Solar Kiss Business Plan Version _ FINAL

7/31/2019 Solar Kiss Business Plan Version _ FINAL

1/54

1

Solar Kiss Project

TheBusinessPlan

ESADE MBA 2009-2011

Zorina Dimitrova

Natalie Tyurin

Vikash Panigrahi


2/54

2

Table of Content

MARKETING PLAN ......................................................................................................................................... 6

The Product (The Invention).......................................................................................................................... 6

Value Proposition .......................................................................................................................................... 7

Target Market ............................................................................................................................................... 8

Why Renewable Sector and Solar in specific? .......................................................................................... 8

Why Europe? ............................................................................................................................................. 9

Drivers for solar power in Europe ......................................................................................................... 9

Why Bulgaria? ........................................................................................................................................... 9

Understanding the Bulgaria Market in depth: .................................................................................... 10

Favorable Conditions .......................................................................................................................... 10

Bulgaria Solar Thermal Market Situational Analysis ........................................................................... 11

Customer Segmentation ............................................................................................................................. 11

Competitors in the Market ......................................................................................................................... 12

Expansion strategy ...................................................................................................................................... 13

Placement ................................................................................................................................................... 14

Channel Design ........................................................................................................................................... 14

Channel Management............................................................................................................................. 15

Promotion ................................................................................................................................................... 15

Price ............................................................................................................................................................ 17

Sales Plan .................................................................................................................................................... 18

Marketing Budget/ Operations ................................................................................................................... 20

Risks and Challenges ................................................................................................................................... 21

Strategic .................................................................................................................................................. 21

Intellectual Property ........................................................................................................................... 21

Threat of Substitutes ........................................................................................................................... 21

Prolonged Price War ........................................................................................................................... 21

Balanced Team Formation .................................................................................................................. 22

Operational ............................................................................................................................................. 22

Low-Cost Outsourced Manufacturing ................................................................................................. 22

Distribution Challenges ....................................................................................................................... 22

Financial .................................................................................................................................................. 23


3/54

3

Working Capital Management ............................................................................................................ 23

OPERATIONS ............................................................................................................................................... 25

Strategic Processes ..................................................................................................................................... 26

Capturing Clients: .................................................................................................................................... 26

Quality Management: ............................................................................................................................. 26

Planning and Budgeting: ......................................................................................................................... 26

Important/Fundamental Processes ............................................................................................................ 26

Supply Chain: .......................................................................................................................................... 26

Process Flow Diagram: ............................................................................................................................ 27

Structural/permanent subcontracting .................................................................................................... 28

Packaging production ............................................................................................................................. 28

Transportation ........................................................................................................................................ 28

Accounting and Finance .......................................................................................................................... 28Necessary resources: equipment ............................................................................................................ 29

Location ................................................................................................................................................... 29

Physical infrastructure and layout .......................................................................................................... 29

Production/service capacity and permanent materials utilization ....................................................... 30

Utilization of transitory materials (consumables) .............................................................................. 31

Delivery time to clients and inventory management ............................................................................. 31

Investment and launching costs ............................................................................................................. 32

Operating expenses ................................................................................................................................ 33

Cost Analysis of opening up a Plant/Sales Offices in all countries...................................................... 33

Unit costs ............................................................................................................................................ 33

Launch plan ............................................................................................................................................. 34

HUMAN RESOURCES ................................................................................................................................... 37

Organizational Structure ......................................................................................................................... 37

Year 2011 ............................................................................................................................................ 37

Year 2013 ............................................................................................................................................ 38

Year 2015 ............................................................................................................................................ 39

Management and Governance Structures .............................................................................................. 39

Company as a Legal Entity .................................................................................................................. 40

Valuation ............................................................................................................................................. 40

Responsibilities of Managing Director ................................................................................................ 41


4/54

4

Personnel ................................................................................................................................................ 42

Sales Department ................................................................................................................................ 42

Production Department ...................................................................................................................... 42

Compensation ..................................................................................................................................... 43

Other HR Policies .................................................................................................................................... 43

FINANCE ...................................................................................................................................................... 46

Balance Sheet .......................................................................................................................................... 46

Income Statement .................................................................................................................................. 47

Sensitivity Analysis .................................................................................................................................. 48

Cash Flow Statement .............................................................................................................................. 49

Risks and Contingency Plans ................................................................................................................... 50

Other Legal Considerations ......................................................................................................................... 51

For a full description of the Companys legal form and structure please see the Human Resourcessection of this business plan under section Companys Legal Form and Structure................................ 51

The European Union Directive ................................................................................................................ 51

Certification............................................................................................................................................. 52

Guarantee ............................................................................................................................................... 53

Patent ...................................................................................................................................................... 53

Growth and Business Development Strategy ............................................................................................. 53

References .................................................................................................................................................. 54


5/54

5

Marketing Plan


6/54

6

MARKETING PLANThe aim of this section is to address some of the key issue associated with market plan for the Solar Kiss

business. As part of the plan, we will detail the potential market size and growth, realistic market

penetration (in terms of sales projections), marketing strategy (in terms of 4Ps: which will include

distribution strategy) and estimated marketing expenses and budget.

The Product(The Invention)Solar Kiss Ltd. will be in the business of providing Solar Domestic Hot Water collectors (SDHW) for the

European market. SDHW (also known as solar thermal collector) capture solar radiation and the

resulting heat is conveyed to a heat transfer medium, in this case a piping system, which in turn heats

up water. Solar thermal can be successfully applied to a broad range of heat requirements including

Water heating plants in residential/commercial buildings Space heating/climate control in residential/commercial buildings Solar power plants: heat is used to produce steam which in turn drives generator turbines

New and improved technologies of this product are consistently being developed which result in higher

efficiency of radiation-to-heat translation and lower product cost structure.

A group member of Solar Kiss Ltd, Victor Atanasov, who has a PhD in Theoretical Physics, has developed

a new and innovative version of the SDHW. The solar thermal collector has a standard structure as those

collectors on the market. However its new and innovative absorptive layer significantly reduces the cost

of production and allows for a marginal reduction from the best in the market in terms of radiation

absorption. Exact price-efficiency ratio will be discussed later in this report.

The following is a technical description of the workings of this

product. Please see diagram on the right hand side for the

visualization of breakdown of the product components. The

aluminum casing is produced from aluminum profiles cut and

joined together. The silicon seal prevents water from entering the

inside of the collector. The protective glass has low-iron content

(FeO 0.02 %), which makes the glass transparent to 90% of thesolar radiation. The rock wool insulation at the back of the

absorber pipe harp onto which the absorber plate is welded

retains the heat in the collector thus increasing its efficiency. The inlet/outlet terminals of the absorber

pipe harp can be provided with screw. To guarantee high conversion efficiency the absorber pipe

harp and plate are made from copper. This structure is common to all solar thermal collectors on the


7/54

7

market. Its simplicity and durability makes it also the best from engineering point of view. The

absorptive coating is applied onto the absorber in the form of a thin film. The simplest possible way to

apply it is by spraying. The composition of this coating is high temperature resistant silicon resin as a

binder, a solvent and nanostructure carbon. The materials used in this coating are widely available and

inexpensive. Its cost is less than 1% of the total production cost of the solar thermal collector. Due to the

durability of the materials and long-lasting compound used for the absorptive layer it is estimated that

the product can function for 25 years without requiring any additional maintenance.

Solar Kiss Ltd. will provide two product models described below:

Product type one: Solar Kiss Petitmodel *

Area of collectors surface: 2,2m2 Overall efficiency of this collector as compared to best in the market: 70%. Amount of heat energy produced in one year or 2.000h solar radiation hours: 1,1MWh Energy saved yearly (in ): 0,10/kWh or 110 CO savings: 1,1 tons / year

Product type two: Solar Kiss Grande model*

Area of collectors surface: 2,9m2 Overall efficiency of this collector as compared to best in the market: 70% Amount of heat energy produced in one year or 2.000h solar radiation hours: 1,5MWh Energy saved yearly (in ): 0,10/kWh or 150 CO savings: 1,5 tons / year

*All figures are based on projections of the Bulgarian market

Value PropositionThe value proposition of the Solar Kiss productsis mainly the price-efficiency ratio. The price of Solar

Kiss will be 50 % cheaper than the typical solar collector available in the market today with a downside

of only 15% loss in efficiency as compared to the best product in the market.

Price of the product can be derived from total production costs plus the premium charged by the

company for the provided service. Exact breakdown of the cost components will be discussed later in

this report. Solar Kiss Ltd. is able to provide a substantial price reduction due to the lean operations of

the business model (see Operations Section of this report). However the main contributing component


8/54

8

of the price is the cheap cost and ease of application of the absorptive layer. To have a better

understand of the pricing, we draw a comparison between the performances of a collector in which the

carbon paint cheapest and short-lived compound - is used as an absorptive coating with the

performance of a collector in which the absorptive coating is Tinox: a ceramic-metal compound applied

on copper base. Tinox is the best possible coating on the market with high efficiency rate and longevity

of compound. Below is a graph comparing the efficiency levels of Tinox vs. standard carbon paint. As

mentioned before the new absorptive layer provided Solar Kiss will be 15% less efficient then Tinox.

Due to its toxicity the Tinox coat is applied in a

vacuum environment which increases the cost of the

Tinox to more than 30% of the total production cost

of the collector. As mentioned before the Solar Kiss

layer only makes up 1% of total production cost. The

exact cost of the layer is 0.75/m. That total cost of

the layer for the Petite model would comprise of

1,65 and for the Grande model 2,18. This is due

to low market price of the compound components as

well as with the ease of application. Solar Kiss layer can be applied in any environment without any

technical background with a simple paintbrush.

Other value proposition of this product is the independence of the customer from high electricity bills

and the ability to decrease his/her carbon footprint. It is projected that for a two story home, the

payback period (based on Bulgarias electricity prices) will be 1,5 to 2 years.

Target Market

Why Renewable Sector and Solar in specific?

In the recent times, the renewable sector has seen tremendous growth and positive signs form the

investment community. Further, most of the nations governments are announcing various stimulus

packages for supporting economic recovery by encouraging programs that reduce dependency on fossil

fuels. Now, when we observe the renewable sector, Solar has the highest contribution and is projected

to become $116.5 billion industry in itself by 2019.


9/54

9

Why Europe?

Europe is the most lucrative market when it comes to renewable sector. There are 29 countries in

Europe enacting legislation to promote renewable which is highest compared to any other region in

world. The key legislation in major European countries which support solar power includes the FIT (Feed

In Tariff) and bonus, tax credits, grants and subsidies.

Drivers for solar power in Europe

EU's carbon reduction targets.

EU aims to reduce its carbon emissions by 20% by the end of 2020 from 1990 levels. The overall goal

has been further split into country-specific targets, setting individual targets for 25 of the total 27

member countries. The installed renewable power generation capacity in the EU is foreseen to reach

512GW by 2020 as a part of the EUs overall carbon emission reduction targets, according to REN21.Out

of the total 512GW renewable capacity, solar power is expected to have a share of close to 20%.

Energy security policies

The EU holds relatively less domestic reserves of fossil fuels compared to the rest of the world. The low

level of domestic reserves enforces a substantial level of importation of fossil fuels for its energy

needs. Hence there is a large drive to implement programs to have alternative sources of energy.

Tax Credit schemes

Some of the European countries are extending various tax benefits to companies in renewable sector.

Renewable Portfolio Standards (RPS) and Renewable Energy Standards (RES) are policy enforced by

many governments globally to increase the share of renewables in the total electricity generated. They

are also focused on creating more price competition between different types of renewable power

sources unlike FITs, which guarantees the purchase of all renewable-based power.

Why Bulgaria?

Although most of the important developments in the solar market in Europe are being witnessed in

countries such as Germany, Spain and Italy, we have specially targeted Bulgaria as our first market for

the very fact that apart from having favorable market conditions, both of our existing team members

are from Bulgaria. We have a very good understanding of the market there and could easily leverage on

the existing network (Business and Research community). Further given that Bulgaria could be

considered a growing market, it is less competitive than the more established markets and thus provides

us a good launching pad. We plan to make Bulgaria as our test market to launch the product, and plan

to then expand to other countries.


10/54

10

Understanding the Bulgaria Market in depth:

Bulgaria Geographic Profile:

Area: 110,910 km

Climate: temperate; cold, damp winters; hot, dry summers

Terrain: mostly mountains with lowlands in north and southeast

Over 80% of the territory of Bulgaria is suitable for utilization of solar energy. In Bulgaria, the average

annual period of sunshine is about 2100 hours. In some of its regions it may reach 2500 hours.

Here are some facts about the thermal potential in Bulgaria:

The average solar radiation is 1517 kWh/m (1410-1600 kWh/m);

The total theoretical potential of the country is about 13x103 ktoe (Kilotons of Oil Equivalent);

The utilizable annual potential is about 390 ktoe. (4535 GWh).

For the region of Bulgaria the selective and non-selective solar thermal installations can produce hot

water with temperature >60 for the period of four months from June to September, with >50

from the end of April until October and with >40 for a period of more than 9 months.

Favorable Conditions

Become a more Energy Independent State (Political and Legal)

Bulgaria is heavily dependent on energy as it imports more than 70% of its primary energy

sources. Bulgaria is mainly reliant on energy sources from Russia: oil, natural gas, high-quality coal and

nuclear fuel. This structure of the energy balance causes concern in terms of the energy supply

security . The European Union, whose dependence on imports is less (about 50%, but with a trend

towards increasing this share up to 70% in 20 years time), is ensuring from each member countries and

Bulgaria is one of the prime countries that needs to adhere to this target :-


11/54

11

Reduction in energy use per GDP; and

Utilization of local renewable energy sources (RES).

Other important Factors (Social)

Rapid increase of tourist facilities.

Increase of energy prices and therefore the price of hot water.

Increased income of the population.

Bulgaria Solar Thermal Market Situational Analysis

Bulgaria was the leader in Eastern Europe in design and production of solar thermal installations. Since

1990, Bulgaria is in transition and major part of the tourism facilities and industrial enterprises

have been privatized that had solar collectors installed in their premises. Around 54% of the

installations in the tourist facilities are still operational, but for the industrial sector only it is 8%. Now,

major parts of the existing installations require repair. The main problems include the corrosion of steel

collector surrounding and the absorber coatings, lack of frost protection, and broken glasses. This

also creates a huge market potential. The actual installation of Solar Collectors is 5000 m/year as of

2010 and is projected to increase to 8000 m/year by 2015 (60% Increase)

Customer SegmentationWe have analyzed the Bulgarian Market and have identified the below as the major segments:-

1. Hotels, holiday houses, camping, swimming pools; Mainly along the Black sea coast and in the mountain areas.

2. State and municipality buildings (hospitals, kindergartens, social houses) with new opportunities and under the structural funds it is expected that such

installations will increase.

3. Multi-storied buildings (mainly in new buildings); Block of flats are privately owned and belong to different people. Furthermore,

with the existing system, building collective solar systems in many cases is

accompanied by difficult decisions, arising from the structure already in place.

While building collective solar systems in new blocks of flats the installation priceneeds to be factored.

4. Industry for wood processing and agricultural products. Very Limited


12/54

12

Limited information is available on the current and potential size of each segment as Bulgarian

institutions have done a poor job of keeping track of their records. However, based on 2010 market

survey of 75 companies operating in Bulgaria published by the Global Solar Thermal Energy Council, the

estimated market size in 2009 was 80.000m2 of solar collectors currently in operations. As mentioned

before Bulgaria continues to be a lucrative market with in of 60% of installing in the next 5 years. The

major clients listed by the companies including the percentage of their operations are as follows:

Single family homes 90% Hotels and recreational facilities 85% Multifamily building 80% Public buildings 70% Industrial enterprises 22%

We will exclude industry enterprises as the regulations requirements are much more depending and notsomething the company can provide at this point. We will also not target public buildings as this will

require involvement with government bureaucracy and corruption. Main target for Solar Kiss will

comprise of multi-family building and hotels. To be successful in the solar industry, high volume sales

are a must. For this reason the company would focus on large projects and not on single family homes

which would require higher sales efforts to cover each home and higher risk of not obtaining the desired

sales volume. Within the two segments, Solar Kiss will contact the project manager/ architect for the

multi-family homes and business owners for the hotels and recreational facilities.

Competitors in the MarketWhen we analyzed the market, we saw that many of the existing players are from outside i.e. most of

the collectors are imported. The imported collectors are from Turkey, China, Germany, Greece, Czech

Republic, Italy and Austria. But overall, the most popular collectors are Chinese and Bulgarian.Of all the

various manufactures, 42.1% of the firms offer Bulgarian collectors, 9.3% of the firms offer Turkish

collectors 38.5% of the firms offer Chinese collectors, 4.3 % offer German collectors, 2.3% offer Czech,

and 2.3% offer Italian. When we break the percentages on the type of collectors (Standard Vs VacuumTubes), we see that 36.8% offer both flat and vacuum tube collectors, 36.8% offer only vacuum

tube collectors and 21% offer only flat collector.

The below are the names of some of the players in the Bulgarian Market :

Sunsystem New Energy Systems Ltd. (NES) Shumen, ERATO Holding Haskovo , ECOTOP Ltd. Sofia


13/54

13

Apex Solar Ltd, Heliotech Solar Energy Systems , KORADO Razgrad and ECOTHERMAL ET Burgas.

The following a positioning map of some of the large competitors in the market.

As can be seen Solar Kiss is competitive advantage is primarily based on pricing at relatively high

efficiency. Another category that fall outside the competition is the homemade collectors. One

potential opportunity Solar Kiss will investigate in the future is to address the needs of the customers

who chose home-made over professionally made collectors and see if there is a service we can provide

that is not addressed by the other major competitors.

Expansion strategyWhile planning for our expansion, we have factored the overall market conditions and where we could

be resourceful. Hence after spending around 1 year in Bulgaria, we plan to move to the bigger markets

in Europe followed by India. The target countries include:

Italy in 2012

Third largest solar power installer. Italy aims to install 3GW of solar power generation capacity by the end of 2016.

Spain in 2012

Second largest installer of solar power globally Spain possesses rich solar resources. Spain has agreed to generate 29.4% of its electricity through renewable energy by 2020.

PRICE -

EXPENSIVE

PRICE -

CHEAP

EFFICIENCYLESS

EFFICIENT

ERATO

Holding

ECOT

OP

Apex

SolarSunsystem

New

Energy MAJOR COMPETITORS

Solar

Kiss

HOMEMADE


14/54

14

Germany in 2013

The largest installer of solar power globally. Germany has agreed to its Individual target of generating 35.2% of its electricity from renewable

sources by 2020.

India in 2014

Located between 30 degrees north and 30 degrees south of the equatorial line which enables itto receive a high level of insulation.

Indian government plans to channel the growth of solar PV in the country through theJawaharlal Nehru National Solar Mission (JNNSM) program. The program sets a roadmap

to achieving an installed solar power generation capacity of 22GW by 2022 from the

existing 120MW in 2009.

PlacementFor placement the two main important sections are the design of the channel and channel management.

In channel design, the focus point will be on in the way in which the Company will reach the customer

and end consumer of the product. Channel management will address the process and procedure that

dictate the relationship between the Company and its distributors.

Channel DesignBased on the market segmentation analysis, the customer is defined as the construction companies

(mentioned as segments 1, 2 and 3 in the above customer segmentation section) in Bulgaria with the

end consumer being the tenants/owners of the building in which the solar thermal collectors will be

installed. This is considered to be the front-end of the supply chain. The back-end of the supply chain,

relates to the suppliers of materials to the Company for construction of the solar thermal collector.

In this business model there are three possible formations of the supply chain:

1. Licensing the absorptive layer to existing solar thermal producing companies.2. Identify supplier in China/India/ and or Bulgaria for production of the solar thermal heater. The

Company will be responsible for adding the final layer to the panels and selling to construction

companies. The customer will then be responsible for the mounting of the product on housing.

3. The Company provides the entire service package from the building of the product to mountingof the product on the building.


15/54

15

After careful analysis of each possibility, option two was the best option. To understand why, the

following factors need to be taken into consideration: market dynamics, product type, production costs,

and supply chain control. Due to the fact that the low end production of the solar market is highly

fragmented and solar thermal heaters are considered to be a commodity good (price driven) success can

be achieved through economies of scale. Additionally, the industry is capital intensive and requires a

large upfront investment especially for the production of the product. Taking this into account upfront,

costs can be reduced by outsourcing production to supplier with lowest costs and best conditions, and

by targeting as many construction companies as possible to achieve visibility in the market. Since the

product is a commodity good, there is no need to be very selective or exclusive with the front or back-

end of the supply chain, as the main driver here is cost. The initial setback for option two is the relative

lack of control or power over the supply chain. However, as the Company gains visibility amongst

construction companies and increase the order size from the suppliers, the control will pass more into

the hands of the Company.

Channel Management

Conflicts may arise along the distribution system and it therefore becomes vital to have the right

strategic alignment with the Companys partners. For the back-end of the supply chain, the Company

will be looking for suppliers that will insure low prices and will not sacrifice on the product quality. In

this industry the main selling point is low costs and higher efficiency in solar absorption. Therefore the

companys supplier will also need to share this goal in common. For the front-end of the supply chain,

the company will be interested in fulfilling all the needs of the construction companies. Currently there

is a directive from the European Commission that requires all members of the European Union by 2020

to have 20% of the countrys energy come from renewable resources. The countries are free to decide

individual on the exact energy mix (solar, wind, biomass, etc). In some countries such as Spain and Italy,

governments have made it mandatory that all newly constructed or renovated building must be

designed with solar thermal collectors. Maintenance of the product (solely the solar thermal collector)

will be the responsibility of the company, where as the tubing and maintenance of the boiler and

pumping system will be the responsibility of the construction company. As the Company will grow the

goal would be to service existing clients and provide with updated product to keep up with technologicalchanges.

PromotionCommunication to the customer is key to raise awareness of the product and generate interest for the

likelihood of installing the product and getting repeat sales. The Companys message to construction


16/54

16

companies will be to provide a product that is 50% cheaper than the averageon the market with an

efficiency that is comparable. Additionally the Company will provide high quality customer service and a

product guarantee for 20 years.

The Company will have a communication mix that utilizes both direct and indirect selling marketing

tools. For direct selling, given the workings of the solar industry, first sales will be mostly generated

based on word-of-mouth and contacts provided by the team. The teams main goal will be to establish

new and build long lasting relationships with construction companies and become well acquainted with

the market demands. In this way the Company will collect marketing research and be able to tweak any

issue that the Company may face either with the product or with the service provided. Other forms of

marketing will be done through indirect selling. This will include:

Website: providing detail description of our product and services Media: buying space in newspapers, or magazines related to renewable energy and

construction business; additional possibility of being included in article written about solar

thermal collectors

Tradeshows: engaging potential investors in the business and gaining exposure for thecompany in the renewable energy industry.

Educational seminars: provide construction business with information of the ease of installationand the added value of the product

A vital part of the promotion will also be to identify some key matrix by which the Company can

measure the effectiveness of its marketing efforts and reach a better understanding of how to best

reach the customers. Some measures of success include:

Measure the daily website traffic; the website can also be used to see if there is increases accessduring the postings of advertisement in newspapers and magazines

Ask the customer how they found you and why they picked the Company Advertising can also be measured by providing telephone numbers and website links to inquire

further about the product

Measure the effectiveness of educational seminars and tradeshows by how much additionalbusiness is received

Based on these metrics the Company will be able identify which communication mix works best and is

worth the financial investment.


17/54

17

PriceThe following section aims to identify the price of the product which is the most comparable to the

market prices. It also provides a consistent source of income for the company. We will start by looking

at the manufacturing costs and any overhead costs that are required to build, sell and deliver the

product. Once these values have been determined, we can address the added value of the product.

Finally we will compare how the current price of the product compares to the average selling price in

the solar thermal market.

The following are the manufacturing costs provided by a sample Chinese supplier:

COST PER PIECE (EURO)

Collector Surface Area 2,2m2

2,9m2

Average Product Cost 121 136

To the manufacturing costs, the Company will then apply the special layer which has the following costs:



2,9m2

Absorptive layer cost 2.87 3.60

The total fixed costs are then as follows:



2,9m2

Total Collector COGS 124 140

Given the industry standard we should assume that variable costs (labor and any consumable) comprise

15% of the total fixed costs. However, as our production is rather labor intensive we assume that our

variable costs in year 1 are 20% of cost of the material of the collector with the tendency of this

percentage to decrease as the company becomes more efficient. The variable costs are as follows:



2,9m2

Variabe Costs 25 28


18/54

18

The Total fixed plus variable cost of the collector then becomes:



2,9m2

Total Collector Costs including Variable 149 168

We have adopted a market based pricing model; therefore we mapped the competition prices against

our target of being at least 50% less expensive than the average competitors collector on the Bulgarian

market. Taking into account that the average cost of solar heating panels in Bulgaria is 250-350 per m

the average price for each surface area is as follows:

PRICE PER PIECE (EURO)


2,9m2

Competitor Collectors Pricing 538 675

The resulting prices (about 50% cheaper, see Solar Kiss Average Price year 1 below) are broken down

to incorporate volume discounts of 20% for order quantities (from our clients) of between 50 and 200

units, and a discount of 30% for order quantities above 300.

PRICE PER PIECE (EURO)


2,9m2

Order Units

Below 50 236 352

50-200 189 282Above 200 165 246

PRODUCT SALES MIX


2,8m2

Order Units

Below 50 65% 65%

50-200 30% 30%

Above 200 5% 5%

Solar Kiss Average Product Price yr. 1 218 326

Sales PlanSales of Solar Kiss are planned to begin in May 2011 in Bulgaria. For the eight months of operations we

plan to sell 2300 units with a ratio of type 1 to type 2 solar collectors of 36 to 64 percent, respectively

(surface area of type 1 collectors is 2.8 sq.m., type 2, 2.9sq.m.). The assumption that most of the sold


19/54

19

collectors are going to be of type 2 is based on the fact that a single household needs only one collector

with such a size to meet its domestic hot water needs. In addition, large apartment blocks can be

covered easier by a smaller quantity of larger surface collectors, which theoretically makes installation

and mounting less costly for the consumer.

Year one and two sales are going to come only from the Bulgarian market, whereby we plan to reach

10% of the projected market share.The roll out on the Bulgarian market will help establish reliability of

the product before we enter the Italian market in the end of year two of operations (2012).

The optimistic view on the development of the market share is based on a number of assumptions

embedded in the business model. Firstly, as mentioned, the positioning of the product is at lower end of

the price spectrum with quality closely following the best performing product on the market. This

positioning of affordable quality will allow us to address a market that was previously untapped;

currently, the solar collectors offered on the Bulgarian market are at two extreme positions they are

either high quality, Tinox collectors, imported from Germany and sold at a very high price for the

average Bulgarian consumer, or they are low quality, black paint, inefficient panels, that are very often

garage production.

Next to the unique positioning of our product, there are the expected changes in the energy strategy of

the country in 2011, part of which are some expected governmental (or agency) stimuli to both

consumer and businesses to use renewable sources of energy. Among the expected changes on the

consumer side is the increased co-financing of credits for private households that want to increase their

energy efficiency. Next to this, the construction business is currently obliged to account for 15% of the

energy to be consumed by the newly constructed buildings to come from renewable sources. This

percentage is expected to increase with the implementation of the new energy strategy. In our second

target market, Italy, the percentage of renewable energy for the construction of new residential

buildings is 30. After the implementation of this law in Italy, the usage of solar collectors for

construction law compliance has tremendously increased as solar collectors are among the cheapest

ways to secure compliance in this area for the construction companies. Since these companies are price

sensitive and need the collectors only for compliance, investment in brand awareness is not necessary

and the price advantage is the driver for the purchasing decision. We assume a constant 20% annual

month-over-month sales growth for both types of collectors since sales will be mostly project contract

related but strongly driven by returning customers (construction companies). We assume that the

construction business will slowly pick up with the recovering economy in both Bulgaria and Italy, which


20/54

20

will drive the sales of solar collectors as well. To minimize sales force expenses and increase sales

volume we will offer volume discounts for purchases above 50 units (20% off from the base price, for

above 200 units, 30% off). These volume discounts and the volume mix are incorporated in the sales

revenue calculation. Gross margin is 51% (direct COGS only)assuming the quotes received by a Chinese

supplier for the collector case and the quote for the absorptive layer components received from a

Belgian producer of carbon black paint. With the so designed operations operating margin is set to grow

from -2 % in year 1 to 25 % in year 5. The average operating margin in the foreign target markets is

planned to be considerably higher: in India due to the lower labor costs and in the rest of Europe due to

the higher sales price.

Marketing Budget/ OperationsAfter having conducted a number of interviews with potential clients in the construction industry, we

concluded that the consumer is entirely insensitive to the brand of the solar collectors as long as theirperformance meets the clients standards. This fact led us to the conclusion that we will not invest in the

development of the brand at this point in time when we will be competing to position our product as a

high performing commodity. With the future expansion abroad we will start investing in brand

awareness mostly by advertising in specialized magazines for construction and green tech, both

traditional and online.

To reach the goal of selling 2300 and 6175 units in 2011 and 2012, respectively we will have to hire

three and six key account managers, respectively, reaching 20 people by the end of the business plan

period. The sales personnel will be directly responsible for identifying the prospects after-sale customer

service. To comply with the ethical standards of our company and at the same time adopt the best HR

practices to maximize sales, our company will engage in revenue sharing with the sales personnel where

all key accounts will, in addition to their base salary, receive five percent of the operating margin of

ones individual sales. The same structure of compensation will be subsequently copied to the sales

force compensation structure in the foreign markets.

The key accounts will only target the business consumer who is in a position to purchase large quantities

of collectors. Among the major target segments identified is the construction business that currently

complies with a regulation to construct all buildings in a way that at least 15% of all future energy

consumed in the new building comes from renewable sources. Nonetheless, the construction business is

the largest target client also due to the fact that it is easier from an engineering perspective to account


21/54

21

for a solar collector installation in the architectural plan of the building rather than to work around an

already existing building structure. The other major target segments are elaborated upon in section

Customer Segmentation of this report.

In addition to direct sales to business consumers, our key accounts will have the choice to sell the

products to large warehouse-type stores, such as Metro (sales of all-usage products for business

consumers, i.e. restaurants, cafes, offices) and Mr. Bricolage (specialized in the sale of small

construction items for the home). Key Accounts will not be awarded the percentage of operating margin

on these sales for two reasons: Firstly, this percentage on operating margin will have to be paid to the

retailer as dealer margin, secondly we would like to stimulate the direct sales to businesses, thus

bypassing intermediaries. However, if the key account sees a ready sell to such a dealer, the key account

can include these sales to reach ones sales targets. Although, not a primary focus, these sales will

necessitate much less customer interactions on the side of our key account (sell once, supply regularly,

not project based), thus leaving more time for targeted sales.

Risks and Challenges

Strategic

Intellectual Property

The success of this business venture is based on the low cost production, both in terms of variable and

fixed costs. Solar Kiss is at immense intellectual property risk. If a competitor (regular solar collectormanufacturer) is able to imitate the performance and low-cost production of Solar Kiss, then the success

of Solar Kiss is at tremendous risk. The competitor, with its financial and/or distribution clout can eclipse

this business venture. The product development team thus needs to protect their intellectual property

as quickly as possible by registering this as a patent and protect Solar Kiss from predating competition.

Legal counsel is recommended to protect and enforce intellectual property rights from the start.

Threat of Substitutes

While at the time of writing this report, solar water heating is the most environment friendly and cost-

effective means of heating water in commercial buildings, but still the danger persists of any competing

product which substitutes the market for solar water heating.

Prolonged Price War

Solar Kiss poses a significant threat to the established solar collector manufacturers. With Solar Kiss

intellectually protected, the established competitors (with deep pockets) can engage Solar Kiss in a


22/54

22

potential price war. Such a price war can be potentially very detrimental to the success of Solar Kiss.

Solar Kiss will not be able to stand up to established products without the price advantage. Prolonged

price wars can spell doom for Solar Kiss and can also lead to selling off the full business or licensing the

intellectual property to established manufacturers. From a marketing standpoint, price war has been the

most common competitive threat to new patent protected innovative products.

Balanced Team Formation

The importance of having a balanced team where the team members are complementary in their skills

and expertise cannot be under estimated in this venture. Here, the skills requirements vary from

technical (in terms of specialized product), manufacturing (low cost outsourced manufacturing),

commercial (sales, marketing, distribution in new geography) and financial (nuances of managing capital

in early stage start up). Finding the right people with right set of skills (and cohesive) is critical to the

long term sustainability of the venture.

Operational

Low-Cost Outsourced Manufacturing

To achieve the primary value proposition of Solar Kiss (50% lower cost), the business will have to look

for and outsource to low cost manufacturing destinations. Outsourcing in essence, has its potential

challenges, the primary being the ability to achieve desired quality on a continuous basis. With an

inherent lack of control in outsourced operation, it will be difficult to monitor quality. Language issues

and geographical separation (most low cost manufacturing centers around India/China) might add to the

complexity of outsourced operation. The business team will have to overcome the challenges by

significant time investment in choosing the right manufacturer who can deliver quality and achieve

production schedules on a continuous basis. Moreover, distribution and supply chain optimization needs

to be considered given Solar Kiss customer locations. Pilot manufacturing with 2-3 suppliers before

finalizing the supplier is recommended.

Distribution Challenges

Typically, commercial real estate development industry is fairly concentrated and a few large players

control majority of the industry. In an effort to get access to these developers, the business team will

either have to go through an existing distribution network to get access to these end users or hire its

own sales teams. Both the options have their own pros and cons. With no sales experience within this

domain and the huge costs of owning a sales force, the choice of distribution through existing

distributors seems to be the rational choice for an early stage start-up company.


23/54

23

Relationship and financial management of distributors is critical to the success of this venture. With not

much financial and marketing clout, the distributors in this case will act as a gatekeeper and need to be

handled in the right way. Right financial incentives need to be provided to keep them interested and

promote Solar Kiss effectively. Also, existing competitors can use their relationship clout to create

barriers within the exiting distributors through better incentive schemes.

Financial

Working Capital Management

Given Solar Kiss will be a new start up venture at the start, working capital management will be critical

to its sustainability. Outsourced manufacturers will demand capital upfront given limited/no credit

history and no company operations. On the other hand, distributors and customers will demand greater

credit period than existing manufacturers to distribute or buy Solar Kiss.


24/54

24

Operations Plan


25/54

25

OPERATIONSIn order to give a holistic view to our operational plan, we first decided to list down the various

processes into strategic, important and normal processes. Strategic processes are those that are core to

the business and lay the foundation for future growth. Important processes refer to the functional

processes that are essential for the day to day operation of the company and which have a huge impact

in making our business venture a success. Finally, normal processes are the ones that are necessary for

the smooth functioning of the company.

Hence in line with the above, we classify them as follows:


26/54

26

Strategic Processes

Capturing Clients:

Housing segment is the key market for our products. We need to target to construction companies, and

try to win large contracts. This segment is very fragmented and generally the builders would be

interested in our products right at the time for new construction so that our management team can help

laying out the plan for installing solar collectors. With that said, we would place a very high focus to

attract the people from this segment. This is a key focus area for growth.

Quality Management:

As the solar thermal collector market is highly competitive, we would put great focus on the quality of

the product so that we always meet the customers expectations both in price and service. Each

collector will be tested for permeability prior to being shipped to the client. The collector will be tested

in Europe and be given a Keymark certificate which is the worldwide certificate recognition for solar

collectors.

Planning and Budgeting:

As we have a very ambitious growth plan. ( 2011 -> Bulgaria, 2011 and 2012 -> Italy and Spain, 2013 ->

Germany and 2014 -> India), we need to take utmost control of our financial resources. We have to have

budgeting for all the different activities and tally them with the actual spending. This will let us know

where we stand and hence plan / adjust our growth strategy. Budgeting will be done once a year with

forecasting done each quarter.

Innovation:

The product we have developed (coating layer) ensures us to have the best price to efficiency ratio in

the market as of today. That is our key value proposition. But as this is a technological driven industry,

we have to put emphasis in product innovation to keep coming with better cost efficient products. This

is very critical, as only then we can remain competitive in the long run.

Important/Fundamental Processes

Supply Chain:In day to day operations, we see Supply Chain function as the most critical. Our business model is

dependent on suppliers for both, procuring solar case panels and getting the paint for mixing. The

manufacturing of paint (coating layer) shall be outsourced to a 3rd party supplier. Hence, our 2 most

important types of raw material are dependent on external suppliers and how we managing these

relationships shall prove vital.


27/54


28/54

28

Structural/permanent subcontracting

The general idea of using subcontractors is to either reduce costs or mitigate certain risks within the

existing process. Based on this definition the outsourcing of the production of the solar collector casing

to a Chinese manufacturer can be considered subcontracting. The reason the Company has decided to

subcontract the production of the casing is to reduce the complexity within the organization, reduce the

risk from the lack of specialized knowledge within the company on the production of the casing, and

naturally, to reduce the costs associated with both the organizational complexity and the necessary

investment for in-house production. As Solar Kiss is taking the low-cost manufacturing approach,

establishing a lean manufacturing process is key. Hence, we are subcontracting most non-core activities

that do not bring added value to the organization.

Packaging production

Production and delivery of ready- made carton packaging and labeling will be subcontracted to a carton

packaging producer based in Bulgaria and packaging is to be delivered to the assembly plant, the

subcontractor bearing the cost thereof. Although we are selling mostly to industrial customers,

packaging is necessary to protect the glass cover of the collector during transportation. The average cost

of the packaging is 5% of the direct material costs of the collector.

Transportation

As capturing clients is considered a strategic process, the entire sales process is kept in-house to ensure

control over the quality of the services supplied. The only part of the sales process that we are planning

to subcontract is the transportation. Transportation will be subcontracted to local and foreign

transportation companies that can offer the best terms. Transportation will be needed for the delivery

of the solar cases from the shipment delivery point in Bulgaria (from China), the Varna port, to the

assembly plant. In addition, this company will deliver the ready assembled product to the client site, be

it nationally, or internationally (within Europe Continent).

Accounting and Finance

As a non-core activity accounting will also be outsourced to a local accounting firm to reduce headcount

and complexity and due to the fact it is a non-core activity that does not require full-time employee

dedication. Two administrative employees will oversee the correct transmission of accounting data to

the subcontracted accounting firm and execute the daily administrative tasks. As the firm grows we can

create a separate finance and accounting department.


29/54

29

Necessary resources: equipment

The assembly of the solar collector will be highly labor intense and will require minimum investment in

equipment. Production personnel will be equipped with protective overalls and face masks, to protect

against the possible traces of silicon that are present in the absorptive layer of paint. Plant equipment is

variable depending on the number of units produced and the number of production employees, and

includes painting pistols and generic mechanical toolbox. In addition, a lifting and carrying cart will be

required for easy inventory placement in the assembly plant as well as working tables, onto which the

collectors will be spray painted. Again, the number of tables will be dependent on the production units:

in year one, four production tables will be needed (an optional fifth for convenient testing of the final

product).

Location

The location of the assembly plant (housing the coating production plant) is 20 minutes drive east of the

Bulgarian capital, Sofia, close to the major highway connecting the capital to the Black Sea coast. The

location has been chosen due to its close proximity to major clients in the capital, easy international

transportation and convenient infrastructural connection to the delivery of the shipped panels from the

Varna port. The assembly plant has already been selected and the renting terms are under negotiation.

Previously, the selected premises have been used for the production of machinery and there is a

possibility for Solar Kiss to rent the already available machinery together with the plant for a very

competitive price. The plant in question houses a production area of 120 square meters and an office

space of roughly 50 square meters. It is currently on sale together with the adjacent equipment (some of

which can be used by Solar Kiss) for 30K Euro.

Physical infrastructure and layout

Figure 1 below depicts the physical layout of the plant set up to serve the production capacity for the

first two years. More space will be needed from year three onwards to meet the higher demand. The

initial plan assumes the renting of a plant with a larger area in the vicinity of the original plant.


30/54

30

Figure 1: Plant layout

Production/service capacity and permanent materials utilization

To match the production of the planned selling units in year one, we assume that the total time for

painting, assembling and testing of a single unit would take approximately 30 minutes, for 4 production

personnel involved. This production time includes painting, assembly and testing, and packaging of the

final product. The production personnel will cross function across a number of activities, so the

employees can easily take over one anothers tasks in case of absences. Initially, four employees will be

needed for production, having two responsible for the painting part, two of packaging and two of the

four stepping in for final testing and packaging. The sequence of work would allow the paintingpersonnel to usually step-in for packaging once the collectors have been assembled and tested. The final

product will be picked up by the transportation company and delivered to the client.

Delivery Area, Row inventory

Finished production (assembled

and tested solar collectors)

Quality Testing

Area

Absorptive

Paint Mixing

Area

Office Space

Assembly

Table

Hygienic

Unit

Canteen/Kitchen

Painting

Table

Testing

Table

Painting

Table

Assembly

Table

Tools and

Protective Outfit

Storage Area

Kitchen

+fridge

Seating

Area

Table +Hangers and

Shelves


31/54

31

Utilization of transitory materials (consumables)

Cost of consumables is variable upon packaging, tailor made carton boxes will be ordered and delivered

by a subcontractor. Other consumables costs are negligible and include the replacement of amortized

painting and toolbox equipment as well as the renewing of protective production wear.

Delivery time to clients and inventory management

The order processing policy of the Company will be assemble-to-order. As most of the orders will be

project based on the side of the client, as assumed under the specificity of the main target market,

which is the construction industry, the Company will not be pressed by short delivery times. This will

allow it to place an order with the Chinese/Indian manufacturer of solar casing well in advance, normally

two months before expected delivery of the final good and final production within 20 days of client

order placement for quantities below 100 units (as we will maintain minimum inventory quantities. For

larger quantities the delivery time would have to be extended, taking into account both supplier

capacity and internal production (final assembly) capacity.


32/54

32

Investment and launching costs

For the company to start off smoothly we would need to assure that all the legal requirements are met.

Investment and launching costs would include the legal fees for setting up the company, including the

minimum 5,000 BGN (2,500 Euro) capital requirement for the registering of a limited liability company,

any lawyer fees and fees paid for patent filing and Keymark certificate issuance. The total of these fees

amounts to approximately 16,000 Euro. Additional start-up expenses such as investment in office and

production equipment will amount to 12,000 Euro (assets). Assets will be doubled in the second month

of operations and will grow accordingly with the international expansion. First months rent for the plant

is also assumed in the launching cost.

Table 2: Start-up

To bridge the gap between the first cash received

from sales and the cost of inventory the Company

would need a buffer of close to 50,000 Euro of

inventory. The high initial cost of inventory is

based on the assumption that we would have

zero days of accounts payable outstanding as we

are an unknown company that would have to pay

the casing suppliers at the time of order

placement. Reversely, as we are an unknown

seller, we would have to give preferential credit

conditions to our new clients, allowing them

more generous payment terms. This would

initially deteriorate our working capital standing.

Therefore, the 50,000 Euro buffer is a

prerequisite to cover for the initial working

capital gap. In addition to the start-up inventory,

we would need to assure we could cover

employee expenses for 3 months assuming no

sales at all, which is the worst case scenario. To cover for this risk, the Company would require cash

reserves of 72,000. The final start-up expenses come up to roughly 150 thousand Euros.


33/54

33

Operating expenses

Cost Analysis of opening up a Plant/Sales Offices in all countries

Breakeven analysis of having a sales force based out of Bulgaria, against opening up representative sales

offices in the foreign markets revealed that it is cost efficient to base the entire sales force in Bulgaria

and, respectively, not to have permanent physical presence in any of the target countries with the

exception of India where the lower personnel and overall operating costs of a sales office are lower than

in Bulgaria. The cost analysis in India favors the opening of both a production plant and a sales office,

driven by the relatively low operating costs.

The cost analysis is based on Bulgarian average payroll cost plus travelling and transportation costs to

the foreign target markets (Spain, Italy and Germany) against the costs of setting up sales offices in the

target markets. With the advancement of videoconferencing facilities and the decreasing travelling

expenses driven by the low cost carriers, it is more cost-efficient to base the entire sales force inBulgaria and allocate it to divisions according to geographic area.

Sales costs including travelling expenses are included in item Other in Table 3 below. Subcontracted

transportation costs are assumed at 15% of total costs of goods sold. Although not planned in detail,

unstructured marketing initiatives including representative expenses are included under

Marketing/Promotion.

Table 3: Operating Expenses

Unit costs

Direct unit costs of Type 1 and Type 2 (different sizes) solar collectors are based on the quotes received

from a Chinese supplier on the cost of the solar casing at orders of above 100 units. The cost of the

absorptive layer mix is on average 3.5 Euro per unit based on price quotes from a Belgian supplier of the

main ingredient of the absorptive layer. Total packaging cost is assumed on the conservative side (it is


34/54

34

probably going to be much lower) at 5% of the direct cost of goods sold per collector. Thus, the resulting

direct cost per unit is 134 Euro, based on the stipulation that the sales ratio of Type 1 to Type 2 collector

is 35 to 65.

Launch plan

The project plans starting date is mid-February when the company will file for a patent. Right after this

process is concluded and the documentation around it is submitted, Solar Kiss will file for a Keymark

certificate which is the world standard certificate for solar collectors. As the certificate is being issued by

a UK certification body, we will have to pay for a representative to come to Bulgaria and test the solar

collector there. Alternatively, if the certification process requires us to take the collector to the UK, we

would only apply for product testing in Bulgaria. This would not grant us official certification until the

end of 2011, when it is expected that a formal solar collector certification body is founded in Bulgaria.

Until then, we can only sell the collector on the territory of Bulgaria, which follows our plan. The

registration of the company usually takes one day, however we have extended the time for this task to

two weeks to account for extraordinary events. Throughout the whole period February-May, starting

mid-February we would be looking for financing in the form of equity investment, loans and

governmental grants.

Towards the end of March we expect to be able to hire a plant manager, the actual informal search

would be ongoing from mid-February as well. However, due to possible investor requirements to staff

this function from ones own lines, we will leave this position open until final financing is secured. Next,

the newly appointed plant manager and the owner will rent the plant premises and hire production

personnel that would set-up the production facility. In the meantime, the first order from the suppliers

can be placed and sales personnel can be instructed on the specificities of the product. Final deployment

of the plant is scheduled for the end of April.


35/54

35

Table 5: Project Plan


36/54

36

Human Resources Plan


37/54

37

HUMAN RESOURCES

In this section we will aim to address some of the key issue associated with management of human

resources (HR). The structure of the organization and the processes involved in HR will be directly

aligned with the strategic goals of the company and provide an underlying culture to create an

environment that is conducive to running a profitable business.

Organizational Structure

The following is the organizational structure of the company in years 2011, 2013, and 2015.

Year 2011

Operations will commence in May 2011 thus providing us with eight working month in this year. - Based

on the market assessment it is fair to say that the Company aims to produce 2,950 SKUs in 2011. Given

that production requirement and financial constraints we have estimated the number of personnel

required and the best organizational structure for this time period. The company will be required to hire

externally a managing director to run the operations of the company as experienced management will

be key to business future success. Victor Atanasov (the scientist) to serve as advisor to the manager

director and provide insight related science aspect of the business. The Managing Director will over look

Sale Personnel, Production Personnel, and Administrative Personnel. We believe that by placing

supervision in the hands of one individual will allow better inter-department communications and faster

development of the correct internal processes within each department-


38/54

38

Year 2013

By 2013, the Company plans to have operations spanning across Italy, Spain and Germany. To

accommodate to the strategic expansion, the Company will add an additional Managing Director to the

Executive Team. Additionally, new roles will be created for Sale Manager and Production Manager. To

avoid extensive travelling expenses and also to have a better feel for the market, the Company will look

into opening sales office in the various countries. Sales Manager will sit in HQ in Bulgaria and willcommunicate with external offices. As productions costs are the lowest in Bulgaria, all manufacturing

will continue to be made there and shipped to countries where the offer was placed.

Executive Team

Managing Director

(1)

Sales Manager

(1)

Sales Personnel forBulgaria (2)

Sales Personnel for Italy/ Spain (3)

Sales Personal forGermany (3)

Production Manager

(1)

Production Personnel in

Bulgaria

(15)

AdministrativePersonnel

(1)

Advisory Board

Victor Atanasov

(1)


39/54

39

Year 2015

In 2015 the company will see a further expansion into the Indian market, where one of our team

members has local knowledge and demand is projected to skyrocket. To address the Indian market, the

Company will split its Sales and Production between Europe and India. New positions include: 1) Sale

Director, who will oversee the Sales Manager for Europe and India and; 2) Production Director to

overlook Production Manager for Europe and India. Production for Europe will continue to take place in

Bulgaria, however to the Indian market, the production will be local. There is a possibility in the future

for India to become the Company HQ for Asia.

Management and Governance Structures

Corporate governance and transparency will be essential in the Companys ability to run it every day

business in a manner that is responsible and ethical. In order to create and sustain value for the

stakeholders, the company must first practice responsible business principles. The company will take

into account the stakeholders interests and be held accountable to them. A supervisory board,

represented by the shareholders of the company will oversee the strategic management decisions and

will navigate the overall development course of the company. Members of the supervisory board are

Zorina Dimitrova, Natalie Tyurin, Vikash Panagrini, Victor Atanasov and a possible fifth person,

Executive Team

Managing Director

(1)

Sales Director

(1)

Sales Manager forEurope (1)

Sales Personnel forBulgaria (4)

Sales Personnel forItaly / Spain (5)

Sales Personnel forGermany (5)

Sales Manager forIndia (1)

Sales Personnel forIndia (5)

Production Director

(1)

Production Managerfor Europe (1)

ProductionPersonnel in Bulgaria

(30)

Production Managerfor India (1)

ProductionPersonnel in India

(15)

AdministrativePersonnel

(2)

Advisory Board

Victor Atanasov

(1)


40/54

40

representing the external investment received by the company at the start. The members will meet

quarterly and on ad-hoc basis.

Company as a Legal Entity

Company will be initially registered as a Private Limited Liability Company (OOD) in Bulgaria. Under this

legal contract, there is a minimum requirement of 5.000 Leva with and at least 70% of the capital must

be paid up on foundation. The statutory bodies of the private limited companies are the general

meeting of shareholders, which must be held at least once a year, and the managing director or board of

directors.

The creation of an OOD will lead to the creation of the articles of association, and the Law on Commerce

stipulates the obligatory provisions of the articles. Following the strategy for expansion, the Company

will expand its presence into India in 2014 at which point it will follow the registration procedures there.

Valuation

Managing Director will be initially appointed by a temporary Advisory Board (Vikash Panigrahi, Zorina

Dimitrova, Natalie Tyurin, and Victor Atanasov). Shares of the Company will be distributed based on the

amount of capital invested.

Initially the company will have 4 members and a managing director. We shall then approach the VCs for

funding. Below are some of the assumptions and calculations:

Market Growth up to n(annual):g =80%

Time to exit (in years):n(5 yrs)

Profit margin after taxes after 5 years (from P&L): Pn=20%

Comparable ratio for a similar company at time n (e.g 15x)=PERn (7 time multiple)

Estimation of Sales at n: In=Io(1+g)^n

Estimation of profit (after Tax):EATn = In*Pn (Sales * Profit)

Enterpise Value :EVn = EATn * PERn ( Profit after tax * multiple)

Discount Rate:10%

Present Value 7,932,700.98

Expected IRR=35%

Minimum Investment = 150,000

Additional Invesment to suit VC= 750,000 ( to give 30% share to VC), without this it we give him only

6%. Hence total Initial Investment - Vio = 900,000


41/54

41

Value of investment (VIn) at the time of exit - VIn = VIo * (1 + IRR)^n 4M ( in order for him to get the

return that he seeks) : 4,035,630.09

Fraction of Firm VC owns for required IRR : Fr = VIn / EVn (31.6%)

Spre (old Shares): old shares = 10,000

Sm (New Shares):Sm = (Fr*Spre)/(1-Fr) issue additional 4618

M (Money to be invested) : 900,000

Price/Share : Pm = M / Sm : 900,000/4618 = 194.2

Sf ( Share of Founders) = 10,000

Sesop ( 15% of the total shares ) = 2,192.61 (Share for Managing Director)

Pre Money Valuation EVpre = Pm* (Sf + Sesop) = 2,376,525.16

Post Money Valuation EVpost = EVpre + M = 3,276,525.16

Responsibilities of Managing Director

Finding the right candidate for this position will be key as the firms future success will entirely depend

on his or her capabilities. It is an exciting opportunity for dynamic and entrepreneurial professional who

will be working out of Sofia, Bulgaria. The following is an overview of his or her responsibilities:

In partnership with the advisory board, the MD will develop and implement a strategic and diversified

business plan to meet the Companys current goals and anticipated future growth:

Identify and secure relationships with construction companies to drive awareness of product inthe market

Development of sale material to reflect Companys image and long term goals Identify, cultivate, and steward the current product offering Ensure accurate maintenance of financial records Establish streamline business processes in various business units Manage, evaluate, and coach the team to manage different aspects of the business

The positions requires an individual with at least 5 years of prior management in a start-up company;

proven abilities to lead an international team; proven track record of hitting financial goals;

commitment and deep understanding of the renewable energy market in Eastern and Western Europe.


42/54

42

Compensation will be based on experience as well future profitability of the company. Current

projection is a minimum of 3.000 per month plus ESOP.

Personnel

This section will address some of the key roles within the Company and provide a general understanding

of functions of the personnel.

Sales Department

The Sales Director position is responsible for the Europe and India regions, and it is a lead from the front

sales role, developing new business opportunities and maximizing existing accounts. It is responsible for

a managing the Sales operations and processes and managing and motivating a team of Sales and Pre-

Sales based across the regions. For this role it is essential to have a strong track record of developing

and closing sales of technical products. Sale director will overlook the activities of the Sales Managers

the different regions. Sales managers are responsible for supervision of their team, setting direction and

guidance, and identifying key accounts.

Reporting to the respective Sales Manager, the sales personnel will be directly responsible for

identifying the prospects after-sale customer service. To comply with the ethical standards of our

company and at the same time adopt the best HR practices to maximize sales, our company will engage

in revenue sharing with the sales personnel where all key accounts will, in addition to their base salary,

receive five percent of the gross margin of ones individual sales. The same structure of compensation

will be subsequently copied to the sales force compensation structure in the foreign markets.

The key accounts will only target the business consumer who is in a position to purchase large quantities

of collectors. Among the major target segments identified is the construction business that currently

complies with a regulation to construct all buildings in a way that at least 15% of all future energy

consumed in the new building comes from renewable sources. Nonetheless, the construction business is

the largest target client also due to the fact that it is easier from an engineering perspective to account

for a solar collector installation in the architectural plan of the building rather than to work around an

already existing building structure.

Production Department

As the Sales Director, the Production Director also is responsible for the Europe and India regions. He or

she will ensure the production of a large quantity of product by developing methods, procedures to

produce quality products in a cost-effective manner, hiring production staff and working to find high-

quality, low-cost materials for producing products. Other management responsibilities include


43/54

43

developing and implementing production policies and procedures to ensure a safe and efficient work

environment. For this role it is essential to be certified in Production and Inventory Management (CPIM)

through the Association for Operations Management, as well as additional training or certification

related to lean manufacturing.

Production personnel will report to the Sales Manager of his or her region. Preferable the individuals will

have prior knowledge of handling technical equipment. As much of the labor will be manual, the

personnel will also need to be in good physical strength.

Compensation

The following is a summary of the project compensation for entire workforce for the next five years:

*Salaries are in line with current average wages paid for those positions in Bulgaria.

Other HR Policies

To ensure that every employee throughout the company plays an active role in implementing our

commitment to responsible business, the Company will develop Policies on Business Conduct. It will

relate all the regulations of the corporation that, subject to statutory law and the Articles of

Incorporation, and provide the basic rules for the conduct of the corporation's business and affairs.

Personnel Plan2011 2012 2013 2014 2015

Payroll 0 0 0 0 0

Personnel Plan2011 2012 2013 2014 2015

Executive Team 64,000 96,000 192,000 192,000 192,000Production Personnel 98,336 154,375 209,950 314,925 503,880Sales and Marketing Personnel 41,600 131,040 240,786 433,415 910,171Administrative Personnel 16,000 24,000 24,000 48,000 48,000

Total People 12 17 24 36 46

Total Payroll 219,936 405,415 666,736 988,340 1,654,051

Personnel Plan2011 2012 2013 2014 2015

Sales and Marketing PersonnelPeople 3 6 10 15 20Average per Person 13,867 21,840 24,079 28,894 45,509

Subtotal 41,600 131,040 240,786 433,415 910,1711,733 1,820 2,007 2,408 3,792

Production PersonnelPeople 6 8 10 15 20Average per Person 16,389

Documents

Solar Kiss Business Plan Version _ FINAL