BUSINESS PLAN ON PREPARED BY: JOLI N SADARANI ENROLL NO. :107360592062 ROLL NO: 87 SUBMITTED FOR:PARTIAL FULFILLMENT OF REQIREMENT OF TWO YEARS OF FULL MBA INDEX 1. Introduction 2. Keys to success
3. Objectives 4. Mission 5. Company ownership 6. Startup summary 7. Startup 8. Products 9. Market analysis summary 10. Market segmentation 11. Target market segment strategy 12. Industry analysis • Shoe only stores • Large department stores • Small women’s retails store 13. Competitions and buying patterns • Nordstrom • sakes 14. Strategy and implantation summary 15. Sales strategy 16. Sales forecast 17. Samples 18. Milestones 19. Captives edge 20. Management summary 21. Personal plan 22. Important assumptions 23. Brake even analysis 24. Projected p&l account 25. Projected case flow 26. Projected balance sheet 27. Business ratio INTRODUCTIONPassion Soles is a women-only shoe store in Eugene, OR.Eugene badly needs an upscale shoe store for women becausethe current stores have an inadequate selection. Currently,women that need a special pair of shoes often must travel up toPortland to find the right shoes.
Passion Soles will have an unmatched, extensive selection ofdifferent shoes. Generally, the size of Passion Soles selection iscost prohibitive due to all the different sizes that must be stockedper style. Passion Soles has a unique business model that allowsthem to have an extensive selection at the cost of only stockingone size per style. This is accomplished through a specialrelationship with the wholesaler so Passion Soles can receive acustomers needed size within two days. Rush overnight shippingis available at additional cost.Passion Soles will leverage Holly Heels extensive knowledge ofthe womens retail shoe industry to quickly gain market share.Profitability will be reached by month ten and $284,000 will begenerated in revenue in year three.Keys to SuccessThe key to success is to meet the demand for an upscale womens shoestore with a wide selection and focused customer attention.ObjectivesThe objectives for the first three years of operation include: 1. To create a product-based retail store whose primary goal is to exceed customers expectations.
2. To increase the number of clients served by 20% per year by serving an unmet need with outstanding selection and customer service. 3. To develop a start-up business, surviving off of its own cash flow.MissionPassion Soles mission is to provide Eugene with an upscale selection ofwomens shoes and outstanding customer service. We exist to attract andmaintain customers. When we adhere to this maxim, everything else willfall into place. Our services will exceed the expectations of ourcustomers.Company SummaryPassion Soles is an upscale womens shoe store located in Eugene, OR.,an un-serviced niche. Customers looking for these shoes must travel up toPortland. Passion Soles will be able to offer a wide selection because theywill typically only have one size available per style. This one size is used asa demonstrative model. All other sizes are available within two days.Company OwnershipPassion Soles is a sole proprietorship owned by Holly Heels.Start-up SummaryPassion Soles will incur the following start-up costs: • Computer system with CD-RW, printer, Microsoft Office, QuickBooks Pro, and POS software. • POS terminal/cash register. • Back office desk and chair. • Front of store counter. • Shelving racks. • Display racks. • Chairs, mirrors. • Assorted halogen track lighting.Please note that the following items which are considered assets to beused for more than a year will labeled long-term assets and will bedepreciated using G.A.A.P. approved straight-line depreciation method.Start- up FundingStart-up Expenses to Fund $600
Start-up Assets to Fund $29,400Total Funding Required $30,000AssetsNon-cash Assets from Start-up $14,368Cash Requirements from Start-up $20,032Additional Cash Raised $0Cash Balance on Starting Date $20,032Total Assets $34,400Liabilities and CapitalLiabilitiesCurrent Borrowing $0Long-term Liabilities $0Accounts Payable (Outstanding Bills) $0Other Current Liabilities (interest-free) $0Total Liabilities $0CapitalPlanned InvestmentHolly $30,000Other $0Additional Investment Requirement $0Total Planned Investment $30,000Loss at Start-up (Start-up Expenses) ($600)Total Capital $29,400
Total Capital and Liabilities $29,400Total Funding $30,000Start- upRequirementsStart- up ExpensesLegal $500Stationery etc. $100Other $0Total Start- up Expenses $600Start- up AssetsCash Required $20,032Other Current Assets $0Long-term Assets $9,368Total Assets $29,400Total RequirementsProductsPassion Soles will sell upscale womens shoes. The general categories ofshoes that will be sold are: • Sandals • Stylish work shoes • Loafers • Dress shoes • Canvas athletic/stylish shoes
Passion Soles will strive to have one of the largest selection of shoes inOregon, barring the larger stores in Portland. Passion Soles will accomplishthis by having one size per style in stock as a demonstration model.Passion Soles will then order the style in the needed size and it willarrive within two days (rush one day service is available). This will beaccomplished through a special relationship with the wholesaler who isable to send out the right size in the right style on demand. Often awholesaler will be unwilling to ship out individual shoes, but Passion Soleswas able to secure an exclusive arrangement with a its wholesaler to meetthis need.Market Analysis SummaryPassion Soles will be targeting two distinct groups of fashion-conciousfemale shoppers--professional workers and housewives. While both groupsare interested in dress shoes, the professionals will also be looking forfashionable shoes they are able to wear with their business attire. Thehousewives might be looking for fasionable but more casual shoes.Market SegmentationPassion Soles is targeting two different population segments within thebroad category of the fashion-conscious female with disposable income. • Professionals: these are full-time working professional women. They typically earn more than $45,000. They will purchase shoes for the workplace, as well as for leisure time. • Housewives: The household income of this group is $60k-$120k, generally toward the higher end of this range.
Market Analysis Year 1 Year 2 Year 3 Year 4 Year 5Potential Customers Growth CAGRProfessionals 9% 12,457 13,578 14,800 16,132 17,584 9.00%Housewives 8% 14,544 15,708 16,965 18,322 19,788 8.00%Other 0% 0 0 0 0 0 0.00%Total 8.47% 27,001 29,286 31,765 34,454 37,372 8.47%.Target Market Segment StrategyThese markets will be targeted through an attractive, eye-catchingstorefront in a popular mall. Most women within the target market shop atmalls. Malls allow them to visit many different stores within the samevicinity. By just having a visible storefront in a well traveled mall, PassionSoles will receive walk-through customers.While the leased space in a mall is expensive, one of the benefits that youpay for is the mall association which spends money on marketing the malland the stores within the mall.
Industry AnalysisWomens shoe retail industry is made up of several different types ofcompanies: • Shoe- only stores : As the name implies, these stores only sell shoes. Generally the shoe-only stores will either sell athletic shoes for men and women, or dress shoes for only one sex. • Large department stores : these types of stores sell everything, including shoes. • Small womens retail stores : these types of stores cater to women by only selling womens clothing and shoes.Competition and Buying PatternsPassion Soles has three direct competitors in Eugene: • (name omitted). This is a womens only clothing and shoe store. They have a nice selection of clothing but a poor selection of shoes. The shoe styles are not cutting edge. The price point for the shoes is $30- $120. • (name omitted). This is a large, complete, department store. The store however, suffers from cluttered displays and a general sense of disorganization. Shoes here are $30-$120. • (name omitted). This is a national franchise that only sells shoes, for both men and women. This company will sell knock-offs, shoes just like name brands, but with their name on it. While this store has a huge selection, the quality of the shoes leaves a lot to be desired. This is somewhat understandable as the shoes typically sell for $13- $50. While the shoes are often good copies of famous brands, the execution is sometimes off. Many of the shoes are made out of pleather and look like they were dipped in wax, giving them a tacky appearance.An indirect competitor is a shoe smith that will dye shoes. The shoes are typically dyed to match a specific dress. Not all colors can be dyed, and dying in general is not the ideal situation. Dying shoes creates a new shoe color that is acceptable only 20% of the time.major competitors • Nordstroms: mid- to high-end department store known for their outstanding customer service. The shoe price point is $60-$300. • Saks : this department store caters to the high class, older crowd. Shoes range from $75-$400.
• The buying habits for fashion-conscious women consist of typically buying at least one pair of shoes per month. Women generally purchase a pair of shoes to go with a specific dress. Once the woman purchases the dress she will then begin the sometimes long search for the perfect pair of shoes.Strategy and Implementation SummaryPassion Soles will leverage their competitive edge of extensive selection todrive sales. This is indeed a competitive edge because it is typically costprohibitive for a store to have as much of a selection that Passion Soles willoffer. Because of a unique business model, Passion Soles is able to leveragetheir financial resources and offer an unmatched selection. This is done bycarrying a large selection of styles by only stocking one size per style.Once the customer has chosen the style, Passion Soles will have thecustomers shoes in one to two days.Sales StrategyPassion Soles sales strategy will be based on display and visibility. Ahighly visible store with attractive product displays located in the mall willget a high percentage of foot traffic.This is especially the case for a womens shoe store. Women love to shopfor shoes. Some women even use shoe shopping as a form of therapy,similar to eating chocolate. These activities can make them feel better.The sales strategy will simply be, have the most complete selection of shoes. Assuming the prices arereasonable, having an extensive selection will drive sales because webelieve our target markets of fashion-conscious females are always lookingfor the perfect pair of shoes to coordinate with their fashion style.Sales ForecastThe first month will be used to set up the store front. The first employee willbe hired and display inventory will be purchased. There will be no salesactivity during the first month.The second month will begin to see sales activity, and it is forecasted thataround month four sales will really begin to pick up. The reason for this is
that word will get out about Passion Soles and more and more people willbe coming in to check out the extensive selection.A third employee will be hired in December for the holiday season.
Sales Forecast Year 1 Year 2 Year 3SalesProfessionals $84,402 $118,745 $135,454Housewives $54,861 $89,184 $102,095Total Sales $139,263 $207,929 $237,549Direct Cost of Sales Year 1 Year 2 Year 3Professionals $33,761 $47,498 $54,182Housewives $21,945 $35,674 $40,838
Subtotal Direct Cost of Sales $55,705 $83,172 $95,020MilestonesPassion Soles will have several milestones early on: • Business plan completion. This will be done as a road map for the organization. This will be an indispensable tool for the ongoing performance and improvement of the company. • Set up the store front. • Revenues exceeding $75,000. • Profitability.MilestonesMilestone Start Date End Date Budget Manager DepartmentBusiness plan completion 1/1/2001 2/1/2001 $0 ABC MarketingSet up the store front 1/1/2001 2/1/2001 $0 ABC DepartmentRevenues exceeding $75,000 1/1/2001 9/31/2001 $0 ABC DepartmentProfitability 1/1/2001 10/31/2001 $0 ABC DepartmentTotals $0Competitive EdgePassion Soles competitive edge is an unmatched selection in Eugene. Thisselection will be achieved in two ways. The first way is a very specific effortto carry as many styles of shoes as possible. Passion Soles recognizesthat Eugene currently does not have a single store that offers a wideselection of decent quality shoes for the fashion conscious femaleconsumer. The competitive edge is the recognition of this unserved nicheand the serving of this demand.Passion Soles will be able to offer a large selection through a uniqueinventory model that stocks only one size per style. The advantage is thatfor the same amount of money that Passion Soles invests in overhead,they can offer far more styles.
This model is effective because women are willing to order a pair of shoessight seen but not fitted. Passion Soles offers two day delivery with anadditional expense rush overnight option.Management SummaryHolly Heels, the founder and owner received her Bachelor of Arts inmarketing from the University of Portland. Throughout college, and full timeafter graduation, Holly worked at Nordstroms. She started out as a salesperson in the Nordstroms outerwear department, where Holly was namedemployee of the month five times. This caught the attention of hersupervisors and after one year of full-time work at Nordstroms, she wasoffered a position as the assistant manager of the womens shoedepartment.Holly worked as the assistant manager for one and a half years beforereceiving a promotion to manager of the department, a huge responsibilityand honor. Holly learned all of the "ins and outs" of the Nordstroms retailshoe industry in this job. After three years, Holly decided to leave and seekanother job. She had always wanted to live in a smaller town and, uponvisiting a friend in Eugene, began to do some market research about thewomens shoe industry in Eugene. She realized that there was an unmetdemand for fashionable shoes and she began to write a business plan toserve this need. She was confident that she would be able to leverage all ofher industry knowledge and create a store in Eugene serving fashion-conscious women.Personnel PlanHolly will be working full time at Passion Soles. She will be in charge of alladministrative details, hiring, inventory management, etc. Beginning withmonth two, Holly will hire a full-time sales clerk to help her at the store. ByDecember, she will hire an additional full-time employee in time for theholiday season.Personnel Plan Year 1 Year 2 Year 3Holly $36,000 $40,000 $42,000Full-time employee $17,600 $19,200 $19,200
Full-time employee $1,600 $19,200 $19,200Total People 3 3 3Total Payroll $55,200 $78,400 $80,400Financial Planhe following sections will outline important financialinformation.Important AssumptionsThe following table details important financial assumptions.General Assumptions Year 1 Year 2 Year 3Plan Month 1 2 3Current Interest Rate 10.00% 10.00% 10.00%Long-term Interest Rate 10.00% 10.00% 10.00%Tax Rate 30.00% 30.00% 30.00%Other 0 0 0Break-even AnalysisThe Break-even Analysis indicates that approximately $13,000 is needed inmonthly revenue to reach the break-even point.
Break- even AnalysisMonthly Revenue Break-even $12,369Assumptions:Average Percent Variable Cost 40%Estimated Monthly Fixed Cost $7,421Projected Profit and LossThe following table will indicate projected profit and loss. We estimatepurchase of new shoe display inventory, primarily for the seasonal changesin styles. Because these are displays, we are tracking them as expenses. Itis estimated that new styles (especially around the change in seasons) willrequire regular purchase of shoe displays as part of the normal course ofbusiness.
Pro Forma Profit and Loss Year 1 Year 2 Year 3Sales $139,263 $207,929 $237,549Direct Cost of Sales $55,705 $83,172 $95,020Other Production Expenses $0 $0 $0Total Cost of Sales $55,705 $83,172 $95,020Gross Margin $83,558 $124,757 $142,529Gross Margin % 60.00% 60.00% 60.00%ExpensesPayroll $55,200 $78,400 $80,400Sales and Marketing and Other Expenses $1,200 $1,200 $1,200Depreciation $1,056 $1,056 $1,056Shoe Display Inventory $7,000 $5,000 $5,000Utilities $1,200 $1,200 $1,200Insurance $1,800 $1,800 $1,800
Rent $21,600 $21,600 $21,600Payroll Taxes $0 $0 $0Other $0 $0 $0Total Operating Expenses $89,056 $110,256 $112,256Profit Before Interest and Taxes ($5,498) $14,501 $30,273EBITDA ($4,442) $15,557 $31,329Interest Expense $255 $224 $37Taxes Incurred $0 $4,283 $9,071Net Profit ($5,753) $9,994 $21,165Net Profit/Sales -4.13% 4.81% 8.91%Projected Cash FlowThe following chart and table will indicate projected cash flow. Weanticipate borrowing $5,000 in June to cover shoe display inventorypurchases and other expenses.Pro Forma Cash Flow
Year 1 Year 2 Year 3Cash ReceivedCash from OperationsCash Sales $139,263 $207,929 $237,549Subtotal Cash from Operations $139,263 $207,929 $237,549Additional Cash ReceivedSales Tax, VAT, HST/GST Received $0 $0 $0New Current Borrowing $5,000 $0 $0New Other Liabilities (interest-free) $0 $0 $0New Long-term Liabilities $0 $0 $0Sales of Other Current Assets $0 $0 $0Sales of Long-term Assets $0 $0 $0New Investment Received $0 $0 $0Subtotal Cash Received $144,263 $207,929 $237,549Expenditures Year 1 Year 2 Year 3Expenditures from OperationsCash Spending $55,200 $78,400 $80,400Bill Payments $78,704 $118,797 $133,576Subtotal Spent on Operations $133,904 $197,197 $213,976Additional Cash SpentSales Tax, VAT, HST/GST Paid Out $0 $0 $0Principal Repayment of Current Borrowing $1,260 $3,000 $740Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0Purchase Other Current Assets $0 $0 $0Purchase Long-term Assets $0 $0 $0Dividends $0 $0 $0Subtotal Cash Spent $135,164 $200,197 $214,716Net Cash Flow $9,099 $7,732 $22,833Cash Balance $29,131 $36,863 $59,697Projected Balance SheetThe following table will indicate the projected balance sheet.Pro Forma Balance Sheet Year 1 Year 2 Year 3AssetsCurrent AssetsCash $29,131 $36,863 $59,697Other Current Assets $0 $0 $0Total Current Assets $29,131 $36,863 $59,697Long-term AssetsLong-term Assets $9,368 $9,368 $9,368Accumulated Depreciation $1,056 $2,112 $3,168Total Long- term Assets $8,312 $7,256 $6,200Total Assets $37,443 $44,119 $65,897Liabilities and Capital Year 1 Year 2 Year 3
Current LiabilitiesAccounts Payable $10,056 $9,738 $11,090Current Borrowing $3,740 $740 $0Other Current Liabilities $0 $0 $0Subtotal Current Liabilities $13,796 $10,478 $11,090Long-term Liabilities $0 $0 $0Total Liabilities $13,796 $10,478 $11,090Paid-in Capital $30,000 $30,000 $30,000Retained Earnings ($600) ($6,353) $3,641Earnings ($5,753) $9,994 $21,165Total Capital $23,647 $33,641 $54,807Total Liabilities and Capital $37,443 $44,119 $65,897Net Worth $23,647 $33,641 $54,807Business RatiosThe following table compares our ratios to Standard Industry Code #3144(Womens footwear, except athletic).Ratio Analysis Year 1 Year 2 Year 3 Industry ProfileSales Growth 0.00% 49.31% 14.25% 10.45%Percent of Total AssetsOther Current Assets 0.00% 0.00% 0.00% 33.22%Total Current Assets 77.80% 83.55% 90.59% 85.17%Long-term Assets 22.20% 16.45% 9.41% 14.83%
Total Assets 100.00% 100.00% 100.00% 100.00%Current Liabilities 36.85% 23.75% 16.83% 26.82%Long-term Liabilities 0.00% 0.00% 0.00% 25.97%Total Liabilities 36.85% 23.75% 16.83% 52.79%Net Worth 63.15% 76.25% 83.17% 47.21%Percent of SalesSales 100.00% 100.00% 100.00% 100.00%Gross Margin 60.00% 60.00% 60.00% 22.01%Selling, General & Administrative Expenses 74.12% 49.27% 48.20% 10.93%Advertising Expenses 0.43% 0.23% 0.21% 1.05%Profit Before Interest and Taxes -3.95% 6.97% 12.74% 2.49%Main RatiosCurrent 2.11 3.52 5.38 2.58Quick 2.11 3.52 5.38 1.37Total Debt to Total Assets 36.85% 23.75% 16.83% 57.34%Pre-tax Return on Net Worth -24.33% 42.44% 55.17% 6.10%Pre-tax Return on Assets -15.36% 32.36% 45.88% 14.29%Additional Ratios Year 1 Year 2 Year 3Net Profit Margin -4.13% 4.81% 8.91% n.aReturn on Equity -24.33% 29.71% 38.62% n.aActivity RatiosAccounts Payable Turnover 8.83 12.17 12.17 n.a
Payment Days 27 30 28 n.aTotal Asset Turnover 3.72 4.71 3.60 n.aDebt RatiosDebt to Net Worth 0.58 0.31 0.20 n.aCurrent Liab. to Liab. 1.00 1.00 1.00 n.aLiquidity RatiosNet Working Capital $15,335 $26,385 $48,607 n.aInterest Coverage -21.57 64.74 818.20 n.aAdditional RatiosAssets to Sales 0.27 0.21 0.28 n.aCurrent Debt/Total Assets 37% 24% 17% n.aAcid Test 2.11 3.52 5.38 n.aSales/Net Worth 5.89 6.18 4.33 n.aDividend Payout 0.00 0.00 0.00 n.a