Formal Business Plan Towline Retail

FormalBusiness Plan: Towline Retail

FormalBusiness Plan: Towline Retail

ExecutiveSummary

Inthe contemporary world, the business environment has been encompassedwith various rapid developments which are deemed to be quitesubstantial while making sure pertinent business decisions. Thechanges are seen to have transcended from the technological stance tothe taste and preferences of the consumers. It is therefore quiteimportant to understand the real dynamics of the business beforeventuring into one. This proposal seeks to give instinctive reasonswhy our business should be funded. The main products which are deemedto be delivered to the esteemed customers entail the retails productssuch as the phones, computers, computer accessories, home appliancesand other pertinent electronic retail goods. The proposal projectsthat the profit margin for the business is deemed to be over andabove 10%. In the retails business, the main driving force is theexistence of high demand. The maintenance of customers through goodreputation and customer service are some of the key success factorsthat a retail business should have. In this regard, it is expectedthe business would have competent employees who will not only help inmaintaining the clientele base but also build the reputation of thecompany. The target market for this business is deemed to be quitediverse and mostly price sensitive. With this knowledge, the companywill look into the quality of the products it sells and ensures thatit is commensurate with the quality of the good in question. Soundmanagement practices are imperative for the growth of the firm. Thesepractices involve good public relations with the competitors, thesuppliers, and the other stakeholders of the business.

TheCompany Description

Themain line of operations of the business will be a retail business.The firm is deemed to liaise with some of the best wholesales in theUnited States, which would help in ensuring that our stocks are up todate. In this prospect, the firm will ensure that it creates a goodrapport with the existing wholesalers and manufacturers who will becharged with the responsibility for ensuring that the company getshigh-quality goods at the most affordable prices possible. Thebusiness is expected to be located near the city where the populationis projected to be high. Additionally, the quality of goods isexpected to be high in such a way that they would ensure that thefinal consumer gets the value for their goods. In the recent, theurban areas around California are seen to have a less retailbusiness. This location is best for the start of the business as itwill help in ensuring that the company is indeed having a higherstance of customers as it provides a high demand for the retailgoods. It also entails the provision of proper compensation for theemployees at their areas of concern with keen attention on the inputthey bring to the company. In the production of retails goods, ourcompany might not have control over the prices of the products beingsold, but through a better bargaining power, the company is expectedto have a higher profit margin. The vital competitive advantage thatthe company will have over others is the inception of expertpersonnel who are very much aware of the pros and cons of investingin the retail industry. Additionally, due to the expert rapidtechnological advancements in this industry, another main advantagewould be the automation of various business transactions with aprofound ERP system, which will help in creating a high level ofefficiency in the delivery of goods and services. The customerservice is also expected to be quite efficient which would create aplatform of customer loyalty.

MarketAnalysis

Industry

Theretail industry has been influenced heavily by the changing tastesand preferences of the individual consumers who want faster deliveryof their goods in the most convenient way. With the wake of thenotion of rapid technological advancements, the consumers’expectation is that the prices should be lower while the quality ofthese goods needs to be high. The leading retailers like Wal-Marthave thrived in the recent past due to its maintenance of fasterservice delivery and the provision of quality goods. Most companiesin this industry have also made sure that they follow suit bychanging their operational strategy with the changes in the market.The current statistics shows that approximately two-thirds of the GDPemanate from the retail business. The advents of bankruptcies andclosure of several retail stores have characterized the year 2016.This event is attributed to the shift in the tastes and preference ofthe various consumers across the United States and the fact that theeconomy is quite unsteady. The total sales for the retail industry inthe year 2014 were around 22 trillion where it increased to 24trillion in the year 2015. These figures show growth in this industryas many players are expected to exploit it. Between the year 1993 and2015, the retails business sales in the country has increased by 12%and is still expected to go up due to various expansion andinnovations brought forward. The graph below shows the growth insales for this industry over the years as connoted by IBIS WorldStatistics (IBIS n.d).

IBISWorld.Retrieved from &lt&lthttps://www.ibisworld.com/industry/default.aspx?indid=1027&gt&gt

Fromthe graph above, it is evident that this industry is indeed on thepositive end of growth. This means that most companies are still attheir growth stage hence the need for more expansion of these retailsto meet the consumer needs.

TargetMarket

Thisretail business as mentioned earlier will be mainly involved in theselling of the electronic goods. The main target market for this firmis the young and middle-aged persons who are proactive in terms ofusing the electronic gadgets with the latest technology.Consequently, we expect to sell to those who are aged between 15years and 32 years since this is the prime age for exploiting thebeauty of technology with vigor. For example, the phones and phoneaccessories will be those of the state of art built with the mostmodern technology. This move will be to ensure that the ever-changingpreferences of the customers are met adequately. This would implythat the firm partner with some of the best phone makes in the markettogether with the best manufacturers of the electronic gadgets andappliances, which are deemed to have embraced the most moderntechnology. Additionally, the firm will mostly stock phones andelectronic accessories which the ladies prefer most since ladies aredeemed to embrace the rapidly changing lifestyle than men.

Becausethis industry requires a high level of competition, the mostdifferentiating factor for our product is the faster delivery ofthese goods and services for the customers. The qualified personnelthat we have will be able to provide sufficient customer services,which would be deemed quite substantial in maintaining a high levelof rapport with the customers. Additionally, the firm will ensurethat they use convenience offering where the goods will be availed tothe customer at their point of need, which means the company willalso institute an online platform where it will make sure that itgets the whole context of customer base intact. The products willalso be put strategically at the points where the customers may needthem in accordance to their preference and tastes. Additionally, theretail shops will be located in the suburbs where the customers feelthe quietness as they carry out their shopping. This would mean thatwe would be targeting those folks in the suburbs who do not want alot of noise but a tranquil ambiance.

Pricingstrategy

Retailbusiness entails many pricing strategies and most retailers usuallyengage in price wars that would help stabilize the price and make thecustomers shift to choosing product about quality. In our retailshops, we will be using the professional based pricing where theprice of the product will be chosen after a careful analysis of themarket and the tastes and preferences of the customers to help ingetting to understand the best price to advance to them.Additionally, the price differentiation will be carried out to helpin maximizing sales in every outlet that we have (Carson, 2012). Thisnotion means that we would be determining the prices of the goodsbased on the location and the income brackets of the consumers inthese designated locations. For this reason, the profit margin isdeemed to be above 10% and projected to grow at a rate of 5% per yearenough to cater for the growth in the operational costs that companywould face. The firm also plans to use the cash discounts on thevarious cash sales that would be made in retail shops to help lurethe customers into buying the products.

CompetitiveAnalysis

TheSWOT Analysis

Strengths

Oneof the strengths of the company is the fact that it plans to have aformidable ERP program that would help in the faster delivery ofgoods and services. The firm also has a profound expertise that itderives from its esteemed human resources. The employees here aredeemed to be well trained and would go ahead to ensure that they gainthe customer loyalty, and therefore clientele base is deemed toincrease. The diversity in terms of sales of variety of electronicsis also a strategic advantage since the customers will be shopping atonce for their electronic needs.

Opportunities

Thereare various locations which needs retail services especially theelectronic services which at times might not be found in the localretail shops. Additionally, the company is able to invest in the ERPprogram that would be very critical in ensuring that it automatesmost of its transactions, which has the effect of creating a highlevel of efficiency in the operations of the company. Thisopportunity is one that has not been exploited by various parties inthis industry and through the expert personnel, it can be wellimplemented.

Weakness

Inthe operation of the production processes, the company has notinculcated the use of advanced technology to accentuate the highlevel of efficiency in its production. This conception is a weaknessthat most of the competitors are making use of. The penetration mightbe a big problem as there are various competitors who might not wantto have the whole context of reduction of the market share from them.

Threats

Thereescalated the level of competition in the realm of United States fromvarious formidable companies like Wall-mat, which provides an adventof low penetration into the market. There are also the dynamisms inthe technological advancement that the company needs to keep up withby making sure that they adopt such advancements. The governmentregulations that posses high tax levies on consumer goods has theeffects of reducing the profit margin.

CompetitorAnalysis

Themain market rivals for Towline Company in the retail industry are theCompUSA and Abt Electronics. CompUSA has the biggest marketplaceshare compared to the other companies succeeded by the AbtElectronics. One of the most imperative strategies that CompUSA hasutilized is the stratified advertising stratagem that has assisted itto accumulate the souk to a tune of approximately 46%. An additionalinsistent gain that the corporation has is the notion of the costbased stratagem of pricing. A study survey carried out pertaining tothe retail firms rated CompUSA as the preeminent company in the areafor the reason that it sells quality goods. Abt Electronics.,conversely, had affordability of its products to the consumers. Themajor reason for this elevated quality of consumer services is theinitiation of the state-of-art IT structure that assists them focusto their clientele base exclusively.

Organizationand Management

Toallow for the proper management of the firm, the followingorganizational structure has been adopted to care for the workforcefor the company.

TowlineRetail Company: Organizational Structure

PersonnelRoles

GeneralManager

Heis charge with the responsibility of the universal management of thecompany, and also makes some of the main premeditated decisions ofthe business after considerations from the directors of the same. Heis also accountable for maintaining a relationship party connectingthe company and the outside parties. He communes diverse pleas of thecorporation to the investors and various issue that is moving boththe stakeholders.

MainAccountant

Heis accountable for approval of a variety of imbursements that thebusiness makes to the investors. He takes charge of the preparationof the various financial records from various accounts juniors in thebusiness. It is to this consequence that he is very significant inthe accentuating various monetary decisions. To this prospect, he isanswerable for the reporting the financial information to theadministrator and the directors in the annual general meeting.

Manager,Purchasing Department

Heis responsible for the procurement of various merchandise of the firmand ensures that him and his team controls the stock in the mostappropriate way possible that would be very critical in ensuring thatthe company is indeed not losing much cash due to stock out costs.

Technicianin Charge

Thesafeguarding of the computer implements and the substitution thereoffalls in his docket. The technician also does the improvement ofthese electronic devices to conform to the modern technologicalinnovation.

ManagerMarketing

Hedirects in the advertising of the products being ventured by thebusiness through efficient media promotion and another structure ofcommercials. Here he builds up a redoubtable marketing stratagem thatbecomes conventional to the technology diligence. He guides in themarket investigation where he analyses the experience and preferenceof the diverse customers and hence advises the corporation on thepreeminent way to please its consumers.

SalesExecutives

Theseindividuals will be responsible for the sales and distribution roles.They are equipped with the skills of customer service with keenattention to the various wants and needs of the customers. They arealso charged with the responsibility of impacting profound knowledgeto the customers on the available products in the stores.

OwnershipInformation

Threebusinesspersons who have a high level of experience in the retailwill own this retail company. Each of them has masters’ degrees inbusiness administration and finance, which would help them in themanagement and run of the daily activities of this company.Currently, the firm requires $5 million to start operating. The threeowners have contributed $1.25 million for the whole constructionstance of the company in equal stance. The other $ 1.25 million isdeemed to be sourced through debt capital and subscription of sharesto the public. Most of the funds raised will be used in acquiring theretail goods, which will be sold in these outlets.

Thestartup Expenses

Thesummary for the start up costs for the company is as shown on thegraph below.

Marketingand Sales Strategy

Thecompany will mainly use media marketing where it will create thewebsite, which would be used as a platform for marketing and sellingits goods(Stelzner, 2011).Additionally, the company will make sure that it has its distributionoutlets well located at the points, which are convenient to theconsumers for faster delivery of the goods and services. The companywill also use the personal selling using the sales executives whowill be in a position to get the whole context of product knowledgeand relay this information to the esteemed customers. Moreover, thefirm will use the local media like local TV channels and radio tomake themselves known to the consumers. This move is deemed to createawareness of the whole conceptualization of the existence of thecompany and its electronic products.

MarketingCommunication Objectives

Withthe inauguration of insightful information system ERP, our mostimportant aim is to make sure that there is efficient coordination ofdifferent activities in the business to improve the customer servicedelivery. In this system, a consumer care communication-center isdeemed to be instituted such that any questions about the goods willbe tackled in real time. Additionally, the information system willbe able to analyze the various transactions across its branches andunderstand the demand for each product in every region. This willhelp the business reduce stock out costs at the same time give thecompany to an opportunity to know the best sales strategy to employ.

FinancialForecasting

Thefollowing are the financial forecasts, which entail the Performabalance sheet, the break-even analysis, cash flow statements, and theprojected income statement.

PRO FORMA STATEMENT OF CASH FLOW

Year 1 ($)

Year 2 ($)

Year 3 ($)

Cash Received

Cash from Operations

Cash Sales

4567000

5392300

6234240

Subtotal Cash from Operations

4567000

5392300

6234240

Additional Cash Received

Sales Tax, Received

0

0

0

New loan

0

0

0

New interest free liabilities

0

0

0

New noncurrent Liabilities

0

0

0

Sales of Other short term Assets

0

0

0

Sales of noncurrent Assets

0

0

0

New Investment income

0

0

0

Total Cash inflow

4,567,000

5,392,300

6,234,240

Expenditures

Year 1

Year 2

Year 3

Expenditures from Operations

Cash Spending

1,124,600

1,143,800

1,155,144

Bill Payments

1,327,865

1,388,715

1,420,945

Subtotal Spent on Operations

2,452,465

2,532,515

2,576,089

Additional Cash Spent

Sales Tax, Paid Out

0

0

0

Principal Repayment

0

0

30,000

Other Liabilities

0

0

0

Long-term Liabilities

0

33,850

37,961

Purchase Other short term Assets

0

0

0

Purchase noncurrent Assets

0

600,000

600,000

Dividends

0

0

0

Subtotal Cash outflow

2,452,465

3,166,365

3,244,050

Net Cash Flow

2,114,535

2,225,935

2,990,190

Cash Balance

2,195,358

2,696,358

3,417,648

BREAK-EVEN ANALYSIS

Monthly Revenue Break-even

$ 380,600

Assumptions:

Average Percent Variable Cost

45%

Estimated Monthly Fixed Cost

209,330

PRO FORMA PROFIT AND LOSS

Year 1 ($)

Year 2 ($)

Year 3 ($)

Sales

4,567,000

5,392,300

6,234,240

Direct Cost of Sales

1440000

1,948,400

2,000,324

Other

0

0

0

Total Cost of Sales

1,440,000

1,948,400

2,000,324

Gross Margin

3,127,000

3,443,900

4,233,916

Gross Margin %

68.47%

63.87%

67.92%

Expenses

Payroll

1,246,000

1,438,000

1551440

Sales and Marketing and Other Expenses

258,000

276,000

310,000

Depreciation

54,000

55,000

55,000

Rent

484,000

528,000

528,000

Rent

60,000

60,000

60,000

Maintenance

58,400

64,240

70,660

Utilities/Phone

90,000

95,000

100,000

Payroll Taxes

186,900

215,700

232,720

Other

0

0

0

Total Operating Expenses

2,437,300

2,731,940

2,907,820

Profit Before Interest and Taxes

689,700

711,960

1,326,096

EBITDA

743,700

766,960

1,381,096

Interest Expense

20,821

20,326

10,618

Taxes Incurred

130,740

115,510

212,424

Net Profit

592,139

631,124

1,158,054

Net Profit/Sales

12.97%

11.70%

15.60%

PRO FORMA BALANCE SHEET

Year 1

Year 2

Year 3

Assets

Current Assets

Cash

2,195,358

2,696,358

3,417,648

Inventory

121,175

123,293

125,622

Other Current Assets

0

0

0

Total Current Assets

2,316,533

2,819,651

3,543,270

Long-term Assets

Long-term Assets

591,700

611,700

631,700

Accumulated Depreciation

54,000

109,000

164,000

Total Long-term Assets

645,700

720,700

795,700

Total Assets

2,962,233

3,540,351

4,338,970

Liabilities and Capital

Year 1

Year 2

Year 3

Current Liabilities

Accounts Payable

319,740

319,470

348,360

Current Borrowing

67,000

34,000

1000

Other Current Liabilities

$0

$0

$0

Subtotal Current Liabilities

386,740

353,470

349,360

Long-term Liabilities

200,000

164,150

124,540

Total Liabilities

586,740

517,620

473,900

Capital from partners

1,549,354

1,600,000

1,540,000

Retained Earnings

234,000

791,607

1,167,016

Earnings

592,139

631,124

1,158,054

Total Capital

2,375,493

3,022,731

3,865,070

Total Liabilities and Capital

2,962,233

3,540,351

4,338,970

Net Worth

2,375,493

3,022,731

3,865,070

https://www.ibisworld.com/industry/default.aspx?indid=1027

References

Carson,R. T. (2012). Contingent valuation: A practical alternative whenprices are not available.&nbspTheJournal of Economic Perspectives,&nbsp26(4),27-42.

IBISWorld.Retrieved from &lt&lthttps://www.ibisworld.com/industry/default.aspx?indid=1027&gt&gt[Accessed 21stJuly, 2016].

Stelzner,M. A. (2011). Social media marketing industry report.&nbspSocialMedia Examiner,&nbsp41.