Business Plan

“K&F Fireplaces�

James J. Keane

Brian Fogarty

Awarded an A1 in the Graduate Diploma in Computing from the University of Limerick

CS5131 Decision Support Systems Module

Mr John Cohalan, Lecturer

Welcome

to

“K&F Fireplaces�

Project for

Graduate Diploma in Computing

written by

James J. Keane: 0321427 Brian Fogarty 0312339

December 14, 2003 2

Acknowledgements

Thanks is due to the following people for their helpful advice which was very fortcoming:

John Cohalan, Senior Lecturer in Economics, University of Liimerick.

James Franklin, Fireplaces Direct, Ballysimon, Co. Limerick.

Joe Kemmy, Treaty Fireplaces, John Street, Limerick. 413000.

Annette Dineen, Dineen Refractories, Ballylehane Upper, Wolfhill, Athy, Co. Laois.

Citizen‟s Information Services, 54 Catherine Street, Limerick.

William Bennett, Manager of PTSB, Upper William Street, Limerick.

Michael Barron, Limerick Enterprise Network, Limerick.

Tony Ryan, Ryan Timber Works, Limerick.

Fiona Smith, P.J. Matthews Supplies, Ballysimon, Co. Limerick.

Joe Hopkins, Hopkins Machinery, 33 Seafield Crescent, Blackrock, Co. Dublin.

Denis O‟Mahoney, Fireplace Accessories, Old Creamery & Stores, Doneraile, Co. Cork.

Ned Toomey, Limerick County Enterprise Board Ltd, County Buildings, Mallow Street/O‟Connell Street, Limerick.

John Shanney, Mr. Binman, 4, St. John‟s Square, Limerick.

Adrian Hopkins, O‟Mara Motors Ltd, Toyota Main Dealer, Ennis Road, Limerick.

Con O‟Connell, Heiton Buckley Builders Merchants, Ballysimon Road, Limerick.

Michael Kinchella, GMP House, Unit 112, Ashbourne Industrial Estate, Ashbourne, Co. Meath.

Gerry Doherty, High Tech Machinery Ltd, Unit 3, Red Cow Interchange Estate, Ballymount Road, Nass Road, Dublin 22.

Michael Cantwell, Limerick County Enterprise Board Ltd, County Buildings, Mallow Street/O‟Connell Street, Limerick.

Liam Judge, Accountant, „Hillcrest‟, Ballysheedy, Co. Limerick, 061-412347.

Revenue Commissioners, River House, Charlottes Quay, Limerick, 061-318711.

Geraldine Thornton, Solicitor, Mill Road, Corbally, Limerick.

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Midwest Mantle and Design, Fireplace Manufacturers, Cork Road, Raheen, Limerick.

061-301666.

Marble City, Unit 2B, Eastway Business Park, Ballysimon Road, Limerick.

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Acknowledgements ................................................................................................................... 3 Executive Summary .................................................................................................................. 7 Self-Assessment ........................................................................................................................ 9 Overview of the Irish Market .................................................................................................. 11 Review of Ireland‟s Economy in the Recent Past ............................................................................. 11 Medium-Term Review of Ireland‟s Economy .................................................................................. 12

Mission and Objective ............................................................................................................ 14 Mission Statement ............................................................................................................................ 14 Objectives ......................................................................................................................................... 14

Market Research ..................................................................................................................... 15 Marketing Strategy.................................................................................................................. 16 Market Analysis................................................................................................................................ 17 SWOT Analysis ................................................................................................................................ 18 Competitive Advantage .................................................................................................................... 24 Market Planning ............................................................................................................................... 25 Marketing Mix .................................................................................................................................. 25  Marketing Control ................................................................................................................... 26

Legal Structure ........................................................................................................................ 29  Simple Partnership .................................................................................................................. 29 Insurance .......................................................................................................................................... 30

Taxation .................................................................................................................................. 32 Calculating business taxable profits ................................................................................................. 32 Self-assessment................................................................................................................................. 33 PAYE/PRSI ...................................................................................................................................... 33 VAT .................................................................................................................................................. 34

Accounting .............................................................................................................................. 35 Recording transactions ..................................................................................................................... 35 Analysing transactions ...................................................................................................................... 35 Interpreting the figures the transactions offer ................................................................................... 35

Plant and Machinery ............................................................................................................... 37 Plant & Planning permission ............................................................................................................ 37

Sourcing the Raw Materials .................................................................................................... 41 Calcium Aluminate Cement ............................................................................................................. 45 Tenax ................................................................................................................................................ 45 Timber .............................................................................................................................................. 46 Lacquers and Sealers ........................................................................................................................ 48

Solver ...................................................................................................................................... 51 Allocation of scarce resources .......................................................................................................... 51 High-Low Profit Contribution Problem for Solver ........................................................................... 52 High-Low Profit Contribution Problem for Students ....................................................................... 53 Solver outputting all the optimal points ............................................................................................ 56 Calculating coordinates for X & Y axis............................................................................................ 57

Production ............................................................................................................................... 58 Producing a Fireplace ....................................................................................................................... 58 Cost of Producing each Fireplace ..................................................................................................... 62

Staff ......................................................................................................................................... 63 Division of labour ............................................................................................................................. 63 Recruitment, Induction & Training .................................................................................................. 63 Wages & Work ................................................................................................................................. 64 External agents ................................................................................................................................. 65 Department of Social, Community and Family Affairs .................................................................... 65

Finance .................................................................................................................................... 67 Loan .................................................................................................................................................. 67 Overdraft .......................................................................................................................................... 68 Internal sources of finance ................................................................................................................ 68 Grants ............................................................................................................................................... 69

Training, Mentoring & Assistance .......................................................................................... 70 Conclusion .............................................................................................................................. 72 Appendix 1 - Questionnaires................................................................................................... 73  Retailer‟s Questionnaire .......................................................................................................... 73 Builder‟s Questionnaire .................................................................................................................... 75

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Appendix 2 – Survey Results .................................................................................................. 77 Results from retailers‟ questionnaire ................................................................................................ 77 Results from builder‟s questionnaire ................................................................................................ 81 Results of the Survey ........................................................................................................................ 84

Appendix 3 - Brochure............................................................................................................ 86 Appendix 4 – Linear Programming ........................................................................................ 93 Appendix 5 – Financial Costings .......................................................................................... 100 Cost of Renovations, Breakdown of Capital Expenditure, Depreciation ........................................ 100 Cost of Wages................................................................................................................................. 101

Appendix 6 – Projections for cash flow plan ........................................................................ 102 Sales Forecast for 2004................................................................................................................... 102 Sales Forecast for 2005................................................................................................................... 107 Sales Forecast for 2006................................................................................................................... 111

Appendix 7 – Accounts for 2004 .......................................................................................... 115 Cash Flow Statement ...................................................................................................................... 115 Trading and P&L Account ............................................................................................................. 116 Balance Sheet ................................................................................................................................. 117

Appendix 8 – Accounts for 2005 .......................................................................................... 118 Cash Flow Statement ...................................................................................................................... 118 Trading and P&L Account ............................................................................................................. 119 Balance Sheet ................................................................................................................................. 120

Appendix 9 – Accounts for 2006 .......................................................................................... 121 Cash Flow Statement ...................................................................................................................... 121 Trading and P&L Account ............................................................................................................. 122 Balance Sheet ................................................................................................................................. 123

Appendix 10 - Database – K&F Fireplaces .......................................................................... 125 Appendix 11 – List of Materials Needed .............................................................................. 126 Appendix 12 – List of Suppliers ........................................................................................... 127 Appendix 13 – List of Customers ......................................................................................... 128 Endnotes................................................................................................................................ 129

“Some people dream dreams that never were and ask why, but I dream dreams that never were and ask why not” said John F. Kennedy.

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Executive Summary

Mr John Cohalan entrusted J J Keane and Brian Fogarty with a project. They were to present a business plan in the manufacturing of two items. Upon completion of the project an interactive audio visual presentation was to be made to their class.

Secondly, a written report is to be submitted to Mr John Cohalan.

Since Ireland is a small, open economy the partners felt it important to look at its place on the world economic stage. It is one of the fastest growing economies. Its competitiveness is in danger because of rising labour costs, the rising euro, and the threat of inflation. It meant thinking globally not just to who is supplying fireplaces put also for sourcing raw materials in the manufacturing of fireplaces. It is clearly a global market that the firm is competing in both in purchasing and retailing.

The manufacture of fireplaces is labour intensive. Therefore the Asian countries especially China with cheaper labour could make inroads into this market as they could in many areas of manufacturing. Currently, many of the raw materials come from China with comparable quality to European products but better priced.

Ireland is a nation flush with cash, and growth rates will remain at about 5% to the end of this decade. As market research will show Ireland is continuing to need fireplaces for the 60,000 houses a year it is currently building. This is anticipated to continue so for the next 8 years. Homeowners are eager to spend to maintain high standards in their new and second-hand homes.

The younger customer tends to like the light coloured soft woods demanding quality marble and granite. The older purchaser prefers the darker solid woods, like mahogany, but again seeking quality marble and granite.

The partnership is competitively placed. It has a premises a few miles from Limerick city at a very nominal rent. It has an opportunity to enter an agreement with GMP which would be financially beneficial to them. GMP is part of a UK conglomerate that imports all the main components for fireplaces from China which are made to GMP specifications. This deal would give them the cheapest quality raw materials in Ireland. Signing this agreement would mean that K&F Fireplaces would buy solely from GMP. JJ has shown his financial aptitude over the past 20 years. He is passionately interested in production and maintaining quality standards – no half measures for him. Brian has a strong background in marketing, being able to acquire the vital information on what customers want. They would intend employing a skilled labourer in the summer of year two for deliveries, and labourers work around the plant in mixing concrete and assembling the marble after training.

The partnership intends to set up their business as partners initially. They will finance it with a loan of €50,000 from PTSB and €65,000 from their own personal savings.

Their motto is – “if you fail to plan then you plan to fail”. They wanted to be prepared for the obstacles that will arise, for new skills they will have to learn, for tasks they will have to handle, for rules and regulations they will have to encounter, right through to the agencies that will help.

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1. They have the personal wherewithal to run this business.

2. There is a market for fireplaces in Ireland.

3. The chosen prize winning designs appeal to people.

4. Examined current competitors and how they are going to enter the market.

5. Running costs for the firm.

6. Projected income and expenditure for the business.

7. Premises with planning permission to manufacture the fireplaces.

8. Sourced the machinery, raw materials, and the workforce.

9. Skilled in the production of the fireplaces.

10. Experienced in Promotion & Sales.

11. Understand what is required in financing the business.

In preparing this Business Plan all of Microsoft Office packages were used including the flawed Solver, or more correctly the limited Solver facility. One of the partners formulated a mathematical expression which overcame these limitations with Solver.

This facilitated their easy use of Solver having six different time constraints which are visible in Heaven.xls.

All prices are quoted inclusive of Value Added Tax (VAT) unless otherwise stated.

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Self-Assessment

J. J. Keane showed entrepreneurial skills at an early age when he invested some of his Confirmation money in market gardening on the home farm where the fruits of his labour were sold in the Milk Market, Limerick on early Saturday mornings.

During his years of study in secondary school and in Maynooth for a degree in philosophy and theology he worked with his neighbour „Franklin Fireplaces Directâ€&#x;.

There he gained valuable experience in the manual trades of making fireplaces and the managerial skills of running the business.

After going to work in the civil service he invested in three holiday homes at the age of 19 years. Because the scale of the operation was not big enough he sold it on making a modest profit from the venture.

He turned his eyes from holiday homes to real estate. In his late 20s he had enough capital to make his first serious investment. From there on everything snowballed with further purchases. At the age of 40 he retired a millionaire from fulltime work to pursue software engineering and live with his ageing parents. His current earnings come from being a part-time property manager.

During those years of purchasing, renovating, real estate he made a huge network of contacts in the construction business and the ancillary businesses and services. He had first hand experience in raising hundreds of thousands of Irish pounds to finance his projects as well as hands on experience of the many and varied tradesmenâ€&#x;s job.

As well as being efficient in managing projects he developed personal qualities of resilience in the face of setbacks and crisis. He has been described as affable with people and effective in teamwork, applauded for being articulate in public speaking, astute in offering counsel, and resolute in work. He is critical in thought which this project will show. He gained this latter quality from his studies of philosophy and theology which earned him an NUI degree. This also included the study of psychology and sociology.

Because of the appeal the construction industry has for him he would like to engage in the manufacture of fireplaces. His particular skills that will be invaluable to this project are the fact that he has: 1.

2.

3.

4.

first hand experience as an manager and especially in construction financial resources and backing to support this project years of experience in the trades of construction and the determination to persevere in the face of discord.

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Brian Fogarty holds a degree in Business and Economics from Trinity College Dublin and a Master of Business Studies in International Business from the Michael Smurfit Business School at University College Dublin. Both of these provide him with a strong knowledge of the theoretical concepts associated with strategy, marketing, and to a lesser degree, finance. Significantly, over many group projects, Brian learned many skills that will be valuable in working with others.

In addition, he has worked for two years from Goodbody Stockbrokers, where along with other members of his team, he was involved in the start up of the first online stockbroking service in Ireland. While hardly the same line of business as that of K&F, his time at Goodbody‟s nonetheless involved much work in spreading knowledge of the new service to Goodbody‟s existing customer base, an activity not unlike K&F‟s task of creating awareness of it‟s products in an already mature market.

Also, since these potential customers‟ portfolio managers frequently had strong reservations regarding the possibility of losing their custom to Goodbody Online, Brian also gained valuable experience of how competitive business can be, and a keen appreciation of how limited mere business theory becomes once you enter real world environments.

Finally, Brian‟s uncle works in the plumbing business, and over many summers of helping him out, Brian has gained some limited experience of the construction business and how business is conducted in Ireland among small businesses not unlike K&F fireplaces.

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Overview of the Irish Market Review of Ireland’s Economy in the Recent Past

In 2003 the Economic and Social Research Institute published an overview of the Irish Economy 1 and these are some of the points it made: Ireland is a small, open, trade-dependent economy and is one of the fastest growing economies in the developed world. Its openness is reflected both in the international mobility of its labour and capital.

Over the last decade, unprecedented economic growth has seen the level of Irish real Gross Domestic Product (GDP) almost double in size.

Irish living standards have increased significantly over the last decade. A recent the Organisation for Economic Co-operation and Development (OECD) study found that in terms of (GDP) per capita, based on current purchasing power, Ireland is ranked 4th in the world. Ireland‟s GDP per capita in 2001 is estimated at US$ 30,000, with only the US, Norway and Luxembourg ranking higher.

PriceWaterhouseCoopers offers similar positive views in a recent publication, “Doing business and investing in Ireland”2, wrote, “With an economy growing at a rate consistently above EU levels, Ireland is one of the most favoured locations for investment in Europe. This is evidenced by approximately 1,240 companies from all over the world which have chosen Ireland as their base to do business.

The continued success of Ireland as an investment location has been founded on the positive approach of successive Irish governments to the development of businesses. This approach has ensured a favourable tax environment, competitive operating costs, a productive and flexible workforce with world-class support services.”

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In a very visible manner, the strength of the Irish economy is demonstrated in the vast amount of money, almost €20bn in 2001, being spent of new residences. The following graph shows the number of new dwellings, both social housing and private completed the years 1992 to 2002. This is based on figures supplied by the Central Statistics Office.3

New Dwellings Completed

Thousands

22464 21391 26863 30575 33725 38842 42349 46512 49812 52602 57695 70 60 50 40 30 20 10 0 1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

The value of construction output in 2001 exceeded €19.7bn. This represents 19% total economic activity in Ireland. The output of the construction industry is now 50% higher than the output of the Agricultural and Food sectors combined.

Employment in the industry has now reached 185,000. A further 75,000 people are employed in the construction materials/materials providers and within the construction profession.

Medium-Term Review of Ireland’s Economy Some of the main findings of the ESRI Medium Term Review4 include: The economy is quite strong. While in the short-term the outlook is very uncertain, the Irish economy remains fundamentally healthy. In the medium term it has the potential to grow at 5 per cent a year. Any underperformance in the next two years is likely to be matched by a subsequent spurt of activity, returning the economy to its trend growth path from 2005.

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Competitiveness is a major challenge. A further substantial appreciation of the euro could also pose serious problems for the Irish economy. However, there remains the possibility that the actual outturn would be better than forecast, fuelled by skilled immigration and further infrastructural investment.

The building sector will not grow significantly, with some fall in output likely later in the decade. This is supported by the Construction Industry Federation who forecast, “the medium-term outlook for the industry remains positive for both activity and employment levels following a significant dip in 2001 in the absence of any international shock which would sharply reduce Ireland's economic growth performance.”5 OECD‟s Economic Outlook for Ireland can be summarised in June 2003 as follows, after unexpected resilience in 2002, real GDP growth is forecast to slow to 3¼ per cent in 2003, before rebounding to 4¼ per cent in 2004 with the strengthening of export market growth. Wage pressure is expected to weaken throughout the forecast period. While inflation is also forecast to fall, it is likely to remain above the European Union average, reflecting persistent price pressures in the service sector.

Now that private sector wages have begun to adjust to slower growth.6 In September 2003 ISME echoed similar concerns about high inflation when it said that small business is suffering through increased costs, thus undermining competitiveness.

Many sectors particularly in manufacturing are already under threat as evidenced by everyday announcement of redundancies.7

Drawing from the past economic trends and predictions for the future from reputable bodies the following conclusions are pertinent to the manufacture of fireplaces.

1. The number of houses being built is currently running at almost 60,000 annually and this growth will remain comparatively steady to the end of the decade. This offers a strong market for fireplaces.

2. Skilled immigration will continue to be attracted to the open Irish market giving a productive and flexible workforce.

3. The Irish economy is set to grow at 5% up to 2010 with one or two years maybe not reaching this target. It is dependent on no international crisis. This will give a large disposal income to the consumer.

4. With an open market, rising labour costs, appreciation of the euro, high inflation, competitiveness is weaning especially with imports from the Far East.

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Mission and Objective

Mission Statement It shall be the mission of K&F Fireplaces to manufacture and sell high quality, Irish made fireplaces, crafted from the finest materials sourced both from home and abroad. The fireside has always traditionally been at the centre of the Irish home, and with a K&F fireplace in your living room,

Objectives

Short term objectives 

To successfully establish their business and to begin trading as K&F Fireplaces.



To move into profitability within one and a half to two years.

Medium Term Objectives  

To expand their product range so as to cater for a wider range of individual tastes.

To expand their workforce in line with the growth in product demand.

Long Term Objectives 

To move into the fireplace retail and installation market, if necessary switching premises or acquiring a second premises.



To expand K&F Fireplaces to service a greater portion of the country.

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Market Research The best businesses don‟t start simply by identifying a market need and then filling it.

They identify where the need is going to be and meet it when it arises. In football parlance, you have to look where the ball is going to be, not where it is now. The kernel of success with this venture is manufacturing a product that the builder and retailer will buy. It must be developed in response to customer demand, and do so in a sustainable manner. This is pivotal. Everything else revolves around this one issue.

As the UK Chartered Institute of Marketing say: „Marketing is the management process responsible for identifying, anticipating and satisfying consumers‟ requirements profitably‟.8 Firstly, the partners needed to determine whether there is a market for fireplaces. In the above chapter, „Overview of the Irish Market‟, they have shown that there is a market for fireplaces with the large number of houses being built. They also showed that people have and will continue to have the ability to purchase fireplaces.

Secondly, they needed to build up a customer profile of their prospective customers.

This included knowing who their potential customers are and why they will buy from them rather than from their competitors.

They drew up a questionnaire for retailers and builders. Coupled with the questionnaires were 7 samples of timber, 2 samples of medite, 20 samples of marble, resin stone-effect, and granite all of which they were familiar with and could be used in the manufacture of fireplaces. They were asked to show how popular these materials were with their customers.

Ten large retailers and ten moderate sized builders in the Munster region were interviewed in autumn 2003. Appendix 1 (RetailersQuest) contains the questionnaires while the results deduced from them are in Appendix 2 (Results).

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Marketing Strategy9 Marketing has moved from Henry Ford‟s old adage that the car buyer could have „any colour he wanted so long as it was black‟. The partnership has embraced the headline promise offered by Texaco, „100% satisfaction guaranteed – or your money back‟. In the 1980s Michael Porter suggested that businesses should develop a market-focused approach. The partnership want to do that in order to build a more concrete and long-term relationship with customers. They believe that first impressions are lasting i.e. if the customer has a positive initial experience then they will most likely stay with them. Generally, people go to the same doctor, accountant, solicitor, garage, pub, bank, barber, hairdresser etc. throughout their lives. As a staff member at Dillon‟s Garage, near the Parkway expressed, „90% of our customers are regulars. I believe people are creatures of habit.‟ The partnership want to offer a high level of service and show a deep interest in doing business with its customers because they believe that is what determines whether buyers will remain loyal or decide to take their business elsewhere. Marketing was the task of the salespeople but now it is seen as an attitude that should permeate the minds of all staff.

So what precisely is marketing? The Institute of Marketing writes: Marketing is the creative management function which promotes trade and employment by assessing consumer needs and initiating research and development to meet them. It coordinates the resources of production and distribution of the goods and services; determines the nature of the total effort required to sell profitably the maximum production to the ultimate user.10 Ultimately, the partners think of marketing as endeavouring to widen public understanding and confidence in their fireplaces and keep the customer satisfied.

Since this is such an important aspect of business the partners took a model of marketing proposed by Tiernan, Morley, and Foley which is outlined below; the former two authors are UL lecturers.

Analysis

Planning

o Customers o Competitors o Company Capability o Market Research

o Strategic and tactical marketing plan o Integration into overall plan

Marketing Mix o Products o Prices o Promotion o Distribution o Services

Feedback

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Control o Monitoring effects of plan o Controlling manpower and costs o Measuring market response

Market Analysis Market research of the potential customers can be viewed in the previous chapter.

Since buying a fireplace is classed as a relatively expensive and infrequent purchase people move through a sequence of steps in the buying process. They gather information, evaluate alternatives, and make a purchase decision. To capitalise on this the partners produced a brochure which can be viewed in Appendix 3. This enables the customer to give time and thought to what K&F Fireplaces have actually on sale.

The quality of the materials used by them is second to none in the world since they have sourced them from the best exporters all over the globe.

The last step in the buying process is post purchase evaluation. This is where they aim to achieve high satisfaction rates with customers who will result in the promotion of their brand name and products.

Analysis of the competitors is essential. Firstly, who are they? How will they react to a new competitor in the market? What are their strengths and weaknesses? Michael Kinchella of GMP through some light on this issue. He is a supplier to fireplace retailers in the south of Ireland. He organised a golfing day out for his customers. The rivalry between some of them was so intense that he finally had to hold a three-day outing for the different factions so they wouldn‟t have to meet each other.

K&F Fireplaces are competing in the medium to lower end of the market. They are selling very similar fireplaces as their competitors. The raw materials in most cases are sourced from the same suppliers. The machinery user, the standards employed, and staff qualifications are very similar. This is most certainly true for the purchase of resin, marble, and granite. Where the difference does come is in the moulding of the timber mantelpiece.

Kilkenny Fireplaces produce award-winning fireplaces, due principally to their ornate mantelpieces which they specialise in. Treaty Fireplaces have the sole franchise for their products in the Mid-West region. Even though Kilkenny products are of a very high standing the Treaty showroom is more akin to a builder‟s yard than the stylish ambience that people look for today. Secondly, since Kilkenny fireplaces command such a high price the retailer‟s margin is small and Treaty Fireplaces doesn‟t tend to highlight their products.

The partners have closely replicated one of Kilkenny‟s fireplaces and are giving higher margins to their potential customers who haven‟t got Kilkenny‟s products.

This will encourage other potential customers to offer K&F Fireplaces an opening in their market. Even though they are new entrants into the market they have a large financial starting, J. J. can work for the partnership for 12 months without taking an income because he has independent financial sources, and their plant is very cheap to rent. This will be discussed in more detail in the chapter, „Financing‟. The larger competitors will not be able to compete financially with the partners who do not have the huge expense of an urban premises and high wage bills for a large staff.

Gerard Murray Products will examine their plant after one year. If the K&F Fireplaces‟ sales and standards are high they are prepared to give them their franchise for the Mid-West region. This is important because they are part of an English-Irish conglomerate that has an agreement with a Chinese factory to manufacture products to their standards and specification. Because of their huge buying power and the low Chinese wage bills GMP raw materials cannot be matched for quality and price. Then the partners would have to agree to buy exclusively from them.

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The biggest weakness is that the partners are new to the market, not established and have no track record for quality. Because of their other strengths they have the capacity to make inroads into the market and establish their brand name as one for quality. They have reason to be optimistic as one builder made this opening remark to them, “if the price is right you have a customer�.

SWOT Analysis

EXTERNAL FACTORS: Opportunities The continued rise in the number of new dwellings in Ireland. Even as growth in the Irish economy has slowed in comparison with the levels experienced in the mid to late 1990s, the number of new homes under construction continues to rise year-on-year. The vast majority of these new dwellings will be fitted with a fireplace.

New Dwellings Completed 22464 21391 26863 30575 33725 38842 42349 46512 49812 52602 57695

Thousands



70

60

50

40

30

20

10

0 1992

1993

1994

1995

18

1996

1997

1998

1999

2000

2001

2002



The prospect of expanding their range of products going forward.

Although they plan to offer only two products initially, they intend to expand on this as their knowledge of the market deepens. As is noted in the section on „marketing control‟, to stand still in a market that is changing around you is not an option.



The signs of recovery evident in the Irish and world economies. According to the ESRI, while the short term outlook is quite uncertain, the Irish economy still remains fundamentally healthy with a potential for growth of up to 5% in the medium term. This is echoed by the OECD who forecast growth of over 4% in 2004.

Threats 

The existence of established experienced competitors. they are entering a mature market populated by competitors with many years of experience in the business. Therefore, a willingness to persevere and to learn quickly will be essential to success.



The emergence of China and elsewhere as sources for cheaper raw materials. As China opens up more and more to the world market, a combination of cheap labour and an abundance of raw materials have implications for many industries, including the fireplace industry. The same can be said of Eastern European countries as the EU expands in that direction.



Continued uncertainty in the Irish and world economies. As stated above, the Irish and world economies are currently performing better than of late.

However, with the continued possibility of terrorism and conflict, coupled with the continued low risk threshold of investors (particularly in the technology sector) there is still much uncertainty in the economy.

Furthermore, the present high U.S. growth rates owe much to President Bush‟s summer tax cut, so a fall in the growth rate is therefore expected in coming quarters. Alan Greenspan does not envisage a rate increase between now and the end of 2004, and as long as this is the case, any optimism must also be accompanied by due caution.



Inflation. Ireland continues to be beset by an above average rate of inflation, which has the potential to increase costs for a small business such as K&F, thus eroding competitiveness.

INTERNAL FACTORS: Strengths 

Distinctive product. Not content to simply duplicate the products offered by other operators in the industry, chief among their strengths will be their distinctive product.



Use of high quality materials. While other operators in the industry are content to offer products composed of materials that will not last the test of time, K&F is dedicated to superior quality.

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

Dedication to success. As highly motivated individuals not easily discouraged by initial difficulties or disappointments, they are determined that K&F will penetrate the fireplace industry and make its mark.



Own premises. While other entrants to the market may be at a disadvantage owing to the need to invest in premises, K&F are fortunate in that they already have their own premises.



Collateral. Banks will not lend money without collateral. K&F can use its premises as collateral to acquire finance for initial set-up and for future expansion of its business.



Barriers to entry. On the whole, the fireplace industry would appear to present medium barriers to entry. While this presents challenges to K&F as new entrants, it provides a measure of protection once that difficult hurdle has been crossed.



Willingness to learn. They are aware that they are entering a mature industry and that they face a learning curve in order to make K&F a success.

Weaknesses 

Inexperience. JJ and Brian are new to self-employment, and new to the fireplace industry. In addition, this is their first time to go into partnership together. All of these factors combined mean that their willingness to learn and to persevere will be vital to the success of K&F.



Narrow initial product range. Coming to the market with an initial product range of just two fireplaces will deprive K&F of a certain number of customers in the short to medium term. Therefore it must be a priority to expand their product range as soon as is practically possible.



Need to establish brand name and reputation. Through a combination of advertising and word of mouth, it is vital in such a mature industry that K&F makes efforts to extend knowledge of their brand throughout the market.



Location. While their rural setting provides K&F with advantages in terms of low rate charges and set-up costs, it is also liable to present challenges should they wish to enter the retail market.



Debtor’s slowness to pay. K&F will not be operating in a seller‟s market, and therefore must be cognisant of the reality in the industry that builders are frequently very slow in paying their suppliers.

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Porter’s Five Forces

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Threat of Substitutes The threat of substitutes comes from several angles. More and more homes are now heated by oil or gas, and due to safety concerns, more consumers are now opting for stoves as opposed to fireplaces.

However, the market for fireplaces remains a strong one.

Government Tax Rates Inflation Rates Charges

Bureaucracy

Supplier Power

Buyer Power

For almost all of the raw materials required to build a fireplace, the abundance of competing suppliers results in supplier power being quite low.

Since K&M will initially be selling to the construction industry and the retail trade, the potential is there for buyer power to be quite high since they can trade off one fireplace manufacturer against another.

RIVALRY

Barriers to Entry The barriers to entry to the fireplace industry could best be described as being medium.

Entering the industry obviously does not require the capital outlay of, say, a car company, but on the other hand, it is not as easy as, for example, going into business as a website designer. The cost in terms of plant and machinery therefore class this as an industry with medium barriers to entry.

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Chance

Porterâ€&#x;s model has been criticized for being quite a static model, but is nevertheless extremely useful for analysing any industry, particularly a mature one such as the fireplace industry. Nevertheless, in order to compensate for this limitation in the Porter model, it is vital to re-evaluate the situation in the industry on an ongoing basis. This is addressed in the section on „marketing controlâ€&#x;.

Competitive Advantage (Porter)

Resources

Distinctive Competencies

Cost Advantage or Differentiation Advantage

Value Creation

Capabilities

One of the central goals of business strategy is to create and sustain a competitive advantage. A competitive advantage exists when a firm is able to deliver the same benefits as its competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables the firm to enjoy high profits than its rivals by delivering better value than its rivals.

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Value Chain Analyses Inbound Logistics

Administration & Infrastructure Operation s Outbound Logistics

Product & Technology Development Sales & Marketing Service

In order to go about creating a competitive advantage, Michael Porter identified five generic steps that could be used to analyse any firm from a value-creation viewpoint.

As a result, Porter argued, sources of competitive advantage could be found.

Competitive Advantage Gerard Murray Products (GMP) Ltd., based in Ashbourne, Co. Meath are wholesale distributors of a wide range of fireplace and heating products, and supply almost all of the materials - apart from the timber - required for the manufacture of both the Thomond and Liberty fireplaces.

The major attraction of GMP is that they are part of a conglomerate of buyers, Gallery Fireplaces in the UK, who use their collective buying power to lever cost advantages by purchasing in bulk from a Chinese manufacturer. Not only that, but Gallery Fireplaces sent engineers, designers and ceramicists to China to work with the manufacturers in improving the quality of the products they purchase. GMP as part of Gallery Fireplaces has worked proactively to get a quality comparable to European standards at a much lower price.

Michael Kinchella is GMPâ€&#x;s sales representative for the mid-west region in Ireland.

According to him GMPâ€&#x;s business strategy involves signing contracts with manufacturers on a region-by-region basis giving them the sole rights to purchase GMPâ€&#x;s materials. GMP is willing to take on K&F as its sole trader in the mid-west region.

This lucrative deal - similar to the notion of car dealerships - gives K&F a significant cost advantage over its competitors, thus affording them an important source of 24

competitive advantage. Because of the cost advantage afforded to K&F by the agreement with GMP, they can produce fireplaces at a much-reduced cost.

For example, the Thomond fireplace is close in appearance to an international awardwinning fireplace currently manufactured by Kilkenny Fireplaces. They can offer this similar product - and do so on a sustained basis - for significantly less. As K&F attempts to penetrate the market, they are in a position to offer retailers an increased mark-up as against that offered by their competitors.

Market Planning Market planning involves asking three crucial questions: 1. Where are we now (markets, products, competitors)?

2. Where do we want to be (marketing mission)?

3. How do we get there?

In spite of being new entrants to the market the SWOT analysis shows that they are motivated young men who have considerable competitive advantage with them as they are propelled into business.

Within two years of starting business they want a 7% share of the market in the Mid West which amounts to selling 420 fireplaces annually. This will give them both a good income and money to invest in the business. Even though they are offering only 2 standard fireplaces they are being sold in a huge range of colours and materials.

They intend to expand their repertoire of designs each year as they listen to their customerâ€&#x;s preferences and peruse what is happening in the national and international fireplace industry. With J. J.â€&#x;s understanding and interest in the real estate market he is keen to invest in city centre property with the possibility of retailing their fireplaces in it.

They are going to reach their intermediary goal of breakeven within 18 months by integrating key areas of business: the product, the price of the product, attracting the buyer, and channels of distribution, as described by McCarthy and Perreault 11. It will also include controls flowing from periodical reviews of the entire marketing operation. All this is described as the marketing mix, which follows next.

Marketing Mix Huge investment of time and talent has been made by the partners in designing their two fireplaces. Coupled with that work, time was and is being invested in promoting these two products. Prices are being kept low and margins high for the partners to gain market share and reach the breakeven point. As customers become aware of the products sales will grow, then production. This will lead to expansion, opening further opportunities and ensuring that the product mix will have both width and depth to it meaning a larger range and variety within each item of the range.

Once the fireplaces go on the market they have a life cycle which ultimately leads to decline. This happens after sales peak. As this is about to happen there are two options open to the partners. The fireplace needs to be redeveloped and relaunched to revive customer interest. A new selling point needs to be presented. This is as 25

important as new product development according to T. Nilson 12. The second option is produce a new product in response to customer demands.

Next the fireplace has to be priced. Initially the production costs, a small mark-up for the partners, and VAT is the selling price. This will give the customer a higher margin and make a greater inroad into the current market. This is known as penetration pricing. Once the partners have received their target share of the market i.e. 7%, and established themselves for quality then they can review their pricing hoping for an increase.

As they launch their business their promotional aim is to highlight the brand name „K&F Fireplaces‟, make prospective customers aware of their two fireplaces, highlight its distinctive qualities and features to the consumer. To the initial customer i.e. builder and retailer, in addition to the above they will contrast it as value for money when examined against other fireplaces.

Personal selling is the primary method of promoting their fireplaces. They sought out potential customers through the yellow pages. Then they met them and gave them a copy of their five-page brochure. There will also be an insert for the customer explaining trading conditions. To the retailers, not the builders, they would place a sample of both fireplaces in their showroom free of charge with a large poster and a bundle of brochures. Once the customer agrees to accept the fireplaces the partners maintained close relationships with them. Both the retailer and builder proved to be a valuable source of customer information and marketing intelligence.

The firm would attend „Ideal Home‟ Exhibitions in their area. They would have an insert in the yellow pages, sign on their premises for the public to see, signs on the front and sides of their van. After initial sales they are conscious word of mouth will be a great boon to promoting their business.

The final concern in this section on the marketing mix is distribution. This calls on the partners to have their fireplaces for sale in the right place, at the right time and at the right price. They have purchased a van which they will use for transporting the fireplaces to the their customers. As orders increase and the seasonality of sales are logged they will be able to decide from these trends on the numbers they will need to have in storage. This will ensure that they can respond to the prompt demand for a fireplace. 

Marketing Control

Having drawn up their initial marketing strategy and begun its implementation, their marketing duties are far from over. Rather, because the task of marketing a firm‟s products is not a one-off activity but a continuous one, their task as marketers is only beginning. While Porter‟s model is an extremely powerful tool in a static situation, its limitations quickly become apparent in a dynamic environment.

For a wide variety of reasons, consumer tastes change over time, as does the power of buyers and suppliers, the quantity and quality of competing products, and the resources and capabilities of competing firms.

Therefore, as their first and subsequent years of trading progress, it is vital that they continuously reassess other products in line with their performance in the evolving marketplace. They must never stop listening to the market, in particular when it 26

comes to adding to their range of products and services. To constantly rely on their initial research will simply not be good enough.

This process of re-evaluating their performance and adjusting their marketing strategy accordingly is known as „marketing control‟, and provides the basis for a feedback loop into the first stage of the process.

One of the tools used in self-evaluation is finding out the Break-even in K&F Fireplaces‟ sales. Illustrated below is a diagrammatical explanation of what it means:

This is the formula going with it showing how the break-even point is arrived at:

Break  Even _ Po int 

Fixed _ Costs Sales _ Re venue _ per _ Unit  Variable _ Costs _ per _ Unit

This is important to Brian in the Sales and Marketing department. In 2004 this is the break-down:

Thomond Fireplaces: 473 

118,264 600  350

OR 27

Liberty Fireplaces: 525 

118,264 400  175

In 2004, 473 Thomond Fireplaces or 525 Liberty Fireplaces must be sold to reach break-even. In practical terms, a combination of both will be sold which will be somewhere between 473 and 526. The threshold that has to be crossed is â‚Ź118,264.

This figure is reached by multiplying the number of each fireplace by the profit contribution on each, and then adding them.

At their monthly meetings Brian will need to show that his sales are surpassing these figures. Otherwise he will have to offer an explanation and a strategy to reverse that downward trend.

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Legal Structure 

Simple Partnership

The allure of owning a private limited company appealed to JJ and Brian initially. So they visited Liam Judge, an accountant, for advise on the merits of pursuing that idea.

He suggested that they should presently form a simple partnership.

He outlined what was entailed in starting a limited company. Financially it would cost about €1,000 to set up. Accounts would have to be audited by a qualified accountant costing an extra €2,000 at minimum annually on top of the usual preparation of yearly accounts. They must be then lodged in the Companies Registration Office on time to avoid penalties. They are available to the public to examine and that also includes their competitors.

They learnt the main advantage of a limited company is that their financial liability is limited to the assets of the company. That is the theory. That has been rolled back with current legislation. If the directors of the company are shown to be guilty of reckless or fraudulent trading, or where the company has failed to keep “proper books of accounts” they can be pursed personally through the courts for losses suffered by their traders or investors. On top of that there is also a whole raft of legislation governing the setting up and operation of private limited companies. The two principal documents to be completed are – The Memorandum of Association and the Articles of Association. For the uninitiated in business this is putting expenses and an unwanted burden on their shoulders.

As regards the loss of their own money, well the banks will not give out loans that are unsupported. The financial institutions have to be assured that their money will be repaid. Debtors are the only people who could loose financially with a limited company.

So what are the advantages of a private limited company? Geraldine Thornton, a solicitor explained three principle benefits. The limited liability would most certainly kick in where insurance policy didn‟t cover a loss. She explained that insurance companies are reluctant to providing an all encompassing, comprehensive insurance cover e.g. after a fireplace is installed will insurance cover extend to damages that it might cause in twenty years time? If it didn‟t the limited company would protect the owners from unlimited responsibility. In a partnership they would be jointly and severally responsible for losses and liabilities.

Secondly, when the profits in a business get very large there is a lower tax regime for private limited companies which is not available to partnerships.

Finally, Ms Thornton, highlighted that there can be extra problems in sharing the assets when one of the partners leaves or dies. It may even result in the closure of the business. This is avoided with a private limited company because it is a separate legal entity from its shareholders.

They chose to set up a simple partnership. They went with Liam Judge‟s advice for the following reasons.

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The accounting and legal costs are much less. The benefits of Corporation Tax will not arise in the early years.

When securing borrowings from the bank they need to provide collateral whatever legal structure they adopt. Risks can be covered by business and personal insurance which are outlined at the end of this section.

Liam Judge explained that the company name must be registered. This is done by completing Form RBN1B and sending the prescribed fee of €25 to the Registrar of Companies in Dublin. Registration of a business name is obligatory if any individual or partnership carries on business under a name other than their own true names. Its purpose is to make public the identities of those individual(s) being the legal entity behind the business name. This is to comply with the “Registration of Business Names Act, 1963”. They have chosen “K&F Fireplaces” because it is unique, easy to remember, pronounce and spell, informative and image-creating. It is not a registered company‟s name or a trade mark.

The banks require this before a business account can be opened. The company also needs to register with the tax office. He explained that when profits grow thought should then be given to starting up a private limited company.

Since a partnership, essentially is an agreement between two or more people to go into business together it would be wise to draw up a formal agreement. The agreement addresses the issue of liabilities, losses, profits, and one of the partners abandoning the partnership. The signed partnership agreement sets out how the business is to be financed, how profits and losses are to be shared, and what will happen if one of the partners decides to leave.

If the partnership breaks up, for any reason, all business contacts need to be notified immediately and the proprietor needs to formally take „public leave‟ of the arrangement. Otherwise, he could remain liable for the partner‟s continued activities and end up being sued for his liabilities, according to David Kirby13.

Insurance Business insurance will cover the following areas of a business:       

Fire – to cover rebuilding costs following a fire.

Buglary/theft – to replace stolen or damaged goods All risks – coverage against loss of assets, however caused.

Public liability – coverage against claims by members of the public.

Product liability – coverage against loss relating to defective or dangerous products.

Employer‟s liability – coverage against claims against staff.

Motor insurance – cover against driving accidents.

Personal insurance is worth considering when the K&F Fireplaces are up and running. It grants security to JJ and Brian in the case of sickness or death. It will provide an income or lump sum. This will help in providing replacement staff and 30

allowing the business to continue. Their families or next-of-kin will also be guaranteed financial security. This insurance is costly.

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Taxation14

K&F Fireplaces are subject to Income Tax, Value Added Tax (VAT), and PAYE/PRSI. All figures quoted below relate to the tax year 2002.

They are obliged to notify the Revenue Commissioners of the establishment of their business. By returning the completed Form TR1 K&F Fireplaces are registered for the relevant taxes. They will receive a “new Business Visit” from a Revenue official who will go through the requirements to ensure that you have proper systems in place.

Calculating business taxable profits Taxable profits are calculated by deducting allowable business expenses from turnover. Turnover is the gross amount of income earned (i.e. total amount for sale of goods or provision of services) by a business before deducting any business expenses.

This turnover figure should not include VAT. If a business makes a loss, it is either offset against other taxable income or carried forward against the future profits of the business.

Revenue expenses (expenditure) cover day-to-day running costs (exclusive of VAT).

Capital expenditure is regarded as capital spent on acquiring or altering premises which are of lasting use in the business. It cannot be deducted in arriving at the taxable profit. Capital allowances which is the wear and tear allowance of capital expenditure can be deducted e.g. office equipment, business plant and machinery.

The following gives a diagrammatic view of what has just been explained: Everything below is Exclusive of VAT Profit = income – expenditure Turnover is the Income Revenue expenses is expenditure Total sale of goods Revenue expenses Allowable: Provision of services Purchase of goods for resale Wages, rent, rates, repairs, lighting, heating etc Running costs of vehicles or Machinery Accountancy fees Interest paid on any monies borrowed to finance business expenses/items Lease payments on vehicles or machinery used in the business Capital expenses not Allowable Purchase of business premises Alteration of business premises Capital allowances Allowable Wear & Tear on capital expenses

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Self-assessment Income tax is payable by JJ and Brian on all income earned in the tax year which now corresponds to the calendar year. They will be calculated on salaries, investment income, rental income, and on annual profits that each receives from K&F Fireplaces.

Their preliminary tax, tax returns, and any balance of tax, must all be submitted on or before 31 October each year. These charges include PRSI and Health Contribution.15 It is 100% of what was paid the previous year or 90% of projected earnings for this year.

PAYE/PRSI JJ and Brian are obliged to deduct tax at a specified rate from an employee‟s pay.

This system is known as Pay As You Earn (PAYE). They have also to deduct Pay Related Social Insurance (PRSI) on behalf of the Department of Social, Community and Family Affairs. The system is designed so that, as far as is possible, the correct amount of tax is deducted from an employee‟s pay to meet his/her liability for the year. The standard rate of income tax is 20% and 42% at the higher rate.

These payments must be paid to the Collector-General within 14 days from the end of the income tax month during which the deductions were made. A form P30 Bank Giro/Payslip is issued to the employer each month on which the figures for total tax and total PRSI contributions should be entered and returned.

Or JJ and Brian can arrange to pay PAYE/PRSI through a direct debit scheme and make an annual return/declaration of liability. At the end of the tax year, they must complete end-of-year forms P35, P35L and P35/T which are returned to the Collector-General.

Below is an example of the weekly deductions to be made from an employee earning €450 each week:

What Wages Cost Weekly Wage € 450.00 Employee PAYE

€ 45.00

Employee PRSI

€ 21.92

Employer's PRSI

€ 45.00

Employee Receives

€ 383.08

Revenue Receives

€ 111.92

Costs Employer

€ 495.00

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VAT Valued Added Tax is a consumer tax collected by VAT-registered traders on their supplies of taxable goods and services in the course of business and by Customs & Excise on imports from outside the EU. K&F Fireplaces are obliged to register and pay VAT because their annual turnover is likely to exceed €51,000 in goods or €25,500 in services sales.

They will pay VAT on goods and services acquired for the business, and charge VAT on goods and services supplied by the business. The amount by which VAT charged exceeds VAT paid must be paid to the Collector-General. If the amount of VAT paid exceeds the VAT charged the Collector-General will pay over the access to K&F Fireplaces.

VAT is charged at 21% on all sales of goods. VAT is charged at 13½ % on services offered. It is paid bi-monthly. VAT is due before the 19th day following the end of the two monthly period. It must be paid to the Collector-General through the Revenue‟s direct debit scheme and form VAT3 returned.

34

Accounting Daniel Defoe said, “A tradesman‟s Books, like a Christian‟s Conscience, should always be kept clean and clear; and he that is not careful of both will give but a sad account of himself either to God or Man.” Accounting is an integral part of a business.

Microsoft Office, especially Excel with its spreadsheets, is a most helpful software package in keeping records, but stationary will also be needed.

It consists of three steps: 1. Recording transactions 2. Analysing them so that they provide information 3. Interpreting them so that they are useful for decision-making.

Recording transactions The partnership have decided to record the following transactions:    

Purchases Sales Receipts for lodgements into the bank Payments of cash from the bank

Analysing transactions Analysis deals with categorising or processing the records in a meaningful manner.

When examining purchases the analysis could be done under the following headings: o o o o

Fixed assets Stock Overheads Miscellaneous

A similar analysis could be done for sales, and bank transactions.

Interpreting the figures the transactions offer This is where the fruit of recording and analysing is seen. This is where the purpose of accounting is most evident. This is where action within the business is impelled forward. It has to be done on an annual basis but either monthly or quarterly would be deemed necessary also.

At a most fundamental level records need to be kept in order to pay VAT, wages, bills, loans, overdrafts, and sharing profits. They are also necessary to charge customers for goods and services offered. This is essential, as credit granted or received will expire at the end of a time period.

35

The accountant will give advice on the kind of information that needs to be collated to run the business effectively. Examples of this would be: o Checking the bank balance – if it is always overdrawn, either schedule a meeting with the bank manager or examine the flow of cash in and out of the company. o If purchases are too high and sales are too low, this could lead to cash flow problems, so there may be a need to cut back on purchases. o If overheads are high, then it is time to look at the least necessary purchases – don‟t purchase a van for another 12 months.

At the end of the year the following documents are required by the Revenue Commissioners: o o o o

Trading Account Profit and Loss Account Capital Account Balance Account

36

Plant and Machinery

Plant & Planning permission We estimate that 1,000 square feet will be needed for manufacturing, as well as for the storage of both materials and finished products. This is based on similarly-sized businesses in their industry. In addition, there needs to be three-phase power in this manufacturing plant. J.J. has a suitable farm shed to offer at a rent of â‚Ź200 a month.

However, it will require some work in order to convert it to a production facility at a cost of â‚Ź15,000. This photo depicts how their plant will look when completed.

K&F plans to operate out of a converted hayshed in Ballysimon, Co. Limerick, a development which falls under the Planning and Development Act 2000 This law sets out the basis for all aspects of planning and building in Ireland, and stipulates that planning permission is needed for practically every significant development.

If applying for planning permission, a planning application form was obtained from the Limerick County Council. In addition to the submission of an application fee, copies of a location map, and a site plan. There are also requirements that the application be made publicly known through local newspapers and by erecting a notice on the site. The plans can also be viewed at the County Council offices and at local libraries.

A decision is normally returned within eight weeks of the submission of an application. This allows any member of the public to comment on or object to an application, and all such comments must be made available for viewing by the applicant.

Permission will generally not be granted if the plans contravene the local development plans that are drawn up every few years by each planning authority.

However, given the current presence of at least two other small businesses within half a mile of the proposed location of K&F Fireplaces - including a rival fireplace manufacturer - this is not expected to become an issue. Should the need arise however, failed applications for planning permission can be appealed to An Bord Pleanala.

37

38

As part of this production facility, the following machines will be required:

PANEL SAW(€4,840)

BAND SAW(€4,235)

OVERHEAD ROUTER (€6,050)

SPINDLE ROUTER (€4,235)

COPYING LATHE (€8,470)

FOUR FOOT BELT SANDING MACHI (€14,200)

These machines will all be sourced from Hopkins Machinery Suppliers, apart from the van pictured below (O‟Mara Motors), and the cement mixer (Heiton Buckley). In the event that a piece of machinery develops a fault, these firms will also service the equipment. Hopkins, their most important supplier of machinery, will come to the site within twenty-four to forty-eight hours, depending on urgency.

39

A table is required for the production of both the hearth and the insert. The frame of this table needs to be made of strong steel that can hold a granite top of dimensions 6 feet by 10 feet. The flatness of the granite top is essential for the correct production of hearths and inserts. Such a table costs €1,000, and they have secured one second-hand from Joe Kemmy, Limerick.

Costings for the above and additional equipment : Wet saw (for cutting stone) Diamond-tipped blades for wet saw Granite Table Angle Grinder (for smaller pieces of stone) Bollhoff spraying machine Belle, half-bag, Honda engine cement mixer Nissan Van Total cost

40

€1,800 €200 €1,000 €150 €4,000 €800 €20,200 €28,150

Sourcing the Raw Materials

Extra details can be found in the database: View Database for full listing of materials and their suppliers. After double clicking this K&F Fireplaces.mdb opens the Reports Object and double click „Materials Neededâ€&#x;. The same material is in printed form in Appendix 11, Materials.

Contact details for each of the companies mentioned below are in Appendix 12, Suppliers.

After compiling a list of all the raw materials that were needed to manufacture fireplaces the partnership needed to find suppliers for them. After consulting the Golden pages, recommendations from people in fireplace manufacturing, the internet, and a directory of Irish businesses they produced a catalogue of possible suppliers.

After ringing or writing to them at least one member of the partnership would meet with a sales representative from each of the respective companies. They travelled as far away as Athy, Co. Laois for one such meeting. The Dublin companies met with them while on their sales rounds in the south-west of Ireland.

They sought the following information when they met each of the company reps: 1. Range of products produced 2. Samples of the products 3. Price of products 4. Lead time for deliveries 5. Credit arrangements 6. Size of the company 7. Examine their production where necessary 8. Quality awards achieved 9. History of their past 10. Competing companies in the market

The standards of all the companies inspected were very high offering a very competitive and efficient service. Many of them are involved in the importing of materials from around the globe and show a prosperous future. Any of the raw materials, if ordered before 12 noon on Tuesday, will be delivered within 48 hours.

Initially, these companies wanted cash on delivery but after 6 months the partnership could apply for credit. 30 days credit is the standard. The prices quoted below are exclusive of VAT.

41

Granite

Amerillo Brazil

Baltic Brown

Bianco Luna Pearl

Blue Pearl

Eagle Black

Emerald Pearl

Eucalyptus

Multicolour

New Baltic Green

New Dakota

Pure Black

Red Venga

Rosso Porrino

Sapphire Blue

Ubatuba

Venetian Gold

Verde Gloria

Verde Star

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Marble

Bianco Carrara

Statuario

Statuario Venato

Calacatta Oro

Statuario Lightly Veined

Arabescato Cervaiole

Calacatta Carrara

Arabescato Vagli

Port'Oro

Marquinia

Bardiglio Carrara

Bardiglio Imperiale

Crema Valencia

Giallo di Siena

Broccatello di Siena

Moca Cream - Fine

Moca Cream - Rustic

Vicenza Antico

Pietra Vicenza

Breccia Antica di Siena

Rosa Portugal Chiaro

Rosa Portugal Venato

Rosa Portugal Salmon

Trani

Verde Alpe

Rosso Alicante

Rosso Francia

Rosso Verona

Rosso Vidraco

Verde Guatemala

43

Michael Kinchella from Gerard Murray Products Ltd visited JJ in Limerick with many samples of their products, colour brochures of their entire range, and photos of their new 50,000 square feet premises. They are part of a purchasing conglomerate involving Irish and UK companies who source most of their materials from a Chinese manufacturer who produces to their standards and specification. In general their overall costs are the most competitive. On the occasion item that competitors surpass them on the margin is very slight. Listed below are the products which would meet their needs.

Gerard Murray Products Ltd Product Price Insert €100 Granite hearth – unfilled €56 Granite insert – unfilled €90 Steel reinforcing – 15 items €29 Fireback €25 Fret €10 Grate €10 By buying in bulk prices would be much less. For example, an insert priced at €132 each would be purchased for €100 each if bought in a crate of 20 units.

When it came to sourcing granite, marble and stone glue the following companies responded to their invitation to be suppliers: Marble & Granite Supplies Ltd, Stonefacings Ltd, and Comet Marble. These were specialists in marble and granite as distinct from GMP Products above who were distributors of a much wider range of associated fireplace and heating products.

Marble & Granite Supplies offer the greatest supply of colours in granite as their website will show www.marblegranite.ie e.g. Amerillo Brazil, Baltic Brown, Bianco Luna Pearl, Blue Pearl, Eagle Black, Emerald Pearl, Eucalyptus, Multicolour, New Baltic Green, New Dakota, Pure Black, Red Venga, Rosso Porrino, Sapphire Blue, Ubatuba, Venetian Gold, Verde Gloria, and Verde Star.

Marble & Granite Supplies offer the following supply of colours in marble: Bianco Carrara C Venato, Rosso Verona/Asiago, Perlato Olimpo, Nero Marquina, Imperial Green.

Granite generally comes in slabs 60 x 18 inches, or 54 x 18 inches. The risers are 2 inches high and come in various lengths. These items are 7/8 inches thick. Slabs generally cost €65 each depending on the colour, quality, availability, source of origin and quantity required. Marble comes in tiles 1 foot by 2 feet. The Chinese is softer and cheaper than the South African.

A large range of fireplace accessories are available from Blackwater Crafts Ltd among them fire trims starting at €19.05. They are the major supplier to the south of Ireland.

A phone call to Brick Yard Builders Providers, Limerick city in the morning would have sand and chippings delivered that evening.

44

Calcium Aluminate Cement

Ciment Fondu Lafarge Lafarge Aluminates, Inc., in Paris is the North European Headquarters of Lafarge Aluminates, the world's leading manufacturer of calcium aluminate cements. Lafarge Aluminates is an ISO 9002 certified production facility. „Ciment Fondu Lafarge‟ can be imported directly from London or Dineen Refractories Ltd, Co. Laois. It costs €14.50 for a 25 Kg bag.

JJ made a visit to Dineen Refractories Ltd, Athy, Co. Laois who are manufacturers of a wide range of residential and industrial chimney products including firebacks, and are the largest importers of „Ciment Fondu Lafarge‟. They have also imported the cheaper Chinese replacement and tested it over the past 3 years with satisfactory results.

Zhengzhou Dengfeng Smelting Materials Co., Ltd. (ZDSM) is the China leading manufacturer of calcium aluminate cements, and holds the number four position in the world market. They export to more than 30 countries to areas such as America, Mexico, Germany, Holland, Japan, South Korea, Pakistan, Taiwan and Hong Kong.

The product CA65-H has been used in constructing blast slideways for a satellite launching pad in Jiuquan Satellite Launching Center many times, and lots of praises were given for the good application result. It costs €11 for a 25 Kg bag.

Both these cements impart excellent mechanical strengths to mortars and concretes and can retain these properties when subjected to heat.

Tenax Tenax S.p.A is the brand name for stone, marble, and granite glue which comes from Italy. Tenax is certified ISO 9001.

In the stone business Tenax is a recognized landmark for the quality of its products. It maintains the undisputed leadership in its field using top quality structures, products and services. Tenax offers a qualified technical support and worldwide sales support for its clients. The small fabrication shop as much as the large slab manufacturer, find among Tenax products all the necessary materials for the gluing, the filling, the reconstruction and the superficial treatments of marbles and granites. In this sector, Tenax is the undisputed world leader. They have a reputable name worldwide and export east as far as Iran and west to Brazil and USA.

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Timber In choosing timber for their fireplaces they took their lead from Kilkenny Mantlepieces Ltd who are the undisputed leaders in the field of producing mantelpieces. They have won international prizes for their work.

They use five kinds of timber: maple, sapele i.e. mahogany, red oak, white oak, cherry wood and pine. The partnership also included iroko i.e. teak, red deal, white deal in their examination. The latter two failed their analysis and tests. They were too soft especially the white deal and would be liable to warp with continuous heat.

All these timber are readily available for sale here in Limerick. The partnership turned to the McMahon timber importers who are the biggest timber providers in the country. They have a reputation for high standards of quality which they have built up since 1830. They source their timber in Europe, Asia, Africa, and America.

Red Oak and Cherry Wood come from the Appalachian region of the USA. Maple originates further north in southern Canada. The hardwoods iroko and sapele come from West Africa. Sapele is the darker of the two. The former is becoming increasingly popular due to its consistency of colour and affordable price. Even though much of the imported pine comes from the Scandinavian countries the best of it originates in the southern part of America. It displays excellent machining qualities.

All these timbers have high strength values. Thatâ€&#x;s what makes them suitable for use in mantelpieces. They vary in colour, hue and grain pattern, even when cut from the same tree. No two pieces of natural wood are alike. That is what makes them attractive to the consumer.

Cherry wood and maple would be the most expensive to purchase, followed by red and white oak, and finally pine, teak and mahogany would be about the same price.

The cheapest way to buy the timber is rough, unplanned, and large planks.

Available shades of solid timber finishes are shown below. If a person has a specific shade in mind to match existing colour schemes then the person can simply bring a sample to the partnership and they will do their utmost to match it at minimum charge.

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Light Mahogany

Light Burnished Mahogany

Traditional Mahogany

Scandinavian Pine

Teak Mahogany

Antique Brown Mahogany

Old Style Pine water based

Light Pine

Golden Pine

Waxed Pine

Cottage Pine water based

Light Oak

Medium Oak

Traditional Oak

Light Maple

Light Cherry

Champagne White Stone Finish

Semi Matt Black

Magnolia

Jade Wash On Pine

Medite and other artificially produced cant compare to solid hardwoods when it comes to holding nails and screws and withstanding the stresses, loads, shocks and abrasions of daily life.

Species – percentage of total U.S. Production Species (Kiln-dried) Hard Maple Sapele Teak White Oak Red Oak Soft Maple Cherry

Pressure to Mar (In pounds) 1,820 1,500 1,450 1,360 1,290 950 950 47

The term pine technically refers to evergreen coniferous trees of which about 70 species are known.

The production of the timber surround involves thoroughly testing, inspecting and kiln drying the wood before use to help ensure its stability in modern living conditions. Then begins the cutting of the timber, sanding, woodturning, routing, and assembling. Brackets, screws, and glue were the only materials needed for the assembling apart from the timber.

Lacquers and Sealers

Granyte was founded in 1850 in Salford UK. It quickly established a reputation for the excellence of its paints, french polishes, stains and woodfillers. The company was awarded the coverted ISO9001 certificate for both development and manufacture.

Throughout the UK and Ireland, a combination of Granyte's own expert distribution and strategically-sited stockists ensures speedy supply of off-the-shelf products.

Through its Colourspeed service Granyte offers from its Salford site, and selective stockists a 24 hour colour matching of Pre-Catalysed and Acid Catalysed enamels in colours totalling almost 3,800 shades. It has over 60% of Irelandâ€&#x;s wood finishing market. These products are notable for their excellent application properties, rapid drying times, excellent durability, as well as their high quality finish and wear resistance.

There are 45 Wood Shade colours in the Water Based Stain Range. A sample of the stains are shown below. Based on good quality dyestuffs and pigments they exhibit excellent appearance, application properties and light fastness in internal situations.

Stains when applied over Pine:

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49

The lacquer is bought in 5 litre and 25 litre polythene containers. It can be bought locally from most of the builder providers. It‟s described as „Granyte Wood finishes, P/C Lacquer‟ and can be bought in mat or sheen. It could do approximately 20 sprays of a fireplace with 5 litres.

The sealer is bought in 5 litre and 25 litre polythene containers. It can be bought locally from most of the builder providers. They describe it as „Granyte, NL 2501, P/C Basecoat High Build‟.

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Solver Link to the Solver solutions, Appendix 4.

This chapter is explaining some of the workings of Solver, its strengths and how the partners compensated for its apparent deficiencies. Illustrations will be made with examples from K&F Fireplaces and Par Golf Bags. But these illustrations can be applied to the manufacture of any product.

When using Solver the following data needed to be input: 1. Amount of time (i.e. scarce resource) required by each fireplace to complete each process.

2. Total amount of time available (i.e. scarce resource) for each process.

3. Profit contribution for each fireplace.

Students experienced difficulties with No 2 and 3 above.

No. 1 above: the amount of time required by each of the two fireplaces to complete each process was calculated by speaking to the manufacturers of fireplaces.

Allocation of scarce resources No. 2: when it came to calculating the total amount of time available (i.e. scarce resource) for each process problems arose. The partners knew the total amount of time they had at their disposal each week for all four processes. But how were they to allocate the total time resource to each of the four processes?

If you look at the Par Golf Bag solution you were given the amount of time for each process, 630, 600, 708, and 135 hours. You werenâ€&#x;t given the total amount of hours available each week, 2,073 hours, and told allocate them as you choose.

If you were told that there were 863 hours available in total each week for the production of golf bags how would you go about allocating those hours for each process?

Or if a new company was starting up and wanted to know how many hours should be allocated to each process how would you go about that? If you attempt it for Par Golf Bags, it should be done without making reference to the allocations already given in the book.

That is the problem that the partners attempted to solve in SolverAssist.xls.

They input the amount of time required by each fireplace to complete each process.

Then they input the total amount of the scarce resource i.e. the total amount of time available each month for the four processes. The final piece of information they input was the ratio between the numbers of each fireplace they wanted produced each month.

Input these three pieces of information into the green cells in the Excel Sheet and the correct allocation of resources are output in the yellow cells. There was no slack time.

The feasible region that satisfies all the constraints simultaneously can now be drawn. When the graph was drawn all the lines met at one point since there was no slack time. This point was one possible optimal solution point. The other two possible optimal solution points are where two constraint lines intersect on the X axis and Y axis nearest the 0, 0 values.

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The criticism has been made that all the constraint lines intersect at exactly one point leaving only three possible optimal points. The number of optimal points can easily be increased by introducing slack time.

We will look at the example of the fireplaces again. In one case of the Solver solutions there is 320 hours available of the scarce resource. So when they initially used SolverAssist.xls they inserted 320 hours into the cell for the scarce resource.

This time they inserted 290 hours and the remaining 30 hours will be slack time. The Excel Sheet will output the correct allocation of resources for 290 hours. Now, and only now, the 30 hours of slack time can be added to any one or more of these outputs.

When the new figures are run through Solver 30 hours of slack time will be shown. If a graphical solution is drawn there will be more than 3 possible optimal points.

High-Low Profit Contribution Problem for Solver No. 3 above: the next problem arose with Solver when the profit contribution for each product was entered. If the contribution was too high for one product and too low for another it could mean that zero of one product was being manufactured, and the coordinates for the optimal solution were either on the X-axis or Y-axis.

When this situation arose students found that they were getting negative values for the amount of products to be manufactured. The problem arose because non-negativity constraints were not defined in the mathematical modelling of the problem in Solver. There are two solutions offered to this problem.

Solution 1: When you open the Solver dialog box click the button labelled „Add‟. It will bring you into Add Constraint dialog box. This is where you can now add a new constraint to the mathematical definition of the problem. What you need to define is that the number of each product to be manufactured will be either equal to or greater than zero. We want these values to remain non-negative. Or to put it another way, when it is being modelled graphically it has to remain in the positive quadrant of the X-Y graph.

In the „Cell Reference‟ dialog box put in the reference to the Changing Cells or adjustable cells i.e. the number of each product that is to be manufactured. Change the default sign to „>=‟. In the Constraint cell input „=0‟. Finally, click „Add‟ and it will be included in the mathematical model.

Solution 2: When you open the Solver dialog box click the button labelled „Options‟. It will bring you into Solver Options dialog box. There is a check box that needs to be ticked in front of the label, „Assume Non-Negative‟.

This causes Solver to give a lower limit of 0 (zero) for all adjustable cells for which a lower limit has not been set in the Constraint box in the Add Constraint dialog box. In linear programming we are dealing with non-negativity constraints which need to be specified in all linear program definitions.

This Solution is recommended because it is quicker, no danger of human error creeping into the calculations, and all adjustable cells are covered by the nonnegativity clause. For understanding purposes Solution 1 would be recommended.

The user will need to know what he is doing and why he is doing it.

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High-Low Profit Contribution Problem for Students There was a second problem that arose when the contribution was very high for one product and very low for another. This could mean that only one product was being manufactured. This was a situation the young entrepreneurs did not want. The differential between the profit contributions for the two products had to be correct so that both products were going to be manufactured.

Solver was no great help with this problem. A person could enter profit contributions speculatively and continue repeatedly running Solver until the right answer was output. This random work is not satisfactory for young scientists. The sensitivity analysis could be used here but it involves pen and paper for each analysis.

This is repetitive and slow when the operation has to be done many times, and is also prone to human error.

Since the students are on a computer course they felt that the computer should be rigged up to do the work for them. Initially, this meant coming up with a mathematical formula and then installing it in MS Excel. Once this was achieved then the cognitive demands on the students was dramatically reduced for evermore.

What was required was a mathematical formula that could solve the problem mathematically. This is what follows.

Problem: arrange the profit contributions for each product so that the optimal point would not be on the X-axis or Y-axis.

Px – profit contribution on Product X, DeLux bag.

Py – profit contribution on Product Y, Standard bag.

When this problem is examined more closely it is asking: if you are given a profit contribution for one product what is the maximum and minimum profit contribution that the second product can have, so that the optimal point would not be on the X-axis or Y-axis.

What this required was to take each of the optimal points that were not on the X-axis or Y-axis. Then find the range of optimality for each of these points.

They have chosen the Par Golf bags to illustrate their work in this field because of everybodyâ€&#x;s familiarity with it. Then they will apply it to K&F Fireplaces.

There are two optimal points that are not on the X-axis or Y-axis in Par Golf.

Firstly, they will find the range of optimality for the optimal point with the coordinates 540, 252.

They began by accepting that Px is given i.e. profit contribution on the DeLux bag. What, then, is the maximum profit contribution Py can have, so that the optimal solution would remain on this point?

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d * Px + a * Py => b * Py + 0 * Px d * Px + a * Py => b * Py d * Px => b * Py – a * Py d * Px => (b – a) * Py Py * (b – a) <= d * Px

Py 

d * Px ba

Again, by accepting that Px is given, what is the minimum profit contribution Py can have, so that the optimal solution would remain on this point? (c * Px) – (d * Px) <= a * Py (c – d) * Px <= a * Py a * Py => (c – d) * Px

Py 

(c  d ) * Px a

This can be viewed working in ProfitFix.xls/ParGolf1. The same worksheet shows the minimum and maximum profit contribution for Px when Py is a given.

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Now, they will find the range of optimality for the optimal point with the coordinates 420, 300.

They began by accepting that Px is given i.e. profit contribution on the DeLux bag, what is the maximum profit contribution Py can have, so that the optimal solution would remain on this point?

Py 

d * Px ba

Again, by accepting that Px is given, what is the minimum profit contribution Py can have, so that the optimal solution would remain on this point?

Py 

(c  d ) * Px a

This can be viewed working in ProfitFix.xls/ParGolf2. The same worksheet shows the minimum and maximum profit contribution for Px when Py is a given.

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When the above mathematical formulas are applied to K&F Fireplaces these are the results that it produces. When the profit contribution on the Liberty is set at €225, the Thomond can have a minimum profit contribution of €202.50 and a maximum profit contribution of €604.99. This means that the coordinates for the optimal solution remain the same and are not on the X-axis and Y-axis.

When the profit contribution on the Thomond is set at €250, the Liberty can have a minimum profit contribution of €92.98 and a maximum profit contribution of €277.78. This means that the coordinates for the optimal solution remain the same and are not on the X-axis and Y-axis.

This can be viewed working in ProfitFix.xls/K&F.

Solver outputting all the optimal points Solver has been criticised for not outputting all the possible optimal points. Solver can be manipulated to do such a task. Enter 0 to the number of each product to be manufactured. Then in the profit contribution cells enter a 0 for one product and 1 for the other product. Then run Solver and save the results.

Next switch the profit contribution for each of the products i.e. 1 where the 0 is, and a 0 where the 1 is. Then click the button labelled „Options‟. It will bring you into Solver Options dialog box. There is a check box that needs to be ticked in front of the label, „Show Iteration Results‟. Finally, click Ok and then run Solver. After each iteration, it will bring you from one axis through all the optimal points sequentially to the other axis, but outputting each of the optimal points after each iteration. It has been tested with the Par Golf bags and has worked satisfactorily.

Further tests may need to be done.

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Calculating coordinates for X & Y axis There is an MS Excel sheet (named CalculateXY.xls.) programmed to calculate the coordinates on the X-axis and Y-axis for each of the constraint lines. There is a second formula for calculating the coordinates of lines that intersect. It is useful for speed and accuracy.

Conclusion Solver has been criticised for not offering help with the allocation of scarce resources for each process in the manufacturing of products but a solution has been offered to that problem in SolverAssist.xls.

Secondly, there were problems with Solver when the profit contribution was very high for one product and very low for another product. Two solutions to that problem have been offered for use with Solver.

Thirdly, when students wanted to know the range of optimality for each possible optimal point so they would be manufacturing each product and not just one product, a mathematical formula was devised and installed in MS Excel. It can be viewed at work in ProfitFix.xls. Solver didnâ&#x20AC;&#x;t help except for verification of the results.

Finally, Solver has been criticised for not outputting all the possible optimal points. It can be manipulated to do such a task as is shown above.

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Production

Each of the two fireplaces that K&F Fireplaces will initially produce will comprise of a number of components, which differ between both products. However, the production times for each fireplace is essentially the same apart from the fact that the more expensive Thomond contains a labour intensive mahogany surround.

Liberty Fireplace

Thomond Fireplace

Producing a Fireplace Timber Surround The production of the timber surround begins with the cutting of the timber, followed by sanding, woodturning, routing, and assembly. In addition to the timber, brackets, screws, staples, pins, and glue are also required. Finally, spraying involves applying three coats of lacquer, sanding it twice, and then applying one coat of sealer. Taking all of these processes into account, a timber surround takes four to five labour hours to produce, in addition to a further two hours drying time. A completed surround consists of a mantle piece (130 cm wide, 14.5 cm deep and 2.25 cm thick), a top transept which fits in below the mantle piece, and two side strings or legs, each of which is 94 cm high, 10.5 cm wide, and 2.25 cm thick. A timber surround is held together by supporting brackets and screws. When staining the timber the following steps are taken: PREPARATION: - Prepare the timber by pre-sanding in stages up to 120, 150 or 180 grit. The degree of timber preparation will affect the strike and final shade achieved when the stain is applied. Ensure that any glue or other surface contaminant is removed before staining. Failure to prepare the timber correctly will lead to an uneven or patchy appearance. Good preparation is important when using water stains to reduce grain raising.

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APPLICATION STIR WELL AND CHECK SHADE BEFORE USE: The stain should be applied directly onto the timber.

Application can be carried out by spray, or dip.

Excess stain is normally removed by wiping within one to two minutes of application but if required it is possible to spray and leave to achieve a more even, bland appearance.

DRYING: Allow one hour drying before recoating under normal drying conditions (20째C). The stain must be thoroughly dry before applying the finishing lacquer.

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Hearth and insert In order to produce the hearth and insert, sheets of marble or granite are firstly cut to the required size. For example, six feet of granite or marble can be cut in about thirty seconds.

To manufacture the hearth, a slab is laid on a table (lollipop sticks can be used for levelling, if required) polished side facing down, with the front and side risers positioned on it using Tenax stone glue and granite gussets. The open side is blocked using a plank of wood to prevent the contents from pouring out (see photo).

It is then filled with a special compound: Ciment Fondu Lafarge (UK) (1 part) mixed with sand (3 parts) and small chips (1 part), and steel reinforcement (3 x Âź inch rods six inches apart). The hearth would take 2 hours of labour to produce and then overnight to dry. A similar job was done for the marble insert with a fire trim inserted around the opening to the fireplace. The insert would take 3 labour hours to produce and overnight to dry. When completed they are packaged by wrapping them in newspaper.

This rectangular space is then filled with the following compound: Ciment Fondu Lafarge (1 part) Sand (3 parts) Small chips for strength (1 part) 60

Steel reinforcement (3 x Âź inch rods six inches apart).

A hearth takes two hours of labour to produce and then overnight to dry. A similar process is followed for the marble insert with a fire trim inserted around the opening to the fireplace. The insert takes three labour hours to produce and, like a hearth, takes overnight to dry. When completed, both are packaged by wrapping them in newspaper.

One tonne of sand will produce twenty hearths or inserts. Four men can produce eight hearts and eight inserts per day.

The hearth and insert can be made either from marble or granite. Granite would be recommended for the hearth as it is nonporous, unlike the insert. The cast iron insert is recommended as it will last much longer.

Granite is more expensive than marble. What increases the value of the hearth or insert is whether it is granite instead of marble, the quantity thereof, and the amount of cutting required. With the surrounds it is the quality of the timber used, and the amount of labour used in cutting it, sanding, woodturning, routing, and assembling it that results in the variation in prices between the two offerings.

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The following table gives a breakdown of the main processes involved in the production of both the Thomond and the Liberty fireplaces, in addition to the time required for each process.

Cost of Producing each Fireplace Materials - Liberty Resin tiles for hearth & insert Granite tile for hot plate Gold trim insert Sand for hearth Chippings for hearth Fondu Cement for hearth Sand for hearth Chippings for insert Fondu Cement for insert Steel reinforcing rods for hearth Steel reinforcing rods for insert Tenax for hearth Tenax for insert Pine Shelf Sealers Lacquer Brackets

Quantity 13 6 x 20 inches 1 25 Kg 6.5 Kg 6.5 Kg 25 Kg 6.5 Kg 6.5 Kg 3 3 50 ml 50 ml 72 x 1 x 5 inches 0.15 litre 0.5 litre 2

€174.56

Total Materials - Thomond Granite for hearth Marble for insert Gold trim insert Sand for hearth Chippings for hearth Fondu Cement for hearth Sand for hearth Chippings for insert Fondu Cement for insert Steel reinforcing rods for hearth Steel reinforcing rods for insert Tenax for hearth Tenax for insert Mahogany Sealers Lacquer Brackets

Cost € 110.00 8.00 12.00 1.00 0.25 4.40 1.00 0.25 4.40 2.34 2.34 3.00 3.00 20.87 0.25 1.30 0.16

Quantity 6.25 sq feet 5.75 sq feet 1 25 Kg 6.5 Kg 6.5 Kg 25 Kg 6.5 Kg 6.5 Kg 3 3 50 ml 50 ml 72 x 1 x 5 inches 0.15 litre 0.5 litre 2

Cost 125.00 75.00 24.00 1.00 0.25 4.40 1.00 0.25 4.40 2.34 2.34 3.00 3.00 100.00 0.60 3.30 0.16 €350.04

Total 62

Staff16

The two cogs on which business revolves are capital and labour. To evolve and develop a business needs to manage both astutely. In this section the partners will outline their management of staff in K&F Fireplaces.

Division of labour The firm is divided into three departments for the purposes of management.

Production deals with the creation of fireplaces and the purchasing of raw materials.

JJ is heading that department. Marketing will examine market research and sale of the fireplaces and Brian is taking responsibility for it. Finance and administration overlooks the obtaining and expending of funds, and human resource management. JJ will head up this department. It is an umbrella department for what is not covered in the former two departments. In a larger enterprise this could make up two departments.

Initially, JJ and Brian will work as the only two tradesmen manufacturing the fireplaces. They can both do all the jobs that are required in production. JJ has a special interest in the timber routing, turning, and spraying.

Since J. J. is responsible for management of human resources he will be overlooking the following:

Employment Education and training Recruitment Termination

Induction Training

Wages

Industrial relations

Policy Job evaluation

Health and safety

Welfare services

Grievance Information procedures Implementing new laws and regulations

Pensions

Recruitment, Induction & Training The aim of this partnership is to expand in the medium term. It will be J. J.â&#x20AC;&#x;s task to recruit the right person with the right skills at the right time. In Ireland all through the 1990s unemployment rates have dropped as the graph below shows:

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When recruiting for production the employees would need to be qualified as machinists, and spray painters. It would be unlikely to find one person with both those qualifications. FAS are continually training these people. They would need to have a driving licence for delivery purposes. They would be employed on the condition that they would accept training in the building of marble/granite inserts and hearths which wouldn‟t take long to achieve. It is the least skilled of all the jobs in fireplace production. The woodwork demands the most training.

FAS says that these people are readily available but it could take up to 3 months to find the suitable employee. They cost about €450 a week. FAS will provide general workers at short notice. They pointed out that even though unemployment levels are low there is a large migrant workforce in the enlarged EU prepared to travel to Ireland for work. Whenever there are unemployment shortages people will travel to Ireland from the employment black spots of Europe.

With a full time staff of 2 there will need to be a part-time staff of 1 to fill in for absenteeism.

When a new employee is taken on induction should cover: 1. Exposition on the company, its products, and place in the fireplace industry.

2. Rules of working and safety and health regulations.

3. Human resource policy regarding discipline, training, holidays, and date of payment of wages.

4. Introduction to staff colleagues.

Wages & Work Apart from the moral obligation to pay an employee the capitalist society has its own objectives for remunerating its workers: 1. To attract staff of the required calibre to meet the firm‟s objectives.

2. To retain them because the cost of replacement is sizeable.

3. To provide staff with incentives for better work.

When deciding on an adequate wage it cannot be done in isolation from what similar staff in other organisations are earning, and what the partnership can afford. National inflation and national wage increases need to be taken into account each year when deciding on increases.

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Job design (job content and work methods) enhances the quality of the worklife, makes more effective use of the potential of the worker and thereby improves worker performance. It should include the following principles: 1. A variety of tasks sufficient not to lead to boredom.

2. A work cycle of just the right length bearing in mind physical demands of this manual labour.

3. Provision to allow the individual to set quality standards above the minimum required; this can then be coupled with feedback by management on personal results to keep motivation strong.

With six machines for manipulating the timber, a sprayer, and machine for cutting marble, cement mixer, and van deliveries, there is plenty of variety in the workplace which protects against monotony and weariness. As the business evolves staff will grow to like and specialise in different aspects of the production which will improve throughput. Setting and acknowledgement of standards is crucial to staff wellbeing and productivity.

Employment may be terminated in a number of ways. The employee may be given notice, may be sacked on the spot, or may be made redundant. Many of the legal rules governing these different situations are covered in the Unfair Dismissals Act 1977.

JJ will endeavour to ensure the physical well-being of employees especially with the risks associated in operating high speed machines in the plant.

External agents The following people have been selected for their services in these four areas when the need arises: o o o o

Solicitor – Geraldine Thornton.

Accountant – Liam Judge.

Van repairs and maintenance – O‟Mara Motors.

Machine repairs and maintenance – Hopkins Machinery.

Department of Social, Community and Family Affairs This department has a raft of literature governing full-time employee‟s entitlements: 1. A written contract of employment within one month of employment.

2. Minimum wages i.e. €5.59 per hour.

3. Equal pay for equal work 4. Protection against discrimination 5. Holidays and rest periods 6. Maternity, adoptive and parental leave 7. Trade union membership 8. Minimum notice on termination of employment 9. Protection against unfair dismissal 10. Protection against redundancy, and minimum payments if it should occur 65

The following laws govern the employment of staff: 1. The National Minimum Wage Act, 2000 states that experienced adult workers (those over 18, more than two years employed and not a trainee) must be paid an average hourly rate of not less than â&#x201A;Ź5.59.

2. The Parental Leave Act, 1998 permits the taking of leave for family reasons usually around the birth of a child.

3. The Organisation of Working Time Act, 1997 requires that employees work no more than a 48 hour week, have rest breaks while at work, have 11 hours rest in each 24 hour period, have one period of 24 hours rest per week.

4. The Worker Protection Act, 1991 extends the benefits of fulltime workers to regular part-time workers.

5. The Industrial Relations Act, 1990 governs union activities, disputes and their conduct.

6. The Employment Equality Act, 1977 bans discrimination on the basis of sex or marital status.

7. The Unfair Dismissals Act, 1977.

8. The Minimum Notice to Terminate Employment Act, 1973.

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Finance17

Now the partners will explain how they will finance their business. They use two sources of finance, external sources and internal sources.

The external source of finance is divided between long term which would be in the form of a loan, and short term which would be in the form of a bank overdraft.

Loan When they were getting their loan of €100,000 from William Bennett of Permanent TSB, William Street, Limerick, the following items were raised in the interview: 1. The period of the loan.

2. Nature of the security being offered - collateral for the borrowings advanced e.g. title deeds of the hay barn, farm, or house.

3. Personal savings amounting to 25% of the borrowings to be invested in the business.

4. Purpose for which the loan will be used.

5. Business plan showing the intended market and current competitors.

6. Accountants projected income and expenditure for the business.

7. Financial track record of the partners.

8. Planning permission for the premises.

9. Grants received, if any.

10. Partners‟ CVs showing firsthand experience of this type of business.

William made the remark, “As a rule of thumb banks will double the projected breakeven time, and half the projected sales.” That focused and concentrated their mind and efforts more thoroughly. After verifying the above and showing a good understanding of the business environment that they were entering he agreed to give them the loan and opened a current account for them.

Both sides entered into a contract in which the: 1. Rate of interest was a variable rate set at 2.5% above the Current European Rate (2.5% in November, 2003). This interest on the loan is allowable against profits for taxation.

2. Dates of interest payments and capital repayments were on the 7th of each month.

3. Security for the loan was a real estate property owned by J J Keane valued by John DeCourcey of DeCourcey Auctioneers at €250,000.

In the event that the interest payments or capital repayments are not made on the due dates, PTSB has the right, under the terms of the contract, to seize the property on which the loan is secured and sell it to repay the amount outstanding. He preferred to have a fixed charge on this property than a floating charge on the whole of the company‟s assets.

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Overdraft When William Bennett opened a current account for the partners they sought overdraft facilities as a short-term source of borrowing. He responded by saying that he would require a forecast cash-flow statement to see when the overdraft will be repaid and how much finance is required. If the amount advanced is substantial then some form of security may be required. This is always the case for young businesses.

But he said that when their creditworthiness is established an overdraft could be arranged by a telephone call to him. He prefers granting overdrafts that are selfliquidating i.e. the funds will result in cash inflows that will extinguish the overdraft balance. One potential drawback with this form of finance is that it is repayable on demand. Inability for the business to do so could have serious consequences.

Internal sources of finance In addition to external sources of finance, there are certain internal sources that the partners will consciously use to generate finance. The major long-term source of internal finance is the profits which are retained rather than taken out by the partners.

The major short-term sources of internal finance involve reducing the levels of debtors and stocks and increasing the level of creditors.

Offering credit has benefits and costs. The partners need to offer it to foster customer goodwill and increase sales. On the other hand, giving too much credit could cause cash-flow problems, huge loss if bad debts occur, and at least the need for short-term borrowings. The partners will have to calculate how much of their funds they can afford to have tied up with trade creditors. This will have to be done in the context of customer needs and the credit policies of rival companies. Whatever credit controls are adopted they should be rigorously implemented. Retailers required 30 days credit and builders required 60 days credit.

Maintaining reduced stock levels is an internal source of funds. The partners have observed that Dell Computers have no stock rooms. The articulated trucks reverse into a port at one side of their factory and the contents are moved onto the conveyor belt for use in production. At the other end of the conveyor belt there is another fleet of trucks ready to ship the finished product to the customer. This will save on borrowings or allow finance to be put to other use.

The partners will adopt a similar policy especially when deliveries of raw materials can be made within 72 hours of placing an order. When big orders for fireplaces are made stock levels will increase and the finished products stored until the required date.

Finally, by delaying payment to creditors, funds are retained within the business for other purposes, or borrowings reduced. The consequences of these delays are poor customer care or even loss of credit. The partnership is currently not being offered any credit.

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Grants Michael Cantwell of Limerick County Enterprise Board (LCEB) gives financial support in the form of a capital grant, employment grant, and a feasibility grant. It also offers training support, management development courses, and mentoring. He said that they would not qualify for a grant because they would be classed as a replacement business.

ISME (Irish Small and Medium Sized Enterprises) told the partners, â&#x20AC;&#x153;Cash flow is the lifeblood of any small business and it is imperative to have a realistic and adequate cash flow within a business for both the day-to-day running of the company and to cope with fluctuating requirements.â&#x20AC;?

In August 2003 they reported that only 13% of companies are being paid within 30 days. Big business continues to put the squeeze on smaller suppliers.18 With this hard reality the partners sought to be cash rich. It needs to have sufficient cash before commencing production.

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Training, Mentoring & Assistance

Challenges arise in business. However good the planning some of them will be unknown. That is why outside support and intervention is essential especially in the early days of a business. The following areas is where the partnership will need assistance: 1. Knowledge of whatâ&#x20AC;&#x;s impacting on the K&F Fireplace business.

2. Managerial training.

3. Improved production skills.

The people that can help are: 1. Joe Kemmy, retired manufacturer of fireplaces.

2. Accountant - Liam Judge.

3. Solicitor - Geraldine Thornton.

4. Limerick County Enterprise Board

The partners can acquaint themselves with research from the following bodies: 1. Central Statistics Office 2. The Economic And Social Research Institute 3. Pricewaterhousecoopers 4. Organisaiton For Economic Co-Operation & Developme 5. Fas Training & Employment Authority 6. Limerick County Council 7. Construction Industry Federation 8. Enterprise Ireland 9. Department of Enterprise, Trade & Employment 10. Department of Social, Community & Family Affairs The partnership could also subscribe to business magazines: 1. Fires and Fireplaces.

The partners could become a member of the following organisations and attend some of the courses that they arrange: 1. Irish Small & Medium Enterprises Association 2. Irish Business And Employers Confederation 3. Limerick County Enterprise Board Ltd 4. Fireplace Association of Ireland

For example, the following help is offered by ISME: 1. Guide to Employers' Obligations & Practices 2. Guide to Government Sponsored Grant Programmes 3. ISME Guide to Revenue Audits 4. Management Training & Development in SMEs 5. Wages and Conditions

70

By availing of outside help it will give the partnership information, knowledge and expertise in a specific area, offer an independent view, give a second opinion, and save time. This is a must in todayâ&#x20AC;&#x;s rapidly changing world.

71

Conclusion Stokes Kennedy Crowley (1987)19 lists the nine most common reasons why a start-up venture might fail to attract finance and these are useful pointers to remember when preparing and presenting a proposal: 1. Weakness in management (lack of motivation, no financial expertise, no feel for the market, no track record) 2. Inadequate personal finance 3. Poorly presented proposals 4. Inadequate security offered 5. Too many risks inherent in the venture 6. Over-ambitiousness 7. Lack of detail as to how to finance will be repaid 8. Product or service weakness 9. Insufficient market research The partners have looked at these 9 criteria and believe that they have answered the demands of each. They have invested time and talent in answering the call to be entrepreneurs. In a time span less than 12 weeks, and among the demands of other pursuits, they have responded well to this challenge, a challenge that has pushed them to making a presentation and producing this book.

They find inspiration from the growth of Kilkenny Mantelpieces which was formed in 1983 by brothers John and George Murphy, who still run the company today. It is from this strong bond between brothers that saw the initial premises of 800 sq. feet grow into a 40,000 sq. foot premises, combining the latest technology with the very best in craftsmanship to give you only top quality mantelpieces.

From the very start brothers John and George accepted only the best, both from their suppliers and their employees. When they choose their materials, they choose only the best and their employees have always been master craftsmen who use their knowledge and their skill to produce what you deserve when you buy your fireplace.

It is these time-honoured traditions combined with today‟s technology that has seen Kilkenny Mantelpieces develop the Rio brand. Rio is now the leading brand of mantelpieces in Ireland and the UK and has won numerous Industry design awards.

George Murphy said, “it‟s not just our products, it‟s also our loyal staff who have been there from the very beginning and we are proud to say that they are part of this tradition that has become the Kilkenny Mantelpieces of today.”

K&F Fireplaces can have a similar story in another 20 years.

Ask not what your country can do for you, ask rather what you can do for your country.

John F Kennedy.

72

Appendix 1 - Questionnaires



Retailer’s Questionnaire

This aims to get a breakdown of the interviewee‟s shop sales which reached a total of 6,000 fireplaces in 2002? There are also some ancillary questions to this principal issue.

Retailer’s Questionnaire

1. For each of the following items you sold during 2003 fill in the boxes: Item

Quantity

Reason

Hearth Granite Resin, stone-effect Natural Marble Stone Limestone Slate Tiles

Insert Granite Resin, stone-effect Natural Marble Stone Limestone Slate Tiles Cast iron

Surround Granite Resin, stone-effect Natural Marble Stone Limestone Slate Tiles Mahogany, Teak Cherry, oak Pine Maple Cast iron Medite

73

Size

Dark/Bright

Comment

2. Enter the percentage of fireplaces you sold at the prices indicated below: €800-€999

€1000-€1199

€1200-€1399

€1400-€1599

€1600-€1799

€1800 +

3. When buying a fireplace, what, in your opinion are the most important factors for the consumer. Out of a total of 100 points how many would you allot to each of the following 3 items?

Style ……………

Price ……………… Reputable trader ……….

4. What percentage of your sales were made during the following seasons: Winter

Spring

Summer

74

Autumn

Builderâ&#x20AC;&#x2122;s Questionnaire This aims to find out what is currently the most popular type of fireplace bought by builders who made purchases of 300 fireplaces in 2002? There are also some ancillary questions to this principal issue.

Builderâ&#x20AC;&#x2122;s Questionnaire

1. For each item you bought during 2003 fill in the boxes: Item

Quantity

Reason

Hearth Granite Resin, stone-effect Natural Marble Stone Limestone Slate Tiles

Insert Granite Resin, stone-effect Natural Marble Stone Limestone Slate Tiles Cast iron

Surround Granite Resin, stone-effect Natural Marble Stone Limestone Slate Tiles Mahogany, Teak Cherry, oak Pine Maple Cast iron Medite Comment

75

Size

Dark/Bright

2. Enter the percentage of fireplaces you sold at the prices indicated below: €800-€999

€1000-€1199

€1200-€1399

€1400-€1599

€1600-€1799

€1800 +

3. When buying a fireplace, what, in your opinion are the most important factors for the consumer. Out of a total of 100 points how many would you allot to each of the following 3 items?

Style ……………

Price ……………… Reputable trader ……….

4. What percentage of your sales were made during the following seasons: Winter

Spring

Summer

76

Autumn

Appendix 2 – Survey Results To read the Retailer‟s Questionnaire you may go to the appendices or click here.

Results from retailers’ questionnaire Question 1: of the 6,000 fireplaces that were sold by the ten interviewees the customers fell into two broad categories, traditional and contemporary. The traditionalist could be buying for a new house but invariably they were replacing an old fireplace. Their most popular choice was a dark coloured hearth, dark timber surround usually dark mahogany, and a light coloured insert. The contemporary choice would generally be light colours in everything. If they intended using coal for their fire they would choose the dark granite hearth.

Tiles were seen as old fashioned by the consumer and are not bought anymore. Resin (factory made marble) is bought when the budget is small. The biggest buyer is the builder of new houses. Slate was generally used in old houses because it is dark, hard wearing, and more in keeping with the surrounds than the glossy granite.

Both limestone, and light coloured stone and natural marble had appeal to the younger customer buying a new house or refurbishing a modern house. These are new products in the fireplace market. For that reason they buy them, yuppie item, but also because they are light coloured and in keeping with their modern décor. They don‟t need them to be hardwearing because fires will not be used. The most they will be used for is gas or electric heaters which are clean and do not emit great heat.

Black Granite is the best seller because it is the hardest wearing of all the products on offer. It is non-porous meaning that it will not soak liquids unlike all the others. It doesn‟t mark easily and won‟t stain. Because of its current popularity the price of granite has come down and is only marginally dearer than the other products.

About 80% of the hearths were 54 x 18 inches in size and the standard 2½ to 3 inches off the floor.

77

Hearth sales for 2002

2000

1960

840 600 420 180 0

The comments attributed to the sales for hearths above can also be ascribed to the sale of inserts with a few qualifications. Firstly, there is the sale of cast iron inserts because of their perpetual ability to endure intense heat with no adverse effects.

Secondly, the sale of granite drops and the sale of light coloured natural marble rises.

The reason for this is that inserts do not need to be as hard wearing as hearths, so marble will suffice. The second reason has to do with the fact that hard carving and machine engraving is primarily done on marble. Thirdly, marble offers much more variety than granite. When there is no carving involved marble offers as many varieties of colour as granite and is cheaper.

Insert Sales for 2002 2500 1960

2000 1500 1000 1000 500

840

800

800

420 180

0

0

What is noticeable in this graph is the swing towards timber, the hardwoods. There is a 60:40 divide between the dark woods and light coloured woods. Even though the sales of medite (factory made timber) are high the trend is moving away from it and 78

towards the natural woods. This also holds true of fibreglass, stone effect fireplaces that are being sold in England but have not won appeal with the Irish consumer. Even though these factory made materials are cheaper they are unsightly looking when they are marked. The factory made inner material contrasts badly with the outer veneer.

The sale of granite drops remarkably. The sale of marble has also dropped but still holds a large slice of the market.

Surround Sales for 2002 1600

1450

1400 1200 1000

900

800

640

600 400 200

600 500

420

350

300 140

220

180

300

0 0

Question 2: The most popular price for a fireplace was between â&#x201A;Ź1,000 and â&#x201A;Ź1199.

People received an item with high quality items in it for that price. From that price upwards fireplaces got more expensive, not because of the materials in them which had a marginal impact on the price, but because of the man hours spent on the inserts or surrounds.

79

Number of Fireplaces sold at what Prices 2500

2220

2000 1500

1200 900

1000 600

600

480

500 0 €800-€999

€1000€1199

€1200€1399

€1400€1599

€1600€1799

€1800 +

Question 3: Customers choose the style of the fireplace as having the greatest impact on them when purchasing with the retailers reputation being of least importance.

Points alotted out of 100 points 50 45

43

40

34

35 30

23

25 20 15 10 5 0 Style

Price

Reputable dealer

Question 4: The sale of fireplaces varies throughout the seasons as this graph shows.

80

Seasonal Sales for 2002 2500 1920

2000

1620

1500 1500 960

1000 500 0 Winter

Spring

Summer

Autumn

To read the Builderâ&#x20AC;&#x;s Questionnaire you may go to the appendices or click here.

Results from builderâ&#x20AC;&#x2122;s questionnaire

Question 1: the standard hearth on offer by the builder was resin with a growing number turning to natural marble. A significant number of house buyers would upgrade to granite.

Hearth Sales for 2002 160

140

140 120

100

100 80

60

60 40 20

0

0

0

0

0

Resin inserts were standard by most builders but again there is a swing towards natural marble. House purchasers upgraded to both the hardwearing granite and cast iron.

81

Insert Sales for 2002 120

108

100 78

72

80 60

42 40 20 0

0

0

0

0

The young purchaser turns towards the timber surrounds and then towards the light coloured woods particularly pine. It has very similar features to the other light coloured timbers but is the cheapest. This trend has continued to grow over the years.

Surround Sales for 2002

80 70 60 50 40 30 20 10 0

75

68 42

39 30

28 18 0

0

0

0

0

82

0

Most house buyers in the lower range because of financial constraints. The people that sought upgrades moved into the higher range brackets.

Number of Fireplaces sold at what Prices 160 140

134

120 95

100 80 60

38

40

28

20

5

0

€1600€1799

€1800 +

0 €800-€999

€1000€1199

€1200€1399

€1400€1599

When the builders were asked how they view priorities when deciding on what fireplace to choose they prioritised them on the following basis:

Pointes alotted out of 100 points 60

53

50 39

40 30 20

8

10 0 Style

Price

Reputable dealer

Weather greatly influences the level of building that occurs in Ireland. Since most of the building is done in the drier seasons then most of the fireplaces will be bought in those seasons as the graph below shows:

83

Seasonal Sales for 2002 120 104 100

88

80

66

60 42 40 20 0 Winter

Spring

Summer

Autumn

Results of the Survey From studying these results the partnership decided to produce two styles of fireplace.

They were to be known as the Liberty and the Thomond. The Liberty was prepared for the builder. The standard Liberty style has a resin hearth, insert, and pine mantelpiece. Below are the dimensions:

MANTELPIECE Liberty

C Overall height

D Shelf length

E Shelf depth

F Base width

40 inches 72 inches 5 inches 64 inches

84

G Shelf thickness 1 inch

In addition to the standard design there are upgrades offered. The hearth and insert can be styled in natural marble or granite. The mantelpiece offers other timbers besides pine, cherry, maple, red and white oak, teak, and mahogany.

85

Appendix 3 - Brochure

For the Comfort and Warmth

You Deserve Liberty Fireplace

Thomond Fireplace

Specifications Height 50 inches Width 50 inches Shelf length 54 inches Colour Light burnished pine Material Mahogany Accompanied Vicenze Actico by marble insert and granite hearth

Specifications Height 44 inches Width 50 inches Shelf length 54 inches Colour Dark burnished pine Material Solid pine Accompanied Emerald Pearl Resin by insert and hearth.

Alterations can be made to the standard sizes of the fireplaces.

Design your own fireplace from the huge variety of different marbles, granites, resins, and timbers shown below.

This brochure offers you the chance to make your dream fireplace become a reality.

86

Details can be viewed on our website: www.k&ffireplaces.com Talk to your local agent for personal assistance

87

Granite

Amerillo Brazil

Baltic Brown

Bianco Luna Pearl

Blue Pearl

Eagle Black

Emerald Pearl

Eucalyptus

Multicolour

New Baltic Green

New Dakota

Pure Black

Red Venga

Rosso Porrino

Sapphire Blue

Ubatuba

88

Venetian Gold

Verde Gloria

Verde Star

Marble

Bianco Carrara

Statuario

Statuario Venato

Calacatta Oro

Statuario Lightly Veined

Arabescato Cervaiole

Calacatta Carrara

Arabescato Vagli

Port'Oro

Marquinia

Bardiglio Carrara

Bardiglio Imperiale

Crema Valencia

Giallo di Siena

Broccatello di Siena

Moca Cream - Fine

Moca Cream - Rustic

Vicenza Antico

Pietra Vicenza

Breccia Antica di Siena

Rosa Portugal Chiaro

Rosa Portugal Venato

Rosa Portugal Salmon

Trani

Verde Alpe

Rosso Alicante

Rosso Francia

Rosso Verona

Rosso Vidraco

Verde Guatemala

89

Finished Timbers

Light Mahogany

Light Burnished Mahogany

Traditional Mahogany

Scandinavian Pine

Teak Mahogany

Antique Brown Mahogany

Old Style Pine water based

Light Pine

Golden Pine

Waxed Pine

Cottage Pine water based

Light Oak

Medium Oak

Traditional Oak

Light Maple

Light Cherry

Champagne White Stone Finish

Semi Matt Black

Magnolia

Jade Wash On Pine

90

Selection of the shades

Selection of the shades they offer to you.

If you want it to match whatâ&#x20AC;&#x;s in your home just bring us a sample for they have 3,800 shades to choose from.

91

Private to the supplier of our fireplaces to the public: K&F Fireplaces, Cahernarry, Ballysimon, Co. Limerick.

Phone: J J at 087-6174874, or Brian at 087-9674343 at any time.

Fax: 061-332245.

You will receive favourable credit terms. Initially you will receive a free fireplace for display purposes. As you place orders with us you will receive 30 days credit from delivery of fireplace.

You are welcome to visit our premises to view our production facility and examine firsthand the quality of our fireplaces crafted by man and machinery of international repute using world class products.

92

Appendix 4 – Linear Programming

Using Solver for 160 hour month

Monthly Profit Annual Profit

Resource Assembling marble Mixing/Pouring Cutting/Moulding Spraying timber Totals

Liberty Thomond Number 12 13 Contribution € 225 € 250

€ 5,824 € 69,890

Available 46.4 16.1 65.3 32.2 160.0

Used 46.4 16.0 61.7 32.2 156.2

Slack 0.0 0.1 3.6 0.0

Liberty Thomond 2.0 1.8 0.6 0.7 1.4 3.6 0.9 1.7 4.9 7.8

Using Solver for 200 hour month Monthly Profit Annual Profit

Liberty Thomond Number 15 16 Contribution € 225 € 250

€ 7,302 € 87,629

Resource Available Assembling marble 58.1 Mixing/Pouring 20.2 Cutting/Moulding 81.2 Spraying timber 40.5 Totals 200.0

Used 58.1 20.0 77.7 40.5 196.3

Slack 0.0 0.2 3.5 0.0

94

Liberty Thomond 2.0 1.8 0.6 0.7 1.4 3.6 0.9 1.7 4.9 7.8

Using Solver for 200 hour month Monthly Profit Annual Profit

Resource Assembling marble Mixing/Pouring Cutting/Moulding Spraying timber Totals

Liberty Thomond Number 18 22 Contribution € 225 € 250

€ 9,511 € 114,131

Available 75.2 26.1 103.7 55.0 260.0

Used 75.2 26.1 103.4 53.5 258.2

Slack 0.0 0.0 0.3 1.5

95

Liberty Thomond 2.0 1.8 0.6 0.7 1.4 3.6 0.9 1.7 4.9 7.8

Using Solver for 320 hour month

Monthly Profit Annual Profit

Resource Assembling marble Mixing/Pouring Cutting/Moulding Spraying timber Totals

Liberty Thomond Number 21 28 Contribution € 225 € 250

€ 11,725 € 140,700

Available 92.4 32.2 128.9 66.5 320.0

Used 92.4 32.2 128.9 66.5 320.0

96

Slack 0.0 0.0 0.0 0.0

Liberty Thomond 2.0 1.8 0.6 0.7 1.4 3.6 0.9 1.7 4.9 7.8

97

Using Solver for 400 hour month

Monthly Profit Annual Profit

Resource Assembling marble Mixing/Pouring Cutting/Moulding Spraying timber Totals

Liberty Thomond Number 29 33 Contribution € 225 € 250

€ 14,718 € 176,614

Available 117 44 157 82

400.0

Used 117.0 40.3 157.0 81.8 396.1

98

Slack 0.0 3.7 0.0 0.2

Liberty Thomond 2.0 1.8 0.6 0.7 1.4 3.6 0.9 1.7 4.9 7.8

Using Solver for 480 hour month

Monthly Profit Annual Profit

Resource Assembling marble Mixing/Pouring Cutting/Moulding Spraying timber Totals

Liberty Thomond Number 29 43 Contribution € 225 € 250

€ 17,282 € 207,381

Available 135.35 47.71 197.53 99.41

480.0

Used 135.4 47.5 194.0 99.4 476.3

99

Slack 0.0 0.2 3.6 0.0

Liberty Thomond 2.0 1.8 0.6 0.7 1.4 3.6 0.9 1.7 4.9 7.8

Appendix 5 – Financial Costings

Cost of Renovations, Breakdown of Capital Expenditure, Depreciation

Renovations, & Capital Expenditure in 2004.

Totals € 15,000

Excl Vat € 13,216

VAT € 1,784

Machinery => Cement mixer Angle grinder Panel saw Band saw Overhead router Spindle router Copying lathe Eight foot sander Production table Wet saw for cutting stone Spraying machine Parts & Blades

800 150 4,840 3,872 6,050 4,235 8,470 14,200 1,000 1,800 4,000 2,000

661 124 4,000 3,200 5,000 3,500 7,000 11,736 826 1,488 3,306 1,653

139 26 840 672 1,050 735 1,470 2,464 174 312 694 347

2.4 Litre Hiace Toyota Van

20,200

16,694

3,506

71,617

59,188

12,429

Renovating the Plant and Office

Totals

Depreciation on Machinery 2004 Depreciation on Machinery 2005 Depreciation on Machinery 2006

14,323.40 11,458.72 9,166.98

Depreciation in 2004, 2005, 2006.

Cost of Wages This is a break down of what the partners will pay themselves over each of the three years. JJ will not be on a salary for the first 12 months. In return Brian will give him 10% of the business when it becomes profitable. From Jan 2005 both will be on a salary.

Weekly What Wages Cost Weekly Wage € 440.00 Employee PAYE

€ 43.00

Employee PRSI

€ 21.32

Employer's PRSI

€ 44.00

Employee Receives

€ 375.68

Monthly € 1,502.72

Revenue Receives

€ 108.32

€ 433.28

Costs Employer

€ 484.00

€ 1,936.00

This is a break down of what the skilled labourer/driver will be earning when he takes up employment in August 2005.

Weekly What Wages Cost Weekly Wage

€ 385.00

Employee PAYE

€ 32.00

Employee PRSI

€ 18.02

Employer's PRSI

€ 38.50

Employee Receives Revenue Receives Costs Employer

Monthly € 334.98 € 1,339.92 € 88.52

€ 354.08

€ 423.50 € 1,694.00

101

Appendix 6 â&#x20AC;&#x201C; Projections for cash flow plan

Sales Forecast for 2004

These sales forecast include a graph and a table showing the number of each fireplace estimated to be sold in 2004. This includes a breakdown of which sales are cash, one monthâ&#x20AC;&#x;s credit, or two months credit, and when the payments are made.

The next table shows the VAT that is owed to the Revenue Commissioners on them in a monthly basis and quarterly basis.

This is finally followed by the Accounts, the cash-flow statement, trading and profit & loss account, and balance sheet.

A similar scenario is done for the years 2005, and 2006.

102

2004 Forecast

Liberty

Thomond

30

Fireplaces

25 20 15 10 5 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Sales for 2004

Liberty Thomond

Cash

1 mth Cr 2 mth Cr

Sales

Sales

Sales

Payments Payments Payments Total Payment

Jan-04

3

5

2

3

3

€ 2,000

€ 1,800

€ 1,200

€ 2,000

€0

€0

€ 2,000

Feb-04

4

6

2

4

4

€ 2,000

€ 2,400

€ 1,600

€ 2,000 € 1,800.00

€0

€ 3,800

Mar-04

6

8

3

5

6

€ 3,000

€ 3,000

€ 2,400

€ 3,000 € 2,400.00 € 1,200.00

€ 6,600

Apr-04

7

10

2

8

7

€ 2,000

€ 4,800

€ 2,800

€ 2,000 € 3,000.00 € 1,600.00

€ 6,600

May-04

8

11

2

9

8

€ 2,000

€ 5,400

€ 3,200

€ 2,000 € 4,800.00 € 2,400.00

€ 9,200

Jun-04

10

11

1

10

10

€ 1,000

€ 6,000

€ 4,000

€ 1,000 € 5,400.00 € 2,800.00

€ 9,200

Jul-04

10

12

2

10

10

€ 2,000

€ 6,000

€ 4,000

€ 2,000 € 6,000.00 € 3,200.00

€ 11,200

Aug-04

11

13

3

10

11

€ 3,000

€ 6,000

€ 4,400

€ 3,000 € 6,000.00 € 4,000.00

€ 13,000

Sep-04

14

19

3

16

14

€ 3,000

€ 9,600

€ 5,600

€ 3,000 € 6,000.00 € 4,000.00

€ 13,000

Oct-04

15

23

2

21

15

€ 2,000

€ 12,600

€ 6,000

€ 2,000 € 9,600.00 € 4,400.00

€ 16,000

Nov-04

17

25

3

22

17

€ 3,000

€ 13,200

€ 6,800

€ 3,000 € 12,600.00 € 5,600.00

€ 21,200

Dec-04

21

28

0

28

21

€0

€ 16,800

€ 8,400

€ 0 € 13,200.00 € 6,000.00

€ 19,200

Jan-05

€ 16,800.00 € 6,800.00

Feb-05

€ 8,400.00

104

Vat on Sales received for 2004 Payments Payments Payments Total Payment

Monthly Vat

Jan-04

€ 2,000

€0

€0

€ 2,000

€ 347.11

Feb-04

€ 2,000 € 1,800.00

€0

€ 3,800

€ 659.50

Mar-04

€ 3,000 € 2,400.00 € 1,200.00

€ 6,600

€ 1,145.45

Apr-04

€ 2,000 € 3,000.00 € 1,600.00

€ 6,600

€ 1,145.45

May-04

€ 2,000 € 4,800.00 € 2,400.00

€ 9,200

€ 1,596.69

Jun-04

€ 1,000 € 5,400.00 € 2,800.00

€ 9,200

€ 1,596.69

Jul-04

€ 2,000 € 6,000.00 € 3,200.00

€ 11,200

€ 1,943.80

Aug-04

€ 3,000 € 6,000.00 € 4,000.00

€ 13,000

€ 2,256.20

Sep-04

€ 3,000 € 6,000.00 € 4,000.00

€ 13,000

€ 2,256.20

Oct-04

€ 2,000 € 9,600.00 € 4,400.00

€ 16,000

€ 2,776.86

Nov-04

€ 3,000 € 12,600.00 € 5,600.00

€ 21,200

€ 3,679.34

Dec-04

€ 0 € 13,200.00 € 6,000.00

€ 19,200

€ 3,332.23

Payments refers to payments made by customers to K&F Fireplaces.

105

Quarterly Vat

€ 1,006.61

€ 2,290.91

€ 3,193.39

€ 4,200.00

€ 5,033.06

Raw material purchases in 2004

Liberty Thomond

Purchases Purchases

Payments

Payments Total Payment

Monthly Vat

Jan-04

3

5

€ 2,274

€0

€ 2,274

€0

€ 2,274

€ 394.64

Feb-04

4

6

€ 2,798

€0

€ 2,798

€0

€ 2,798

€ 485.69

Mar-04

6

8

€ 3,848

€0

€ 3,848

€0

€ 3,848

€ 667.78

Apr-04

7

10

€ 4,722

€0

€ 4,722

€0

€ 4,722

€ 819.58

May-04

8

11

€ 5,247

€0

€ 5,247

€0

€ 5,247

€ 910.62

Jun-04

10

11

€ 5,596

€0

€ 5,596

€0

€ 5,596

€ 971.21

Jul-04

10

12

€0

€ 5,946

€0

€0

€0

€ 0.00

Aug-04

11

13

€0

€ 6,471

€0

€ 5,946

€ 5,946

€ 1,031.96

Sep-04

14

19

€0

€ 9,095

€0

€ 6,471

€ 6,471

€ 1,123.01

Oct-04

15

23

€0

€ 10,669

€0

€ 9,095

€ 9,095

€ 1,578.40

Nov-04

17

25

€0

€ 11,719

€0

€ 10,669

€ 10,669

€ 1,851.70

Dec-04

21

28

€0

€ 13,467

€0

€ 11,719

€ 11,719

€ 2,033.79

€ 13,467

Jan-05

106

Quarterly Vat

€ 880.33

€ 1,487.36

€ 1,881.84

€ 1,031.96

€ 2,701.41

Sales Forecast for 2005

2005 Forecast

Liberty

Thomond

35 Fireplaces

30 25 20 15

10 5 0 Jan

Feb

Mar

Apr

May

Jun

Jul

107

Aug Sep

Oct

Nov Dec

Sales for 2005 Liberty Thomond

Cash

1 mth Cr 2 mth Cr

Sales

Sales

Payments Payments Payments Total Payment

€ 6,800

€ 3,000 € 12,600.00 € 5,600.00

€ 21,200

€ 16,800

€ 8,400

€ 0 € 13,200.00 € 6,000.00

€ 19,200

Nov-04 Dec-04

Sales

Jan-05

21

28

1

27

21

€ 1,000

€ 16,200

€ 8,400

€ 1,000 € 16,800.00 € 6,800.00

€ 24,600

Feb-05

21

25

2

23

21

€ 2,000

€ 13,800

€ 8,400

€ 2,000 € 16,200.00 € 8,400.00

€ 26,600

Mar-05

20

24

1

23

20

€ 1,000

€ 13,800

€ 8,000

€ 1,000 € 13,800.00 € 8,400.00

€ 23,200

Apr-05

19

24

1

23

19

€ 1,000

€ 13,800

€ 7,600

€ 1,000 € 13,800.00 € 8,400.00

€ 23,200

May-05

18

24

2

22

18

€ 2,000

€ 13,200

€ 7,200

€ 2,000 € 13,800.00 € 8,000.00

€ 23,800

Jun-05

18

25

3

22

18

€ 3,000

€ 13,200

€ 7,200

€ 3,000 € 13,200.00 € 7,600.00

€ 23,800

Jul-05

20

25

3

22

20

€ 3,000

€ 13,200

€ 8,000

€ 3,000 € 13,200.00 € 7,200.00

€ 23,400

Aug-05

23

26

1

25

23

€ 1,000

€ 15,000

€ 9,200

€ 1,000 € 13,200.00 € 7,200.00

€ 21,400

Sep-05

25

26

2

24

25

€ 2,000

€ 14,400

€ 10,000

€ 2,000 € 15,000.00 € 8,000.00

€ 25,000

Oct-05

28

30

2

28

28

€ 2,000

€ 16,800

€ 11,200

€ 2,000 € 14,400.00 € 9,200.00

€ 25,600

Nov-05

29

33

1

32

29

€ 1,000

€ 19,200

€ 11,600

€ 1,000 € 16,800.00 € 10,000.00

€ 27,800

Dec-05

29

33

3

30

29

€ 3,000

€ 18,000

€ 11,600 € 311,000

€ 3,000 € 19,200.00 € 11,200.00

€ 33,400

Jan-06

€ 18,000.00 € 11,600.00

Feb-06

€ 11,600.00

108

Vat on Sales received for 2005 Payments Payments Payments Total Payment

Monthly Vat

Nov-04

€ 3,000 € 12,600.00 € 5,600.00

€ 21,200

€ 3,679.34

Dec-04

€ 0 € 13,200.00 € 6,000.00

€ 19,200

€ 3,332.23

Jan-05

€ 1,000 € 16,800.00 € 6,800.00

€ 24,600

€ 4,269.42

Feb-05

€ 2,000 € 16,200.00 € 8,400.00

€ 26,600

€ 4,616.53

Mar-05

€ 1,000 € 13,800.00 € 8,400.00

€ 23,200

€ 4,026.45

Apr-05

€ 1,000 € 13,800.00 € 8,400.00

€ 23,200

€ 4,026.45

May-05

€ 2,000 € 13,800.00 € 8,000.00

€ 23,800

€ 4,130.58

Jun-05

€ 3,000 € 13,200.00 € 7,600.00

€ 23,800

€ 4,130.58

Jul-05

€ 3,000 € 13,200.00 € 7,200.00

€ 23,400

€ 4,061.16

Aug-05

€ 1,000 € 13,200.00 € 7,200.00

€ 21,400

€ 3,714.05

Sep-05

€ 2,000 € 15,000.00 € 8,000.00

€ 25,000

€ 4,338.84

Oct-05

€ 2,000 € 14,400.00 € 9,200.00

€ 25,600

€ 4,442.98

Nov-05

€ 1,000 € 16,800.00 € 10,000.00

€ 27,800

€ 4,824.79

Dec-05

€ 3,000 € 19,200.00 € 11,200.00

€ 33,400

€ 5,796.69

109

Quarterly Vat

€ 7,011.57

€ 8,885.95

€ 8,052.89

€ 8,261.16

€ 7,775.21

€ 8,781.82

Raw material purchases in 2005 Liberty Thomond

Purchases Purchases

Payments

Nov-04 € 13,467

Dec-04

Payments Total Payment

Monthly Vat

€ 10,669

€ 10,669

€ 1,851.64

€ 11,791

€ 11,791

€ 2,046.37

Jan-05

21

28

€0

€ 13,467

€0

€ 13,467

€ 13,467

€ 2,337.25

Feb-05

21

25

€0

€ 12,417

€0

€ 13,467

€ 13,467

€ 2,337.23

Mar-05

20

24

€0

€ 11,892

€0

€ 12,417

€ 12,417

€ 2,154.97

Apr-05

19

24

€0

€ 11,718

€0

€ 11,892

€ 11,892

€ 2,063.93

May-05

18

24

€0

€ 11,543

€0

€ 11,718

€ 11,718

€ 2,033.63

Jun-05

18

25

€0

€ 11,893

€0

€ 11,543

€ 11,543

€ 2,003.34

Jul-05

20

25

€0

€ 12,242

€0

€ 11,893

€ 11,893

€ 2,064.09

Aug-05

23

26

€0

€ 13,116

€0

€ 12,242

€ 12,242

€ 2,124.68

Sep-05

25

26

€0

€ 13,465

€0

€ 13,116

€ 13,116

€ 2,276.32

Oct-05

28

30

€0

€ 15,389

€0

€ 13,465

€ 13,465

€ 2,336.91

Nov-05

29

33

€0

€ 16,614

€0

€ 15,389

€ 15,389

€ 2,670.80

Dec-05

29

33

€0

€ 16,614

€0

€ 16,614

€ 16,614

€ 2,883.35

€ 16,614

€ 16,614

Jan-06

110

Quarterly Vat

€ 3,898.02

€ 4,674.48

€ 4,218.90

€ 4,036.97

€ 4,188.77

€ 4,613.22

€ 5,554.14

Sales Forecast for 2006

2006 Forecast

Liberty

Thomond

35

Fireplaces

30 25 20 15 10 5 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

111

Sales for 2006

Liberty Thomond

Cash

1 mth Cr 2 mth Cr

Sales

Sales

Payments Payments Payments Total Payment

€ 11,600

€ 1,000 € 16,800.00 € 10,000.00

€ 27,800

€ 18,000

€ 11,600

€ 3,000 € 19,200.00 € 11,200.00

€ 33,400

Nov-05 Dec-05

Sales

Jan-06

25

27

1

26

25

€ 1,000

€ 15,600

€ 10,000

€ 1,000 € 18,000.00 € 11,600.00

€ 30,600

Feb-06

23

26

3

23

23

€ 3,000

€ 13,800

€ 9,200

€ 3,000 € 15,600.00 € 11,600.00

€ 30,200

Mar-06

23

26

3

23

23

€ 3,000

€ 13,800

€ 9,200

€ 3,000 € 13,800.00 € 10,000.00

€ 26,800

Apr-06

23

26

1

25

23

€ 1,000

€ 15,000

€ 9,200

€ 1,000 € 13,800.00 € 9,200.00

€ 24,000

May-06

24

26

1

25

24

€ 1,000

€ 15,000

€ 9,600

€ 1,000 € 15,000.00 € 9,200.00

€ 25,200

Jun-06

24

28

3

25

24

€ 3,000

€ 15,000

€ 9,600

€ 3,000 € 15,000.00 € 9,200.00

€ 27,200

Jul-06

25

29

1

28

25

€ 1,000

€ 16,800

€ 10,000

€ 1,000 € 15,000.00 € 9,600.00

€ 25,600

Aug-06

27

29

1

28

27

€ 1,000

€ 16,800

€ 10,800

€ 1,000 € 16,800.00 € 9,600.00

€ 27,400

Sep-06

28

30

1

29

28

€ 1,000

€ 17,400

€ 11,200

€ 1,000 € 16,800.00 € 10,000.00

€ 27,800

Oct-06

29

33

2

31

29

€ 2,000

€ 18,600

€ 11,600

€ 2,000 € 17,400.00 € 10,800.00

€ 30,200

Nov-06

29

33

2

31

29

€ 2,000

€ 18,600

€ 11,600

€ 2,000 € 18,600.00 € 11,200.00

€ 31,800

Dec-06

29

33

3

29

30

€ 3,000

€ 17,400

€ 12,000

€ 3,000 € 18,600.00 € 11,600.00

€ 33,200

112

Vat on Sales received for 2006 Payments Payments Payments Total Payment

Monthly Vat

Nov-05

€ 1,000 € 16,800.00 € 10,000.00

€ 27,800

€ 4,824.79

Dec-05

€ 3,000 € 19,200.00 € 11,200.00

€ 33,400

€ 5,796.69

Jan-06

€ 1,000 € 18,000.00 € 11,600.00

€ 30,600

€ 5,310.74

Feb-06

€ 3,000 € 15,600.00 € 11,600.00

€ 30,200

€ 5,241.32

Mar-06

€ 3,000 € 13,800.00 € 10,000.00

€ 26,800

€ 4,651.24

Apr-06

€ 1,000 € 13,800.00 € 9,200.00

€ 24,000

€ 4,165.29

May-06

€ 1,000 € 15,000.00 € 9,200.00

€ 25,200

€ 4,373.55

Jun-06

€ 3,000 € 15,000.00 € 9,200.00

€ 27,200

€ 4,720.66

Jul-06

€ 1,000 € 15,000.00 € 9,600.00

€ 25,600

€ 4,442.98

Aug-06

€ 1,000 € 16,800.00 € 9,600.00

€ 27,400

€ 4,755.37

Sep-06

€ 1,000 € 16,800.00 € 10,000.00

€ 27,800

€ 4,824.79

Oct-06

€ 2,000 € 17,400.00 € 10,800.00

€ 30,200

€ 5,241.32

Nov-06

€ 2,000 € 18,600.00 € 11,200.00

€ 31,800

€ 5,519.01

Dec-06

€ 3,000 € 18,600.00 € 11,600.00

€ 33,200 € 340,000

€ 5,761.98

113

Quarterly Vat

€ 10,621.49

€ 10,552.07

€ 8,816.53

€ 9,094.21

€ 9,198.35

€ 10,066.12

Raw material purchases in 2006

Liberty Thomond

Purchases Purchases

Monthly Vat

€0

€ 15,389

€ 15,389

€ 2,670.82

€ 16,614

€0

€ 16,614

€ 16,614

€ 2,883.42

Nov-05 Dec-05

Cash Payments Payments Total Payment

Jan-06

25

27

€0

€ 13,815

€0

€ 16,614

€ 16,614

€ 2,883.42

Feb-06

23

26

€0

€ 13,116

€0

€ 13,815

€ 13,815

€ 2,397.66

Mar-06

23

26

€0

€ 13,116

€0

€ 13,116

€ 13,116

€ 2,276.32

Apr-06

23

26

€0

€ 13,116

€0

€ 13,116

€ 13,116

€ 2,276.32

May-06

24

26

€0

€ 13,290

€0

€ 13,116

€ 13,116

€ 2,276.32

Jun-06

24

28

€0

€ 13,991

€0

€ 13,290

€ 13,290

€ 2,306.61

Jul-06

25

29

€0

€ 14,515

€0

€ 13,991

€ 13,991

€ 2,428.11

Aug-06

27

29

€0

€ 14,864

€0

€ 14,515

€ 14,515

€ 2,519.16

Sep-06

28

30

€0

€ 15,389

€0

€ 14,864

€ 14,864

€ 2,579.75

Oct-06

29

33

€0

€ 16,614

€0

€ 15,389

€ 15,389

€ 2,670.80

Nov-06

29

33

€0

€ 16,614

€0

€ 16,614

€ 16,614

€ 2,883.35

Dec-06

29

33

€0

€ 16,614

€0

€ 16,614

€ 16,614

€ 2,883.35

114

Quarterly Vat

€ 5,554.24

€ 5,281.08

€ 4,552.63

€ 4,582.93

€ 4,947.27

€ 5,250.55

Cash Flow Statement RECEIPTS Cash Sales From Debtors Term Loans Personal Funds Vat Refunds A: TOTAL RECEIPTS

Appendix 7 – Accounts for 2004

January February € € 2,000 2,000 1,800 50,000 65,000

March € 3,000 3,600

April € 2,000 4,600

May € 2,000 7,200

June € 1,000 8,200

July August September October November December € € € € € € 2,000 3,000 3,000 2,000 3,000 0 9,200 10,000 10,000 14,000 18,200 19,200

6,600

9,200

9,200

11,200

13,000

13,000

16,000

21,200

19,200

0 5,946 1,503

0 6,471 1,503

0 9,095 1,503

0 10,669 1,503

0 11,719 1,503

200 600 200 200

200

200 700 300 200

200

837 245

837 245 433

837 245 1985 433

837 245

433

837 245 2926 433

Total € 25,000 106,000 50,000 65,000 16,111 262,111

117,000

3,800

16,111 22,711

2,118

2,274

2,798

3,848

4,722

5,247

5,596

1,503 7,000

1,503

1,503

1,503

1,503

1,503

1,503

200

200 200 200 200

200

200

200 500

200 300 200 200

200 500 200 500

833 250

833 250

833 250

833 250

433 71,617 15,000 1,144

433

433

433

833 250 562 433

433

858 225 1034 433

104,168

6,093

6,717

7,767

8,903

9,666

11,749

10,164

13,415

13,513

16,372

18,037

226,564

12,833

-2,293

15,994

-1,167

297

-466

-549

2,836

-415

2,487

4,828

1,163

35,548

OPENING BALANCE

0

12,833

10,540

26,534

25,367

25,664

25,198

24,649

27,485

27,070

29,557

34,385

CLOSING BALANCE

12,833

10,540

26,534

25,367

25,664

25,198

24,649

27,485

27,070

29,557

34,385

35,548

PAYMENTS Cash purchases To creditors Wages & salaries Insurance Rates Rent Light,heat and power Telephone, & stationery Transport Promotion Loan repayments Financial charges/interest VAT PAYE, PRSI Capital Expenditure Renovations Other payments B: TOTAL PAYMENTS C: NET CASH FLOW (A-B)

200 1,870 2,000 833 250

200 200

115

1,500 200 200 200

300 500

300 200

1,500 200 800 300 500

433

26,603 43,900 18,036 7,000 3,000 2,400 3,100 2,800 5,270 2,000 10,041 2,950 6,507 5,196 71,617 15,000 1,144

Trading and P&L Account

€ Sales

Sub-totals Totals € € 163,000

LESS Purchases

83,970

Trading Profit

79,031

LESS EXPENSES Wages & salaries Insurance Rates Rent Light,heat and power Telephone, post and stationery Transport Promotion Financial charges/interest VAT PAYE, PRSI Renovations Other payments

18,036 7,000 3,000 2400 3100 2,800 5,270 2000 2,950 2,825 5,196 15,000 1,144

TOTAL EXPENSES

70,721

PROFIT/(Loss)

8,310

116

Balance Sheet Notes FIXED ASSETS Land & Buildings Plant & Equipment

€ 1

Sub-totals €

Totals €

0 59,188

TOTAL FIXED ASSETS =>

59,188

CURRENT ASSETS Debtors Cash

32,000 35,548

TOTAL CURRENT ASSETS =>

67,548

LESS CURRENT LIABILITIES Creditors Loans Outstanding

2

TOTAL CURRENT LIABILITIES =>

13,467 39,959 53,426

NET CURRENT ASSETS

14,122

TOTAL ASSETS

73,310

FINANCED BY Profit Owners Equity

8,310 65,000

117

73,310

73,310

Cash Flow Statement RECEIPTS Cash Sales From Debtors Term Loans Personal Funds Vat Refunds A: TOTAL RECEIPTS

Appendix 8 – Accounts for 2005 January February € € 1,000 2,000 23,600 24,600

March € 1,000 22,200

April € 1,000 22,200

May € 2,000 21,800

June € 3,000 20,800

July August September October November December € € € € € € 3,000 1,000 2,000 2,000 1,000 3,000 20,400 20,400 23,000 23,600 26,800 30,400

24,600

26,600

23,200

23,200

23,800

23,800

23,400

21,400

25,000

25,600

27,800

33,400

0 13,467 3,002 8,000

0 13,467 3,002

0 12,417 3,002

0 11,892 3,002

0 11,718 3,002

0 11,543 3,002

0 11,893 4,346

0 12,242 4,346

0 13,116 4,346

0 13,465 4,346

0 15,389 4,346

0 16,614 4,346

200

200 700 300 400

200

200 750 300 400

200

200 800 300 750

200 900 400 400

200

200 1,000 400 400

200

880 199

880 199

897 173

897 173

867

880 199 3,400 867

880 199

867

880 199 1,649 867

1,221

897 173 3,656 1,221

1,221

36,347

20,015

20,264

18,490

-11,747

6,585

2,936

OPENING BALANCE

35,548

23,801

CLOSING BALANCE

23,801

30,387

PAYMENTS Cash purchases To creditors Wages & salaries Insurance Rates Rent Light,heat and power Telephone, & stationery Transport Promotion Loan repayments Financial charges/interest VAT PAYE, PRSI Capital Expenditure Other payments B: TOTAL PAYMENTS C: NET CASH FLOW (A-B)

200 2,170 3,000 880 199 2,762 867

300 750

300 400

1,600 200 300 400

400 750

400 400

1,600 200 1,100 400 750 897 173

Total € 22,000 279,800 0 0 0 301,800

0 157,223 44,088 8,000 3,200 2,400 5,250 4,000 7,970 3,000 10,662 2,232 18,557 12,524 0 1,600

867

897 173 3,920 1,221

1,221

897 173 3,170 1,221

20,966

18,541

24,950

20,779

24,273

22,102

26,682

27,301

280,706

4,710

2,834

5,259

-1,550

621

727

3,498

1,118

6,099

21,094

30,387

33,323

38,034

40,868

46,128

44,578

45,199

45,926

49,425

50,543

35,548

33,323

38,034

40,868

46,128

44,578

45,199

45,926

49,425

50,543

56,642

56,642

1,600

118

Trading and P&L Account

€ Sales

Sub-totals Totals € € 311,000

LESS Purchases

160,370

Trading Profit

150,630

LESS EXPENSES Wages & salaries Insurance Rates Rent Light,heat and power Telephone, post and stationery Transport Promotion Financial charges/interest VAT PAYE, PRSI Other payments

44,088 8,000 3,200 2400 5250 4,000 7,970 3000 2,232 18,557 12,524 1,600

TOTAL EXPENSES Profit from 2004

112,821 8,310

PROFIT/(Loss)

46,119

119

Balance Sheet

FIXED ASSETS Land & Buildings Plant & Equipment

€ 1

Sub-totals €

Totals €

0 59,188

TOTAL FIXED ASSETS =>

59,188

CURRENT ASSETS Debtors Cash

41,200 56,642

TOTAL CURRENT ASSETS =>

97,842

LESS CURRENT LIABILITIES Creditors Loans Outstanding

2

TOTAL CURRENT LIABILITIES =>

16,614 29,297 45,911

NET CURRENT ASSETS

51,931

TOTAL ASSETS

111,119

FINANCED BY Opening Balance Profit

46,119

Owners Equity

65,000

120

111,119

111,119

Cash Flow Statement RECEIPTS Cash Sales From Debtors Term Loans Profits 2005 Personal Funds Vat Refunds

Appendix 9 – Accounts for 2006 January February € € 1,000 3,000 29,600 27,200

March € 3,000 23,800

April € 1,000 23,000

May € 1,000 24,200

June € 3,000 24,200

July August September October November December € € € € € € 1,000 1,000 1,000 2,000 2,000 3,000 24,600 26,400 26,800 28,200 29,800 30,200

Total € 22,000 318,000 0 0 0 0

0

A: TOTAL RECEIPTS PAYMENTS Cash purchases To creditors Wages & salaries Insurance Rates Rent Light,heat and power Telephone, & stationery Transport Promotion Loan repayments Financial charges/interest VAT PAYE, PRSI Capital Expenditure Other payments

30,600

30,200

26,800

24,000

25,200

27,200

25,600

27,400

27,800

30,200

31,800

33,200

340,000

0 16,614 4,346 9,000

0 13,815 4,346

0 13,116 4,346

0 13,116 4,346

0 13,116 4,346

0 13,209 4,346

0 13,991 4,346

0 14,515 4,346

0 14,864 4,346

0 15,389 4,346

0 16,614 4,346

0 16,614 4,346

200

200 1,000 500 450

200

200 1,050 500 450

200

200 1,100 500 825

200 1,150 500 450

200

200 1,200 500 450

200

908 146

908 146

910 119

1,221

908 146 3,687 1,221

910 119

1,221

908 146 2,198 1,221

1,221

910 119 4,212 1,221

1,221

0 174,973 52,152 9,000 3,400 2,400 6,700 6,000 8,770 4,000 10,908 1,590 22,042 14,652 0 2,000

B: TOTAL PAYMENTS

45,619

22,586

23,460

21,937

-15,019

7,614

3,340

OPENING BALANCE

56,642

41,623

CLOSING BALANCE

41,623

49,237

C: NET CASH FLOW (A-B)

500 2,320 4,000 908 146 4,364 1,221

500 825

500 450

908 146

1,700 200 500 450

500 825

500 450

1,700 200 1,200 500 825

1,221

910 119 3,925 1,221

1,221

910 119 3,656 1,221

910 119

24,574

22,455

27,362

23,411

26,641

24,335

28,572

27,635

318,587

2,063

626

4,745

-1,762

3,989

1,159

5,865

3,228

5,565

21,413

49,237

52,577

54,640

55,266

60,011

58,249

62,238

63,397

69,262

72,490

56,642

52,577

54,640

55,266

60,011

58,249

62,238

63,397

69,262

72,490

78,055

78,055

2,000

121

Trading and P&L Account

€ Sales

Sub-totals Totals € € 339,800

LESS Purchases

174,973

Trading Profit

164,827

LESS EXPENSES Wages & salaries Insurance Rates Rent Light,heat and power Telephone, post and stationery Transport Promotion Financial charges/interest VAT PAYE, PRSI Other payments

52,152 9,000 3,400 2400 6700 6,000 8,770 4000 1,590 22,042 14,652 2,000

TOTAL EXPENSES Profit from 2005

132,706 46,119

PROFIT/(Loss)

78,240

122

Balance Sheet €

FIXED ASSETS Land & Buildings Plant & Equipment

Sub-totals €

Totals €

0 59,188

TOTAL FIXED ASSETS =>

59,188

CURRENT ASSETS Debtors Cash

41,000 78,055

TOTAL CURRENT ASSETS =>

119,055

LESS CURRENT LIABILITIES Creditors Loans Outstanding

16,614 18,389

TOTAL CURRENT LIABILITIES =>

35,003

NET CURRENT ASSETS

84,052

TOTAL ASSETS

143,240

FINANCED BY

Profit Owners Equity

78,240 65,000

123

143,240

143,240

124

Appendix 10 - Database – K&F Fireplaces K&F Fireplaces.mdb

The K&F Fireplaces Database comprises of: 1.

2.

3.

4.

Tables.

Forms.

Reports.

Macros.

There are seven tables in this database: 1. Prospective customers 2. Products made 3. Orders for products 4. Payments received 5. Materials needed 6. Suppliers of materials 7. Payments made out for materials These tables are the fundamental structure in an Access Database because they store all the essential data the partnership will be utilising. Within the tables, the data is organised into fields (columns) and records (rows). The user of this database application will not be able to interface directly with the tables.

Forms will be the first means the user will have of interfacing with the tables. They will enable the user to display data selectively from the tables. Data can also be entered into the tables in a convenient format that resembles „fill-in-the-blanks‟ forms. The „Main Menu‟ is the initial form that the user will interface with in this database. From there all the other interfaces can be accessed. The following are the list of forms: 1. Main menu 2. Add New Customer 3. Add New Products or Product details 4. Orders for Products 5. Payments made 6. Materials 7. Add New Suppliers 8. Payments made out Reports allow the user to preview or print data from the tables in a useful format. There are three detailed reports that are available to be viewed in this database: 1. List of customers 2. Manufactured products 3. Suppliers of materials

This database contains a number of Macros: 1. Open Main Menu 2. Open Add New Customer form These contain a set of instructions that automate repeated tasks e.g. open Main Menu. The various buttons in the forms contain them. They can be accessed directly from the Macro window.

Appendix 11 – List of Materials Needed

Materials ID Product Name Product Description Supplier ID Unit Price LeadTimeHrs 32 Bracket - angle 19 x 19 mm steel 12 €0.08 24 33 Bracket - angle 40 x 40 mm steel 12 €0.12 24 13 Cement - Fondu 25 Kg UK - Dineen 11 €17.55 72 19 Cement -Chinese 25 Kg - Dineen 11 €13.31 72 5 Cherry wood 2.0 x 5.0 inch x 10 feet 17 €65.76 24 2 Chippings - BY Tonne - 10 ton loads 9 €190.00 6 22 Chippings - SA Tonne - 1 ton bags 10 24 9 Fire trim Blackwater Crafts 6 €23.05 24 18 Fireback 18 x 22 inch - Dineen 11 €23.57 72 21 Fireback 16 x 22 inch - Dineen 11 €21.44 72 12 Fireback 16 x 22 inch - GMP 5 €30.25 24 11 Front GMP 5 €12.10 24 28 Fronts 16 inch Black 6 €53.77 24 31 Glue 5 Lt Evo Stik Resin W 17 €57.33 24 36 Glue 350 ml Evogrip 17 €3.95 24 3 Glue 5 Lt Evo Stik Wood Adhesive 12 €22.00 4 Granite 60 x 18 inches, GMP 5 €108.90 24 10 Grate GMP 5 €12.10 24 27 Grates 16 inch Black 6 €84.50 24 7 Insert - cast iron GMP 5 €121.00 24 53 Iroko - teak 2.0 x 5.0 inch x 10 feet 17 €32.19 24 16 Lacquers 5 Lt,P/C Lacquer 12 €33.64 24 8 Mahogany 19 x 140 mm x 2.4m 12 €20.09 24 57 Maple kiln dried 2.0 x 5.0 inch x 10 feet 17 €54.00 24 6 Marble 12 x 24 inch 2 €36.30 24 20 Perlite aggregate 9.5 Kg - Dineen 11 €12.21 72 47 Pine 1.0 x 6 inch x 14 feet 17 €13.14 24 48 Pine 1.0 x 4 inch x 14 feet 17 €10.44 24 29 Pine - red deal 19 x 140 mm x 2.4m 12 €14.52 24 58 Pine-southern yel 2.0 x 6.0 inch x 10 feet 17 €21.27 24 56 Red Oak 2.0 x 5.0 inch x 10 feet 17 €40.87 24 59 Resin 12 x 24 inch 2 €18.15 24 24 Rollback 18 x 22 inch - Dineen 11 €32.50 72 25 Rollback 16 x 22 inch - Dineen 11 €29.95 72 1 Sand - BY Tonne - 10 ton loads 9 €18.99 6 23 Sand - SA Tonne - 1 ton bags 10 24 26 Sand&Chips- BY Tonne - 10 ton loads 9 €18.99 6 55 Sapele-mahogany 2.0 x 5.0 inch x 10 feet 17 €27.20 24 34 Screws 200 brass timber to timber 17 €3.39 24 35 Screws 200 brass insert to wall 17 €5.60 24 17 Sealers 5 Lt,P/C Basecoat High Build 12 €38.08 24 15 Steel - 3 rods GMP reinforcing 5 €2.34 24 30 Tenax 1 Litre stone glue 5 €30.00 24 44 White Oak 2.0 x 5.0 inch x 10 feet 17 €44.72 24

Appendix 12 – List of Suppliers ID

Suppliers

Contact

Address

Address

County

Phone Number

1 Comet Marble

Rathmullen Rd

Drogheda

Co. Louth

041-983 2937

2 Marble Granite Supplies Ltd

Malahide Rd Indl Park

Malahide Rd

Dublin 17

01-8671077

3 Stonefacings Ltd

Lynn Industrial Est

Mullingar

Co. Westmeath

044-40202

4 Stephen Tripp

2 Renmore Business Pk Kilcoole

Co. Wicklow

01-2870444

Co. Meath

01-835 1471

Co. Cork

022-24333

Co. Dublin

01-260 1292

5 Gerard Murray Products Ltd

Michael Kinchella Cast Iron Specialists

112 Ashbourne

6 Blackwater Crafts Ltd

Denis O’Mahoney Old Creamery & Stores Doneraile

7 Hopkins Machinery

33 Seafield Crescent

Blackrock

8 Tenax

Via I Maggio

226 - 37020 Volargne Italy

9 Brick Yard Builders Providers

19 Creagh Ave

Kileely

10 Stone Age

Crecora

Limerick

061-327276

Co. Limerick

061-301177

11 Dineen Refractories Ltd

Annette Dineen

Wolfhill

Athy

Co. Laois

059-8635557

12 Heiton Buckley Builders

Con O’Connell

Ballysimon Road

Ballysimon

Limerick

061-416844

13 O'Mara Motors Ltd

Adrian Hopkins

Toyota Main Dealer

Ennis Road

Limerick

061-451611

14 Mr Binman

John Shanney

4 St John's Square

Limerick

061-440474

15 Hibernian Insurance

Denis Mahon

Hibernian House

Liimerick

061-312266

16 Chadwicks

Pat Kilcoyle

Childer's Road

Limerick

061-313766

17 James McMahon

Don Madigan

Dock Road

Limerick

061-315388

18 Heiton McMahon Ltd

Seamus Flynn

Dock Road

Limerick

061-227444

6/7 Great Ship Street

Dublin 8

01-4782699 01-464 1880

19 Granyte Surface Coatings (Ireland) Ltd 20 High Tech Machinery Ltd 21 United Kingdom Lafarge Aluminates Ltd

Gerry Doherty

Henry Street

Ballymount Road

Nass Road

Dublin 22

730 London Road

Grays

Essex RM20 3NJ

127

Appendix 13 â&#x20AC;&#x201C; List of Customers ID

Company Name

First Name Surname

204 Singland Homes

Address

Address

County

Craguan

Fr Russell Road

Limerick

Phone Number 061-225111

205

Thomas

Slattery

Cloonaduff

Patrickswell

Co. Limerick 061-355041

206 Dick Smyth Ltd

Dick

Smyth

Caherdavin

Ennis Road

Limerick

207 Sunnyside Construction

20 Southkey

Newcastle West

Co. Limerick 069-77622

208 Tatloon Construction Ltd

Boreen

Ballinacurra

Limerick

061-301040

Clarecastle

Ennis

Co. Clare

065-6828430

Limerick

061-216112

209 Frank Travers & Sons

Frank

Travers

061-452506

210 Union Construction

Harveys Quay

211 W.D.K Construction

Dromineer

Nenagh

Co. Tipperary 067-24113

Ballyvalley

Killaloe

Co. Clare

061-376399

Ballina

Killaloe

Co. Clare

061-361092

212

Michael

Weldon

213 Wellingford Construction Ltd 214 John Whelan Ltd

John

Whelan

Unit 5 Steamboat Quay

Dock Road

Limerick

061-314449

215

Noel

Whelan

Larchill

Ennis

Co. Clare

065-6840680

216 Windrush Grove Ltd

Oldtown

Hospital Road

Limerick

016-383038

217 Elm Fireplaces

Loughill

Foynes

Co. Limerick 069-65360

218 Limerick Fireplaces

O'Connell Avenue

Limerick

061-317777

219 Designer Fireplaces Ltd

Mill Road

Ennis

Co. Clare

065-6828400

220 Europa Tile Market Ltd

Kilrush Road

Ennis

Co. Clare

065-6845764

221 Fineline Furniture Ltd

Ruanard

Clonlara

Co. Clare

061-354455

222 Galtee Fireplaces Ltd

Fair Green

Tipperary Town

Tipperary

062-51550

223 Marble City

Unit 2

Eastway Business Park

Limerick

061-423916

224 Mid West Fireplaces

Mill Road

Ennis

Co. Clare

065-6823991

225 Midwest Mantel & Design Ltd

Raheen Ind Estate

Limerick

061-301666

Ballysimon Road

Limerick

061-313299 061-229142

226 Munster Fireplace Ltd 227 Naughtons Fireplaces

Ballyclough

Rosbrien

Limerick

228 Shanid Fireplaces

Old Mill

Newcastle West

Co. Limerick 069-61766

John Street

Limerick

061-413000

Mulgrave Street

Limerick

061-356833

Tipperary

054-839649

229 Treaty Fireplaces

Joe

Kemmy

230 Ger Coffey

Ger

Coffey

231 Tipperary Fireplaces

Main Street

232 Tintean Fireplaces

Market Street

Nenagh

Co, Tipperary 0504-364729

128

Endnotes

1

Irish Economy Overview, www.esri.ie The Economic and Social Institute, 2003.

Doing business and investing in Ireland, PriceWaterhouseCoopers team of investment specialists in Ireland, February 2003.

3 Central Statistics Office, www.cso.ie/text/principalstats/pristat10a.html.

4 The Economic and Social Institute, Medium-Term Review 2003 - 2010, number 9; Adele Bergin, Joe Cullen, David Duffy, John FitzGerald, Ide Kearney, and Danny McCoy, published 18 July 2003.

5 Construction Industry Federation website: www.cif.ie 6 Economic developments in Ireland, No. 73 - OECD Economic Outlook, June 2003, vol. 2003, no. 1, pp. 255-265 (11 pages) Authors: OECD Organisation for Economic Co-operation and Development.

7 ISME, Press Release. Thursday 11th September 2003.

8 Dibb, S., Simkin, L., Pride, W. and Ferrell, O., Marketing: Concepts and Strategies, Houghton Mifflin, Boston. 1994, p74.

9 Tiernan, Siobhรกn and Morley, Michael and Foley,Edel, Modern Management, Gill & Macmillan Ltd, Dublin 8, 1996, pp 249-275.

10 Appleby, Robert C., Modern Business Administration, 6th ed., Pitman Publishing, London, 1994, p.

262.

11 McCarthy, E. J., and Perreault, W. D., Basic Marketing, Irwin, Homewood, Illinois, 1990, p.258.

12 Nilson, T., Value Added Marketing, McGraw-Hill, London, 1992, p.183.

13 Kirby, David A., Entrepreneurship, McGraw-Hill Education (UK) Limited, Berkshire, 2003, p. 240.

14 Starting in Business Guide, Revenue Commissioners, www.revenue.ie 15 Self-Assessment for the Self-Employed, an explanatory booklet (IT10) from the Revenue Commissioners.

16 Appleby, Robert C., Modern Business Administration, 6th ed., Pitman Publishing, London, 1994, pp.

359-427.

17 McLaney, Eddie and Atrill, Peter, Accounting, An Introduction. Pearson Education Ltd, Essex, 2002, pp. 474-502.

18 Press Release, ISME. Wednesday 6th August 2003.

19 Stokes, Kennedy, Crowley, Running Your Own Business, second Edition, SKC, Dublin 1987.

2

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