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Buster’s Business Plan

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Focusing on its strengths, key customers and the underlying values, Buster’s seeks to increase the provision of a wide range of products. The store intends to sell snacks, small gift items, pre-wrapped sandwiches, greeting cards, bottled/canned beverages, newspapers and paperback books. We also target to make prompt minor alterations on our prices, while improving the gross margin on sales and cash management, as well as the working capital. This business plan leads the way to renewing the stores vision and strategic focus: provision of the first class stores services and products, while adding value to our target market segments. Buster’s is positioning itself strategically to offer the store products in the new office building, which will open two blocks away from the building our retail store occupies currently.

Business Description

Buster’s is looking for $500,000 for its first round of financing and $700,000 in second round. Buster’s projects a return of approximately 60% IRR after 3 years of operations with 57% share worth $2 million. Because of the strategic location of the store and the long-term loyalties of Buster’s will have an indefinite life cycle, as long as its high standards of products and services will be maintained. The management will conduct a self study regularly to ensure that the display and the products are rejuvenated

Marketing

Buster’s will continually learn more about its target market and identify the new marketing opportunities. The store will come up with focus groups composed of existing and potential customers that will help them to identify what customer wants. Buster’s will focus on the extensive communications between the upper and lower management, so as to identify opportunities for new customers or the special promotions.

Niche marketing will play a big role to Buster’s marketing strategy. This is because it will help to expand our company’s products to cater for the entire market segment. Our company also adds the private label products, such as gifts, to attract women. Promotions will be used to keep customers interested. At the same time, employees will change the two window displays every month. Buster’s will also use the cost-effective cooperative advertising that will keep customers up-to-date on the latest specials. 

Products

The store intends to sell snacks, pre-wrapped sandwiches, bottled/canned beverages, greeting cards, newspapers, paperback books and small gift items. The choice of these ranges of products is based on the fact that the products and goods offered by other stores in the neighboring buildings are generally focused on low-end customers. Buster’s will serve individual customers, businesses and organizations in the new building who have a high usage of such range of products. It also intends to introduce the new products, such as office stationeries, so as to increase our market share.

Positioning

Buster’s will initially be positioned as the quality provider of current products in the target markets described below. Our strategy is to build a good customer loyalty within the key markets of store products in the building, before moving on to the other building in the town. New products, such as beverages and snacks, will be promoted as the most stylishly advanced in the market. The use of social networking sites will be vital to achieving this image. Our marketing strategy is the core of the main stratagem: emphasize good customer service and support, build a relationship store business, and focus on lower and high-end customer, as the key target markets.

Target Market

Buster’s will serve different categories of people in the building, as well as customers and visitors coming from other towns. The table below shows the type of customers Buster’s is targeting within its new building.

Category

Estimated customers

In the building/year

Percentage of Potential customers

Potential Customers
(2012-2013)

Office worker’s

5000

10%

500

Professionals

4000

10%

400

College students & Teens

10000

10%

1000

Visitors

10000

10%

1000

Firms and Companies

500

10%

50

Total

 

 

2,950

The employees of Buster’s will have to realize that prices determine the sales, and consequently, revenue generation of the store. In this context it will leverage the quality of products, in order to increase the sales. In pricing, we will minimize the profit margin to increase the total sales where applicable and necessary, and at the same time, lower the cost price and introduce the service charges to special customers who need the customized clothes.

Buster’s will maintain a mailing lists of its customers and prospects from information obtained at the point of sale. We will then use the lists to send flyers, announcing the current store promotions and new products. Buster’s will ensure that each employee works with 50 key personal customers, sending those flyers, announcing new products and offering personal shopping services. As the part of the promotional strategy employees at Buster’s will send thank-you cards to customers who purchase more than $50 worth of products.

The above promotional strategy has been projected to cost the business a substantial amount: 1st Year $3,000; 2nd Year $ 4,000 and 3rd Year $8,000. Supplemental to these efforts will be the development of the stores website and development of supporting print. A direct mail campaign will begin immediately to prospective clients, notifying them of the available gifts, snacks and beverages, their features and benefits of purchasing such products.

Buster’s is targeting to the new office building that will open two blocks away from the building our retail store currently occupies. The sales team in partnership with our vendors will often visit the large buildings in downtown to create awareness of our store. There will be later plans to move to the neighboring buildings which have the potential market. Buster’s will also ensure there is effective communication with its existing and prospective customers.

Established partnership with vendors will enable Buster’s to create a network of client contacts, and this will lead to the ease of customers reaching us on the mail or telephone, in case they have any questions. Buster’s will make a good use of the social networks as a tool, such as Facebook, Twitter and You+ to distribute and promote the efficiency in the daily distribution operations. Buster’s will also establish partnership with vendors of the latest products and with this network; the vendors will give us leads to sales of ours.

Buster’s will offer the relaxed atmosphere with some personalized attention. The store will feature a modern design and offer an inviting feeling. The store will maintain regular office hours of Monday through Friday from 7:00 a.m. until 10:00 p.m. and Saturdays from 8:00 a.m. until 6:00 p.m. These hours will be suitable to all customer segments, especially those working in the offices. Buster’s will offer the delivery on a regular basis of newspapers, snacks and beverages, and besides that it will offer,  it will maintain a website together with an active e-mail correspondence with customers, so that they can express their feelings about any concerns.

In addition, Buster’s will keep its employee turnover rate low by making everyone to be the part of the management team, and keeping the lines of communication open. This is because employees also feel empowered to do whatever it takes to get things done, is it responding to customer’s complaints or special ordering merchandise. Buster’s will keep its employees up-to-date on product trends and business practices by holding monthly employee meetings.

The management of the store assisted by sales personnel will make all decisions concerning the stock purchases. Once we know what products are required, we will be inviting the vendors to supply their goods, while at the same time informing them up front what they expect in terms of performance. While keeping in line with their desire for fresh products, we will place the high value on the sell-through quality products, such as snacks and beverages. We will stick with vendors with fast-selling products and quickly dismiss vendors with slow-moving goods. As the part of our operations, it also brings new products in on the trial basis and restock based on their selling patterns and power.

To be effective, our company will develop a formal sales training manual and include such items as; sales attire, register functions, job expectations and performance standards. Buster’s will also develop a selling productivity measures, such as sales per employee hour, as standards to review the performance of the sales associate in the store. Buster’s will develop its operating systems in a way to identify both financial and non-financial key performance indicators to measure the goal achievement. Such performance indicators will include sales per employee and percent of the total sales needed for the payroll.

Future Trends

There are conflicting trends that will affect the Buster’s. One of the future trends of the store is that the new building is currently gaining popularity, as more clients and professionals are entering the building offices. For my business, this implies that professional working men and women will appreciate even more in the years ahead the extra service and convenience that Buster’s will continue to offer. In order to take care of these trends, Buster’s will pay attention to its customers changing tastes, as they grow older, not ignoring the growing teen. The management will come up with new ways to market to smaller number of younger women and men entering college and workforce.

Finance

The start-up costs of $350,100 are to be financed by the loan form a bank will additional boost from an angel investor. The details are shown in the table below.

Start-up Funding (Year 2012)

First Year

Second Year

Third Year

Start-up Expenses to Fund

150,100

0

0

Stock to Fund

200,000

750,000

1,300,000

 

350,100

750,000

1,300,000

 

 

 

 

Bank Loan

350,100

750,000

850,000

Venture capitalist

0

0

450,000

Total Investment

350,100

750,000

1,300,000

In the third year, Buster’s will also seek funding to the tune of $ 850,000 from the bank and 450,000 from venture capitalist to open more stores downtown. It will utilize the anticipated cash injection to indulge the store operations. Provided below is a breakdown of the sources and application of the funds.

Backup statement:

  1. The additional funding will be used to acquire expand the store business operations.
  2. The $ 850,000 from the bank and 450,000 from venture capitalist are needed by January 1st, 2014 in order to precede with the purchase more stock and open a chain of stores and make it fully operational.

Financial Projections

By critically looking at the financial projections of the business plan, it can be concluded that the business idea will be profitable before it is implemented. Buster’s financial section will take into consideration the break even analysis, sales revenue forecast, fixed costs, and gross profit for each sale and break even sales revenue. Sales revenue for Buster’s will be the total dollars from the sales activity that we will bring into the business each month, year or week. Fixed costs also called overheads for Buster’s must be paid, regardless of how well we will do. Fixed costs usually will include rent, insurance and other set expenses that we will incur.

The gross profit for each sale is the amount of money that will be left from each sales dollar after paying for the direct costs of that sale. Finally, the breakeven sales revenue will be dollar amount the business needs each week or month to pay for both direct product costs and fixed costs. This will not include the profit.

Sales Revenue Forecast

Buster’s intends to open a 2,000-square foot in a main building to sell snacks, pre-wrapped sandwiches, bottled/canned beverages, greeting cards, newspapers, paperback books, and small gift items. After comparing with other stores retailers, reading trade magazines, visiting similar stores in other building, Buster’s decides that it can achieve the $200-per-foot-per year figure. This implies that our annual sales should be $400,000 (2000* $200). To be conservative we plan the first year’s sales to be about 20% below that level to allow for the business to build. This, therefore, means that the first year sales will be about $320,000, or $160 per foot.

Sales Revenue Forecast.

S/no (month)

Month

Total Estimated Revenue ($)

1

May

10,000

2

June

12,000

3

July

15,000

4

August

17,000

5

September

16,000

6

October

15,000

7

November

16,000

8

December

16,000

9

January

15,000

10

February

16,000

11

March

18,000

12

April

20,000

 

Total

320,000

Fixed Cost Estimated at Monthly Basis

By looking at the table below, we realize that we should have at least $ 5,150 left after accounting for the sales. Annually, this amounts to $ 61,800. To do it proper, company must not only cover fixed costs, but also take enough to make a decent living.  

Allocation

Cost ($)

Rent, including taxes, maintenance

500

Wages, employees

2,000

Utilities

200

Advertising

250

Telephone

250

Supplies

300

Insurance

250

Legal

400

Others

1,000

Total

5,150

Gross Profit for Each Sales Dollar

Buster’s should determine how much of each dollar will be left after subtracting the costs of the goods sold. This number will pay fixed costs and determine the profit of the store. In this context, we plan to sell half of our products at the double cost we pay. Snacks will sell at a profit of about 30%, pre-wrapped sandwiches will sell at profit of 35%, bottled/canned beverages will profit 50%, greeting cards will sell at a profit of 50%, newspapers 25% and paperback books will return 50%. Small gifts bought at $ 50 we will sell at $100. This implies that our average gross profit for our products will be estimated at 40%.

Forecasted Gross Profit.

Description

Product

Sale of product

Total

Average cost of product

50

5

N/A

Bags/wraps

2

2

N/A

Average total cost

52

7

N/A

Average selling price

100

15

N/A

Gross Profit (Selling price less Total Cost)

42

8

N/A

Gross Profit% (Gross Profit / Selling price)

42%

53%

N/A

Total Annual sales

160,000

160,000

320,000

Total Annual Gross profit

67,200

84,800

152,000

Average gross profit % ($152,000 / $320000 = 47.5%)

Buster’s needs $130,105 in sales revenue just to break even. This is $2, 895 more than we expect the first year and $5,000 more than we expect for the second year.

A

B

C

Fixed costs per year

The average gross profit percentage expressed as the decimal

Break even sales revenue (A/B)

$61,800

0.475

$130,105

 Buster’s will improve its profit, by increasing our sales revenue by selling more bottled/canned beverages, snacks, pre-wrapped sandwiches, , greeting cards, newspapers, small gift items and paperback books  to our customers and increase the gross profits percentage by raising the selling prices or by lowering our product costs. Buster’s should realize that a very aggressive sales increase alone will bring a small profit. Our company will find some combination of the higher sales estimates, higher gross profit margin and lower fixed costs that will improve profits and enable to make a living wage.

Buster’s starts generating profit in the first year of operations, and positive cash flow appears in the same year. It means that once spent, money can be fully recovered by the bank. This creates very good chances for the bank to recover its money and for the shareholders to sell their participation at a very good price for other investors.

This business plan depends on the important assumptions: The main underlying assumptions are that there will be a slow-growth economy, without the major recession and that there are not any unforeseen changes in the technology to make the products immediately obsolete.

 

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