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This is a business plan. It does not imply an offering of securities.
1.1 Objectives ...................................................................................................................................11.2 Mission ........................................................................................................................................21.3 Keys to Success ........................................................................................................................2
2.0 Company Summary.............................................................................................................................22.1 Company Ownership .................................................................................................................22.2 Start-up Summary ......................................................................................................................2
4.1 Market Segmentation ................................................................................................................84.2 Industry Analysis .........................................................................................................................8
4.2.1 Competition and Buying Patterns................................................................................85.0 Strategy and Imlpementation Summary ............................................................................................9
6.1 Personnel Plan .........................................................................................................................12Table: Personnel ...................................................................................................................12
7.0 Financial Plan ....................................................................................................................................137.1 Important Assumptions............................................................................................................13
Table: General Assumptions ...............................................................................................137.2 Projected Profit and Loss .......................................................................................................14
Table: Profit and Loss ..........................................................................................................14Chart: Profit Monthly .............................................................................................................15Chart: Profit Yearly ................................................................................................................15Chart: Gross Margin Monthly ...............................................................................................16Chart: Gross Margin Yearly..................................................................................................16
7.6 Business Ratios .......................................................................................................................21Table: Ratios .........................................................................................................................22
Table: Sales Forecast ...............................................................................................................................1Table: Personnel ........................................................................................................................................2Table: General Assumptions ....................................................................................................................3Table: Profit and Loss ...............................................................................................................................4Table: Cash Flow .......................................................................................................................................5Table: Balance Sheet ................................................................................................................................6
Classique Gifts Etc.
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1.0 Executive Summary
Classique Gifts Etc. is a start-up retail store offering fine gifts, collectible dolls and dollaccessories. The store will be located in Lexington, Kentucky, catering to the middle- andupper-class consumers who look beyond the congested retail malls for the special shoppingexperience. In addition to offering a wide array of unique, quality products, the consumer willenjoy friendly and knowledgeable customer service and a convenient, uncongested location.
This business plan is prepared to obtain financing in the amount of $50,000 topurchase inventory and to help cover expenses in the first year of operations. We are alsoasking for a credit line of $10,000 to be used as necessary in low cash flow periods. Brendaand Charles Gajdik will own and operate the store together as a team. They will provide$40,000 in cash as an equity investment to be used in start-up costs, equipment purchases, andoperating capital.
The sales forecasts used in this plan are very conservative compared to a similar business nowoperating in Lexington. Brenda has observed the strengths and weaknesses of this store and isconvinced it can be done better.
1.1 Objectives
· To develop Classique Gifts Etc. into the premier gift retail store in Central Kentucky.· To begin and maintain a gross profit margin above 40% for the first year.· To acquire a customer base of 4,000 by the end of the second year by using personal
customer service and marketing.· To achieve a substantial net profit by the end of Year 3.
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1.2 Mission
Classique Gifts Etc.will be a retail gift store specializing in fine gifts, collectible dolls and dollaccessories. We want to provide products from quality suppliers and provide professionalcustomer service in a friendly environment.
1.3 Keys to Success
To succeed in this business we must:
· Sell products the customer desires and are of the highest quality.· Provide friendly customer service.· Establish excellent vendor/supplier relations that will facilitate quick shipment of orders.· Advertise and promote our store immediately to take advantage of the current
Christmas shopping season.· Continuously review our inventory and sales and adjust our inventory levels based on
detailed records.
2.0 Company Summary
Classique Gifts Etc. is proposed to be a sole-proprietorship company operated by Brenda andCharles Gajdik and is a newly established retail store offering unique gifts and elegantcollectible dolls.
Located in Lexington, Kentucky, we will cater to special consumers who are interested infinding unique items to supplement their doll collection or finding a gift that cannot be found inthe national chain store in the very busy, very congested shopping mall.
We intend to expand our business by carefully building a repeat customer base and provide theproducts and merchandise they wish to purchase. We feel it is important to offer personalcustomer support and services to achieve our business philosophy.
2.1 Company Ownership
Classique Gifts Etc. will begin operation as a sole-proprietorship. The company will be ownedby Charles and Brenda Gajdik.
2.2 Start-up Summary
Total current and long-term assets will make up 78% of start-up requirements. Start-upexpenses, which are detailed in the following start-up table comprise the remaining 22% at$20,058
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Funding
As detailed in the start-up funding table, $90,000 with a $10,000 line of credit will be required tofund Classique Gifts Etc. This proposal is to be accomplished as follows:
· Owners' investment from Charles and Brenda of $40,000· Commercial loan of $50,000, calculated at 7% for seven years· Line of credit of $10,000 to be used as necessary
Details of other start-up expenses include:
· Research and Development:
Buying trip expenses toColumbus, OH.
$133
Buying trip expenses toAtlanta, GA.
$430
Internet provider service paidin July, for the Year 1
$120
Total $683
· 1st Month Rent & Deposit (proposed location):
Rent = $9.50/squarefoot
$1425/mo. $17,100/yr.
Common AreaMaintenance (CAM) =$1.50/square foot
$225/mo. $2700/yr.
Total Rent and CAM $1650/mo. $19,800/yr.
· Leasehold Improvements:
Slatwall Panels andAccessories
50 panels @ $50each
$2500
Ceiling Tiles 1,400 sq ft @ $.50/sqft
$700
Carpet with Pad 1,400 sq ft @ 2.50/sqft
$3500
Carpenter Estimate Display Risers andCounter
$300
Total $7,000
· Phone line installation: Single line installation $100· Insurance: Medical insurance for Brenda and Charles $650 first month
· Advertising & Promotion:
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Newspaper $76/week for 26weeks (CommunitySection onWednesday)
The most desirable location we have found is in Imperial Plaza Shopping Center located on WallerAvenue. The center will soon be renamed to Waller Center. The property manager estimates that20,000 cars pass this center daily.
Imperial Plaza: This location has 1,800 sq. ft. and is priced at $9.50 per sq. ft. The CAM expenseis $1.50 per sq. ft. and is adjustable and refundable at the end of the year. In other words, ifthe common area maintenance fund has not been fully used during the year, the remainingportion of the fund will be credited toward the tenant's lease payment.
Approximately 350 sq ft in the back room can be used as work space and storage. The salescounter is adequate but could use some paint. The drop-down ceiling panels need to bereplaced. The floor needs carpet and the walls need to have the pegboard panels removed orcovered with slatwall. The window display risers are adequate but could use some carpet.
Monthly rent is $1,425 and the Common Area Maintenance (CAM) is $225 for a total of $1,650per month. However, the owner's representative said he would consider taking less. Allappropriate insurance for liability and inventory is the tenant's responsibility. The ownerappears to be very flexible and helpful. The start-up leasehold expenses have been based on thisproperty.
Other potential sites we have looked at are as follows:
Southland Drive: The location has 2,000 sq. ft. at the very end of Southland Drive close toLane Allen Rd. It was previously occupied by Southland Florists, which moved to a new location.The property has been available for about three years. The space is one of 4 or 5 spaces ofthe same size in a stand-alone building at the end of Southland Shopping Center.
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The back room, which serves as a work and storage area, has a bathroom and will needremodeling. The floor will need new tile and some of the walls in back need repair.
There is an office area with a separate ceiling which should be removed for additional ventilation.An additional small room is adjacent to the office and should be removed to provide additionalretail floor space.
The retail portion of the property needs the carpet replaced. The sales counter and thedisplay window risers need to be replaced. The front door needs advertising material removedand the walls throughout the front and back need painting. The entire ceiling must be repaired.
The business sign must be flat against the outside surface. The existing sign with a new facecan be utilized. However, the signs cannot be seen from Southland Drive because of three verylarge pine trees blocking the view. Parking is small but probably adequate for these shops.
The rent is $1,800 per month with the first month free for renovation. There is no commonarea maintenance (CAM) charge. The deposit is $1,800 and is due along with the first month'srent. The tenant must provide the appropriate insurance for liability and protection of his assets.The owner said he would repair the ceiling and walls. The tenant is responsible for all otherleasehold improvements.
This space will need considerable leasehold improvements. An existing tenant next door is nothappy with the owner or her current situation and has only been in the location for six months.
Chinoe Center: The location has 2,280 sq ft in an upscale strip center with a mix of officespace and retail outlets anchored by Kroger Supermarket Grocery Store. The property islocated next to Kroger and with the right sign will receive a tremendous amount of visualadvertisement exposure with the Kroger traffic. However, there is no display window, whichexplains the relatively inexpensive rent and CAM expenses. We have not seen the inside space.
The door leading to the space is located between a carryout Pizza store and Kroger. The doorleads to a hallway about 25 to 30 feet long into a space which turns into three separate oddlyshaped rooms. The space was previously used as a modern dance studio.
The space is priced at $8 per sq ft and $1.65 per sq ft CAM fee. That is $1,833.50 per month.The tenant assumes full insurance responsibility for inventory and liability.
3.0 Products
Classique Gifts Etc. plans to carry special occasion gifts and merchandise from the San FranciscoMusic Box Company, Swarovski crystal, Lennox crystal, Outback Chair Company, TraditionsArtglass Company, children's books from Harvest House and other suppliers who display theirproducts at the Atlanta International Gift Market or the Columbus Marketplace for Gift, Gardenand Home.
We will also purchase merchandise from the most well-known collectible doll manufacturers andsuppliers in the United States, including Steiff, Madame Alexander, Turner Dolls, LeeMiddleton, Wendy Lawton, Susan Wakeen, Kish Dolls, Lloyd Middleton and others that providethe quality products that our customers wish to purchase.
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4.0 Market Analysis Summary
According to Pam Danziger, President of Unity Marketing, the collectible doll industry generated$3 billion in retail sales in 2000. The gift industry, which includes general gifts, collectibles,stationery and greeting cards, generated $54 billion in sales in 2002. As predicted by UnityMarketing, "the future of the gifts and home accents market is positive for the next severalyears." Source:Unity Marketing, The Home Report 2001:The Market, The Competitors, TheTrends
4.1 Market Segmentation
The ideal customer we expect to serve is:
· Middle to Upper Class· Primarily Female· 30-75 Years of Age· Educated· Homeowner· Quality Conscious· Value Conscious· Family Oriented
We will attract these customers by offering unique and uncommon product selections not foundin the mass-market retail stores.
4.2 Industry Analysis
· More and more consumers are seeking independent retailers that offer them the feel ofhome with a more personalized shopping experience.
· As consumers become more time-deprived, they are looking to shop at stores whoseservice offerings are as equal in quality and value to their products.
4.2.1 Competition and Buying Patterns
Brand name products sell well in stores that maintain a good selection, good location, andknowledgeable, friendly employees. These are the most important factors when sellingcollectibles and gifts.
There is only one store in the Lexington area that carries a wide variety of collectible dolls.However, the doll inventory only makes up about 25% of the total inventory. We do notconsider this store serious competition because their lease for the 4800 sq. ft. store expires inMarch, 2004, and it is rumored the business will not renew the lease.
Other stores in the Central Kentucky area carry one or two lines of dolls but do not offer awide variety of collectible doll lines. We intend to offer many different doll lines, doll accessories, personalized knowledgeable service, and a variety of other unique gift merchandise.
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The Internet offers dolls at discount prices. However, most of the merchandise is retired ordiscontinued lines that the manufacturers sell in bulk at discount wholesale prices. These are notthe products we intend to carry in Classique Gifts Etc.
We intend to develop a web page at some point, probably in year three to marketour merchandise on the Internet.
5.0 Strategy and Imlpementation Summary
Classique Gifts Etc. will develop product offerings and marketing strategy to increase itscustomer base while driving sales and profit. The following sections review the various strategiesthat will support this effort.
5.1 Marketing Strategy
Classique Gifts Etc. will focus its marketing efforts by advertising in the Lexington Herald-Leader and Insight Media Advertising on cable TV.
We will also increase consumer awareness, retain the existing customer base and promotesales via seasonal postcard and newsletter mailings. The mailings will announce special events orholiday specials during the year. These events will be used to sell slow-moving products andvendor special promotions. This means our marketing resources will be centered around bothsales promotions (events, displays) and personal sales (customer service, friendly atmosphere).
Classique Gifts Etc. will offer $5 coupons for every $100 spent. The coupon can be used bythe customer on future visits to the store.
5.2 Sales Strategy
Classique Gifts Etc. will approach sales from a salesperson-customer relationship basis. Allcustomers will be assisted in a very personal manner. Gathering key customer information andseeking performance feedback on the products and services offered will assist us in the followingways:
· Targeting our marketing efforts more effectively.· Developing product offers and merchandising formats that will increase sales.· Developing services that enhance the shopping experience.· Increase awareness of Classique Gifts Etc. within the retail consumer marketplace.· Develop future sales opportunities that allow for continued growth of the business.
5.2.1 Sales Forecast
Sales in the retail gift and collectible doll industry is enhanced by seasonal holidays and specialgift giving occasions. The following sales forecast is from direct retail sales and does notinclude miscellaneous income. The figures also include dips in sales for those slow periods thebusiness usually experiences in the summer months.
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Table: Sales Forecast
Sales Forecast
Year 1 Year 2 Year 3
Sales
Dolls & Accessories $72,105 $80,758 $90,449
Gifts $71,405 $79,974 $89,570
Total Sales $143,510 $160,731 $180,019
Direct Cost of Sales Year 1 Year 2 Year 3
Dolls & Accessories $40,871 $42,915 $45,060
Gifts $40,885 $42,929 $45,076
Subtotal Direct Cost of Sales $81,756 $85,844 $90,136
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5.3 Competitive Edge
Classique Gifts Etc. will establish itself competitively as a unique retail environment throughproduct offering and friendly, personal customer service. With St. Joseph Hospital, medicaloffices, the Kentucky Inn, the University of Kentucky and the Campbell House all located within1/2 mile of the proposed site, we will attempt to offer items that appeal to this diversepopulation as well as the doll collector.
5.4 Milestones
The following table lists important milestone dates.
Table: Milestones
Milestones
Milestone Start Date End Date Budget Manager Department
Business Plan 11/1/2003 11/18/2003 $0 Charles Department
Secure Funding 11/18/2003 12/31/2003 $0 Charles Department
Negotiate and Sign Lease 11/18/2003 12/31/2003 $0 Charles Department
Business Setup 11/18/2003 12/31/2003 $0 Charles Department
Leasehold Improvements 11/18/2003 12/31/2003 $0 Charles Department
Purchase Start-up Equipment 11/18/2003 12/31/2003 $0 Charles Department
Advertising Developed 1/1/2004 2/1/2004 $0 Charles/Brenda Department
Store Open For Business 2/1/2004 2/2/2004 $0 Charles/Brenda Department
Totals $0
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6.0 Management Summary
Classique Gifts Etc. will be managed and operated on a daily basis by Brenda and CharlesGajdik, a husband and wife team.
Brenda will manage merchandising, sales, customer relations, and all part-time staff. She will alsoprovide the information necessary to develop a marketing plan to attract repeat customers.Brenda has been employed for three years at Schwab's Collectibles, a retail collectible and giftstore in Lexington. She is currently the assistant store manager which she has held for twoyears. Some of her management duties include shipping and receiving, merchandising, andsales. She has always served the public in most every position she has previously held. Sheunderstands what customer service is and has a loyal following of repeat customers.
Charles will manage the finances and financial records, operations, data processing and assistin all other areas of the business. Charles has 14 years experience in accounting and nearly 15years experience in information technology as an Information Systems (IS) Support Specialist.He also maintains the financial records for a family owned business and has some experience inretail sales.
6.1 Personnel Plan
The personnel plan is included in the following table. It shows the owners' salaries along with onepart-time employee used as needed.
Table: Personnel
Personnel Plan
Year 1 Year 2 Year 3
Brenda Owner/Manager-Sales & Merchandising $14,600 $16,000 $16,000
Charles Owner/Manager-Operations & Finance $9,000 $14,000 $14,000
Part-Time as Needed ($7 per hour) $3,120 $4,120 $5,120
Total People 3 3 3
Total Payroll $26,720 $34,120 $35,120
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7.0 Financial Plan
· Growth will be moderate.· Costs will be managed and forecasts for future needs will be performed on a regular basis.· Finding the right product, at the right price will enable the business to meet planned
margins and maintain inventory at an acceptable level.
7.1 Important Assumptions
Key assumptions are:
· We do not sell anything on credit.· We assume the continued popularity of collectibles.· We assume access to financing sufficient to maintain our financial plan as shown in the
tables.
Table: General Assumptions
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 6.00% 6.00% 6.00%
Long-term Interest Rate 7.00% 7.00% 7.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0
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7.2 Projected Profit and Loss
The following table shows our planned three-year profit and loss estimates. We expect to have agross margin percent above 40% our first year, which will continue to grow in years two andthree.
The associated charts show that we will have a negative profit/sales percentage for the firsttwo years with a positive net profit by year three.
Table: Profit and Loss
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $143,510 $160,731 $180,019
Direct Cost of Sales $81,756 $85,844 $90,136
Other Costs of Goods $0 $0 $0
Total Cost of Sales $81,756 $85,844 $90,136
Gross Margin $61,754 $74,887 $89,883
Gross Margin % 43.03% 46.59% 49.93%
Expenses
Payroll $26,720 $34,120 $35,120
Sales and Marketing and Other Expenses $600 $1,200 $2,400
Depreciation $0 $0 $0
Rent and CAM Expense $18,150 $18,150 $18,150
Util ities $3,600 $3,600 $3,600
Liabil ity Insurance:Store $0 $2,400 $2,400
Insurance (medical Brenda & Charles) $7,800 $7,150 $7,150
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $56,870 $66,620 $68,820
Profit Before Interest and Taxes $4,884 $8,267 $21,063
EBITDA $4,884 $8,267 $21,063
Interest Expense $3,156 $2,549 $1,915
Taxes Incurred $518 $1,716 $5,745
Net Profit $1,209 $4,003 $13,404
Net Profit/Sales 0.84% 2.49% 7.45%
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7.3 Break-even Analysis
The following table and chart show our estimated monthly revenue break-even point.
Table: Break-even Analysis
Break-even Analysis
Monthly Revenue Break-even $11,013
Assumptions:
Average Percent Variable Cost 57%
Estimated Monthly Fixed Cost $4,739
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7.4 Projected Cash Flow
The following table and chart represents the projected cash flow.
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Table: Cash Flow
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $143,510 $160,731 $180,019
Subtotal Cash from Operations $143,510 $160,731 $180,019
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabil ities (interest-free) $0 $0 $0
New Long-term Liabil ities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $143,510 $160,731 $180,019
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $26,720 $34,120 $35,120
Bill Payments $67,291 $130,902 $132,065
Subtotal Spent on Operations $94,011 $165,022 $167,185
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabil ities Principal Repayment $0 $0 $0
Long-term Liabil ities Principal Repayment $9,060 $9,060 $9,060
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $103,071 $174,082 $176,245
Net Cash Flow $40,439 ($13,351) $3,774
Cash Balance $52,624 $39,273 $43,047
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7.5 Projected Balance Sheet
The following table shows our projected Balance Sheet.
Table: Balance Sheet
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $52,624 $39,273 $43,047
Inventory $8,583 $15,664 $16,447
Other Current Assets $12,757 $12,757 $12,757
Total Current Assets $73,964 $67,694 $72,250
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $73,964 $67,694 $72,250
Liabil ities and Capital Year 1 Year 2 Year 3
Current Liabil ities
Accounts Payable $11,873 $10,659 $10,872
Current Borrowing $0 $0 $0
Other Current Liabil ities $0 $0 $0
Subtotal Current Liabil ities $11,873 $10,659 $10,872
Long-term Liabil ities $40,940 $31,880 $22,820
Total Liabil ities $52,813 $42,539 $33,692
Paid-in Capital $40,000 $40,000 $40,000
Retained Earnings ($20,058) ($18,849) ($14,846)
Earnings $1,209 $4,003 $13,404
Total Capital $21,151 $25,154 $38,558
Total Liabil ities and Capital $73,964 $67,694 $72,250
Net Worth $21,151 $25,154 $38,558
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7.6 Business Ratios
The following table outlines some of the more important ratios from the Gift Shop industry. Thefinal column, Industry Profile, details specific ratios based on the industry as it is classified bythe Standard Industry Classification (SIC) code 5947.
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Table: Ratios
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profi le
Sales Growth n.a. 12.00% 12.00% 3.34%
Percent of Total Assets
Inventory 11.60% 23.14% 22.76% 40.42%
Other Current Assets 17.25% 18.85% 17.66% 23.99%
Total Current Assets 100.00% 100.00% 100.00% 80.29%
