You can see his passion for entrepreneurship and business development throughout Lukat Group.Eduardo Baez got his Associate Degree on Building Construction Management. Prior to founding Lukat Group, Eduardo has worked on the food industry and the construction industry, and in 2009, he opened his first eBay store with his father German Baez. After a year and a half of selling on eBay, they moved to a warehouse where, together with Bernardo Baez, Lukat Group was born. His passion about computer systems, technology, and logistics, has helped his education in programming languages like Java and VBA. He is in charge of the development and optimization of the systems by constantly looking for new software and ways to improve optimization in the current logistics.Bernardo Baez has an Associate Degree on Business Administration and advanced studies in Management. At the same time he has been working in conjunction with German Baez & Eduardo Baez to form what is today Lukat Group LLC. Prior working to form Lukat Group LLC, he had worked in retail, restaurant, & catering companies that gave him the work ethic and experience which he has used to build a great team among all Lukat Group’s family members. His dedication and understanding of business in general has encourage him to learn constantly about this topic and grow personally as a leader and amazing business owner, which is reflected directly in our business culture. Bernardo has been a key component for the development of Lukat Group’s owners and team members by providing tools to improve our leadership and self-development skills.PERSONAL GROWTHLukat Group’s success comes from all our team members, from owners down. It is very important for us to make sure we are successful and in constant growth. We are committed to provide our team with the best possible tools to ensure their growth. Some of these tools include, but are not limited to, a big variety of audiobooks and hardcopy books, mastermind meetings, and leadership/self-growth events.HISTORICAL MILESTONESAug2010We achieved to fulfill our orders in less than 24 hours from purchase.EditDeleteDec2011In-house creation of a database for all our merchandise. Increased our productivity by 66%.EditDeleteMar2012Offering our great service and high quality products on Amazon USEditDeleteApr2013Contract with an offshore company for photo editing, which increased the quality of our pictures with a great reduction in our cost.EditDeleteJul2013Expanding our great service to Newegg, Sears, and Rakuten.EditDeleteAug2013Feature Seller on Amazon.EditDeleteAug2013Creation of eBay Branded Storefront.EditDeleteDec2013Met our 100,000th sale and reached $1,000,000 in revenue since we opened.EditDeleteJan2014Improved our customer service's response time to less than 5 hours average.EditDeleteApr2014Agreement with Globegistics, INC which reduced our International shipping cost by over 60%EditDeleteApr2014Agreement with DHL Global Mail which reduced our shipping cost by 30%EditDeleteMay2014Offering our great service and high quality products on Amazon CanadaEditDeleteJul2014Production Process improvement: allows us to process an average of 250 units an hour/employee.EditDeleteJul2014Order Fulfillment Process improvement that doubled the fulfillment capacity.EditDeleteAug2014Offering our great service and high quality products on Amazon JapanEditDeleteOct2014Reached an average of 98% of customer satisfaction.EditDeleteDec2014We increased our unit revenue by 30%.EditDeleteJan2015Offering our great service and high quality products on Amazon UK, Amazon Deutschland, and Amazon France.EditDeleteJul2015Reached $2,000,000 in revenue.EditDeleteAug2015Reached an average of 99.9% customer satisfaction.EditDeleteOct2015Offering our great service and high quality products on (New Zealand).EditDeleteJun2016We achieved a operating profit margin of 22%.BUSINESS MODELOur business is based on overstock and shelf-pull merchandise from major retail stores. We buy merchandise in bulk, which our suppliers get from retail stores. The advantage of this merchandise is that it is the same brand name item everybody knows, but up to 85% off its retail price. Our production process is focused on detecting any item that doesn't meet our expectations in order to bring the best quality product to our customers. In addition, some of these items have been discontinued by the manufacturers and have a high demand. Our merchandise is of everyday use, which means that it has a high demand. In addition, this industry is categorized as recession-proof. Now a day, women all over the world are constantly looking for great deals but keeping a high expectation for these products. Our target is basically every women looking for this brand name items but up to 85% off what they usually pay. We bring the exact same product and quality as the major retail store, and we offer a great customer service focused on the satisfaction of our customers.Besides our online retail stores, we have an online wholesale store that we use to liquidate all the merchandise that doesn't meet our expectations for the online retail stores, and merchandise that needs to be rotated. This online wholesale store is not related to our online retail stores.INTELECTUAL trademarkOPERATIONSINVENTORY MANAGEMENTProducts are bought though brand distributors by 10,000 unit’s pallets.Products are daily been processed and added to the active inventory offerings though all the marketplaces.Products not offered in retail though the marketplaces are immediately sold in our wholesale webstore.By May 2016 we have more than 1,200 products and will reach 4,000 products by the end of year 3.Considering that there are products that sell slower than other products:We will increase sales of slow sale products by using direct marketing and promotions.As per the portfolio rotation model, will send to wholesale specific quantities of the longest rotation products of the portfolio. A portion of the investment made finances products that take the longest to sell. Since the quantities in the market are limited, the lower seller will sell faster as offer decreases over time. The offered price of the slower seller will get better as offer decreases.Gainesville FL. Warehouse has a capacity of 650,000 units.SALES PRICE MANAGEMENTThe sales price of products is determined by the competitive market from Amazon US. We use a repricer software whose job is to compare a series of factors on each item on Amazon and sets a price for each particular item. It is a crucial part of our business since it allows us to be competitive at all times throughout the whole web.SHIPPING AND HADLING MANAGEMENTOur optimized order fulfillment facility allows us to ship orders within 24 hours from purchase. With a capacity of 80 orders per hour, we are able to fulfill over 1,900 orders a day (8 hours day). In addition, we have contracts with carriers nationally and internationally, which give us competitive rates that we offer to our buyers. Our average shipping cost per unit is $1.42 (national).CUSTOMER SERVICE MANAGEMENTIt is clear for us the importance of the customer in the business. Therefore, we are focused in making sure we cover all their needs maintaining a high moral thinking. We believe that by creating a business culture base on the well-being of our team members, this will transfer to our customers in the best way possible. On the other hand, it is extremely important for us to create a trustful relationship with our customers by taking care of them in a personalized way. Our team members dedicated for customer service have a complete knowledge and access to all our products in order to respond any concern a customer may have. That way we will be able to go the extra mile to satisfy our customers.TECHNOLOGIESSince our business is completely online, it is extremely important for us to be up to date with all the software and hardware available to make our business more productive. The following are the software that keeps our business running flawlessly.ChannelAdvisor: This is our online inventory manager. It helps us manage our inventory throughout the marketplaces and website. ChannelAdvisor is key on our success due to its ability of pooling quantity depending on the channel it was sold, making sure we always have the maximum quantity available in all our channels. Repricer Software: Its job is to compare a series of factors on each item on the entire web (not only marketplaces but other websites as well) and sets a price for all our items. It is a crucial part of our business since it allows us to be competitive at all times throughout the whole web. ShipWorks: After a transaction has occurred, the order goes from ChannelAdvisor to ShipWorks. This is our order fulfillment software in charge of gathering every order and organizing them according to a set of filters created by us to make the process of order fulfillment more efficient. ShipWorks allow us to process thousands of orders at once, being limited only by the hardware used.Access DataBase: We have created in-house a database to manage our incoming inventory. Due to the type of merchandise we carry, it saves us significant time and human errors compared to just managing our inventory through ChannelAdvisor. It is important to know that this database manages information about our products and not quantities. In addition, we are constantly updating this database and molding it to our needs.Shopify: Used as the host for . It connects to ChannelAdvisor via API, making it very convenient due to its easy user interface (UI). Shopify helps us to manage promotions and other marketing tools directly on our website, in addition to the website design itself.Technology never stops improving. That is why we dedicate time researching and improving our software. At the same time, hardware is as important to maintain a perfect efficiency in our business. TEAM MEMBERS HEAD COUNT20172018201920202021Production5791218Picking and Shipping58141928Production Supervision11122Picking and Shipping Supervision11122Customer Service1234Marketing1122Administrative1122The flowing statistical data was used to calculate the Team Members head countProcessing: 10,000 gross units in 45 hoursPicking: 150 orders per hourShipping: 80 orders per hourMARKET SIZEThe annual revenue of the cosmetic industry in the U.S. is over $56 billion, which about 41% comes from drugstore cosmetics.MARKETING PLANOur focus will be getting our name known through Social Media. This way we can attract our ideal customers directly in a cost-effective way. There will be constant activity through social media to make sure there is always fresh and new relevant content. On the other hand, by creating an affiliate program with bloggers and beauty experts, we will have a constant blogging activity were our makeup artists will be giving out tips and information about products. These activities will also be used to upsell specific products. It is very important for us that people identify with us and understand our why, our reason of business.Beside social media and blogging, we will also create formalized referral systems, PPC campaigns, and SEO, directed not only to the US but also internationally.We will be creating newsletters and coupons which we will be sending in the packages we ship out daily. By creating a strategic host-beneficiary relationship with other businesses, we will reach people out through related industries but maintaining always the same target.Our entire marketing plan will be created to be mobile and user-friendly.SALES PLANAs of today, we are selling on many marketplaces such as Amazon US, Amazon CA, Amazon UK, Amazon Japan, Amazon Deutschland, Amazon France, eBay Worldwide, Sears, Rakuten US, Newegg, , TradeMe.co.nz, and .Our most important selling channel will be our website . All the marketing will be directed to it as we will be able to offer better prices and deals than in the marketplaces. We have been working on very attractive promotions which will create the best opportunity for the buyer to get what they are looking for at a great price. However, our most important advantage is our great customer service. We will promote and offer the best customer service in the market by treating each customer concern individually and not generalize them. Moreover, we will offer other services such as makeup tips, makeup artist advice, and personalized consultations. This will create a more dynamic relationship between our customers and the TFSbeauty team.RETAIL INCOME FROM MARKETPLACES (NATIONAL, INTERNATIONAL)The following chart shows in detail the variables that contributes to the growth of Marketplaces sales:20172018201920202021Increase on new inventory449%49%66%40%28%Increase on numbers of units per product5%3%3%3%3%Natural increase of online retail market15%15%15%15%15%Increase of conversion rate3%3%3%3%3%Total increase projected472%70%87%61%49%RETAIL INCOME FROM (NATIONAL, INTERNATIONAL)The following chart shows in detail the variables that contribute to the growth of sales: Growth20172018201920202021Median increase of availabilities of UPC43%10%15%11%9%Increase on number of units per UPC5%4%3%3%3%Increase of traffic through marketing strategy661%54%56%56%55%Natural increase of online retail market15%15%15%15%15%Increase of conversion rate25%3%3%3%3%Total increase projected749%86%92%88%85%COMPETITIONBeauty EncounterCosmetics, Fragrance, Skincare, Hair Care, & FashiBeauty Encounter started in 1990’s with a wholesale beauty retail company. In 1999, they started selling their product online as well, and now the offer more than 40,000 products across all beauty categories. They also sell in eBay, Amazon, Newegg, Rakuten, & .Buy Me BeautyCosmetics, Fragrance, Skincare, Hair CareBuy Me Beauty was established in 2012. They offer a large variety of brand name beauty products that are discontinue & hard to find. They only offer their product through their main website to the United States and internationally.S W StoresCosmetics & SkincareS W Stores open on July 2005 selling only on eBay. They carry over 500 different beauty products. This company only sells on eBay and they are not a big professional website, but they still sell a fair amount of cosmetics.STRATEGY FOR COMPETITIVE PROJECTIONSOur competitive edge and strategy for ongoing competitive protection includes: - Offer a personalize customer service where each customer case is resolved individually with the goal of achieving 100% customer satisfaction taking all the hassle from the problem. - Constantly add value to our customers by offering makeup tips & techniques from professional makeup artists. - Offer the best prices in the industry. We are constantly working on the improvement of our processes to transfer these savings to our buyers. - Offer the best shipping rates national & international, and to shipped all orders within 24 hours from purchase. - Offer risk free transaction guarantees to our customers. - Offer a large variety of products at great prices so customers can find everything they need at their fingertips. - Make a user & mobile friendly website where is really easy to find and purchase products from us.ASSUMPTIONS FOR FINANCIAL PROJECTIONSSales projections: (projected from daily statistical data plus market size).We will invest $320.000 in inventory from the new capital. Then, by 2020 we will have made an additional investment of $1,060,000 in new inventory. This will result in an increase of inventory from 58,000 units to 550,000 units in 2017 and to 1,700,000 units by 2020. Additionally, we will increase the brands we carry from 7 to 12 in 2017, and keep adding new brands throughout the years. This will result in an increase of our SKUs from 700 to 3,000 on 2017, and to 4,500 by 2020. Actual breakdown of the current sales is: Amazon USA 60%, 6%, other marketplaces 34%. We will be implementing our marketing strategy to bring sales share to 25% in 2017 and to 60% by 2020. To start our marketing strategy we’ll use $25,000 from the new capital and then we will use 10% of gross sales. In addition, We will use various marketing strategies to increase our conversion rate from 3.5% to 5% by the end of 2017 and to 7% by the end of 2020. At the same time we will be working on increasing the traffic to 70,000 visitors monthly by the end of 2017 and to 350,000 visitors monthly by the end of 2020. We will be working on lowering our cost as follow. Shipping cost starts in 19.0% and ends in 18.2% of gross sales. The marketplaces fees will be lowered from 19% to 17.5% of gross sales. And, the cost of revenue will decrease from 21.6% to 20.07% of gross sales.All short term debt outstanding will be paid off during 2017 and 2018, and we have no additional debt projected.InventoryAt the beginning of this business we used to sell brand name woman’s clothing. In 2013 we decided that it was in the best interest of the company to only focus the entire vision to sell beauty products; therefore, in 2016 we liquidated and donated all the clothing that we didn’t sell in retail from 2011 until 2013. Moreover, in the beginning of the business we had very small cosmetics suppliers which did not have the best quality products, so in 2015 we decided to clean our cosmetics inventory to ensure that we only carry good quality products (it is important to note that now we have good relationship with the biggest distributors of cosmetics ensuring the excellent quality products and the best prices which make this business possible). Also, wages needed to process all the woman’s clothing and cosmetics was added to the cost of inventory as aggregated value in production. From 2014 to 2016, only 6.5% of gross sales were being generated with this part of the inventory. For these reasons we are doing an inventory write off for the amount of $344,363.03.ANNUAL HISTORICAL AND PROYECTED FINANCIAL METRICSFINANCIAL PLAN 201320142015 2016 201720182019 2020Number of UnitBeauty products73,766125,274192,982207,498870,2781,190,6321,824,9122,813,897RevenueBeauty Products$331,948$540,670$743,117$805,258$3,621,769$4,967,231$7,591,397$11,763,013Other Revenue$149,136$58,954$24,684$0$0$0$0$0 Total$481,084$588,624$767,801$805,258$3,621,769$4,967,231$7,591,397$11,736,013Direct cost of revenueBeauty Products$55,219$152,537$183,798$185,209$791,870$1,072,264$1,672,955$2,539,180Direct cost of Other Revenue$24,808$41,689$17,455$344,363$0$0$0$0 Total$80,027$194,226$201,253$529,572$791,870$1,072,264$1,672,955$2,539,180Gross ProfitBeauty Products$276,729$388,133$559,319$620,049$2,829,899$3,894,967$5,918,442$9,223,833Other$124,328$17,265$7,229($344,363)$0$0$0$0 Total$401,057$405,398$566,548$275,686$2,829,899$3,894,967$5,918,442$9,223,833Operating ExpensesSales & Marketing$112,796$141,648$217,937$177,156$741,836$1,019,974$1,548,565$2,431,172General & Administrative$224,646$272,962$270,489$353656$1,299,765$1,770,894$2,611,601$3,908,692Depreciation/Amortization$11,656$8,274$6,660$11,665$22,450$38,420$36,250$48,630 Total$349,098$422,884$495,086$557,284$2,064,051$2,829,288$4,196,416$6,388,494Operating Income$51,959($17,486)$74,348($281,598)$765,848$1,065,679$1,722,026$2,835,339Other Income$0$0$0$0$0$0$0$0Interest Expense$36,640$76,760$60,783$65,784$26,090$6,620$0$0Income Tax/Member Dist$0$0$0$36,000$272,373$386,268$615,397$1,009,389Net income $15,319($94,246)$13,565($383,382)$467,385$679,411$1,106,629$1,825,950 ................
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