Executive
Summary
Arena Store is a sports retailer based in Johor Bahru, Johor.
Arena Store offers the most
comprehensive selection in town and arguably on the Internet/mail order as
well.
By offering the most complete selection as well as a
knowledgeable support staff, Arena Store
will quickly gain market share.
Johor Bahru was chosen because of its diverse,
active culture. It is not uncommon for people to make a job sacrifices in
exchange for quality of life gains, and the active, outdoor lifestyle is the
majority in Johor Bahru.
Keys
to Success
Arena Store has
identified three keys to success that they believe will be instrumental in
reaching sustainable profitable. The first is the need to meet the customer's
needs by offering the most comprehensive selection and knowledgeable staff. The
second key to success is the need to monitor the competitive environment in an
effort to ensure differentiation. The last is related to the accounting systems
of the organization. Arena Store has
identified the need to design and adhere to strict financial controls.
Competitive
Edge
Arena Store ‘s competitive edge is its unsurpassed
selection and sales staff knowledge. This will be a significant edge because no
other store offers the comprehensiveness within multi-sports as Arena Store
. The type of athletes that participate in a variety of sports do so as
a part of their lifestyle. It is a part of their life, an activity that they
enjoy and look forward to. While the activities may be somewhat painful when
you are doing them, depending of course on the intensity that you reach,
overall it is quite enjoyable. This would also explain why they participate in
so many different ones.
Management
Arena Store is being led by Syahmi, a experience of
the outdoor sport industry. While in undergraduate school, Syahmi was an active
member of two different sport teams. This was his first introduction to his
passion of challenging sports.
Arena Store has conservatively forecasted explosive sales
by the end of year two, escalating continually in year three. The net profit margin will be low in year two
and increase modestly in year three.
While this appears to be fairly low for a retail operation, Arena Store
has sufficient cash to weather the first few years with the goal of building a
sound foundation for the business, including a loyal customer base.
1.1
Objectives
- Become the premier sports clothing retailer in Johor.
- Increase market penetration to 10% by year three.
- Reach profitability within the second year.
1.2
Mission
- It is Arena Store’s mission to become the premier sports clothing retailer in Johor. This will be accomplished by offering fair prices, the best selection, and a knowledgeable staff to assist customers in any way. Arena Store will strive to exceed all of their customer's expectations.
1.3
Keys to Success
- Meet the customer's needs by offering a comprehensive selection and knowledgeable staff.
- Monitor the competitive environment ensuring differentiation.
- Employ strict financial controls.
Company Summary
Arena Store is a Johor Bahru,
Johor based retailer of sports clothing. Arena Store will concentrate
on outdoor sports .Currently, there are local retailers that offer these types
of garments, however most retailers are sport specific, such as a bicycle shop
or a running store. The few retailers that have a wide range of sports have
limited inventories. This company was founded on the premise that most aerobic
sport athletes participate in more than one type of activity.
2.1
Start-up Summary
Arena Store is in the process
of starting up the company. Legal counsel was consulted for a variety of issues
including business organization formation, contract negotiations, and etc. Arena
Store also
utilized a business consultant to gain insight into business issues that were
not intuitive to Syahmi. Arena Store
will incur RM30,000 of build out expenses
for the space.
The following equipment
will be needed for start-up:
- Cash register and bar code scanner.
- Computer system with printer, scanner, and Internet connection.
- Assorted display racks, shelves, mirrors, etc.
- Stereo system.
Products
Arena Store sells a wide
variety of male-only clothing for aerobic sports such as cycling, running,
cross country skiing, and snowshoeing.
The main common element
of the products for sale is NO cotton. Cotton is the worst possible fabric to
make sportswear out of, PERIOD. Cotton absorbs and holds water which is
undesirable because when saturated with water clothing loses almost
all of its insulating characteristics. It also becomes much heavier because of
the water weight.
Lastly, when a garment is
wet friction is significantly increased. This is most evident in socks where
blisters are almost guaranteed when running in cotton socks. Arena Store ‘smantra is "friends do not let friends wear
cotton."
The following is by no
means an exhaustive list of the products that are for sale:
- Shorts
- Long and short sleeve shirts
- Tights
- Balls(Any types of outdoor sports)
- Football accessories (gloves, guards etc)
- Socks
Arena Store has
segmented its market into two distinct segments. The first distinguishable
segment is hardcore athletes. These are people who live and breathe
to push their body harder and harder in aerobic activities. This market
segment is present in Ashland, however, they will not be the largest source of
revenue as they already have most of the pieces of clothing for their
activities as they have been doing it for a long time.
They are more likely to
pick up a piece here and there. The second market segment is the newbies, these
are people who are relatively new to aerobic activities. While their purchases
may not be quite as frequent, their number of potential customers is higher and
they will have larger ticket amounts.
Each group will be
targeted with a different strategy, recognizing the fact that these groups,
although they are participating in the same sports have different demographics.
The competitive industry can be broken down into sport specific retailers and
all encompassing sports/outdoor retailers.
The sport specific
retailers have a lot of clothing, but for only one sport. The all encompassing
retailers have a wide selection but not comprehensive selection. Lastly,
serving this market should be a steady, profitable endeavor simply because most
people that participate in these type of activities tend to for life.
4.1
Market Segmentation
Arena Store market can be
broken down into two distinct segments: hardcore athletes and newbies. Each
group has distinctive demographics which are detailed below:
Hardcore Athletes
- Typically spend seven - 15 hours per week on their training/activities.
- Regularly participate in two to three different aerobic sport activities.
- 61% have at least an undergraduate degree.
Newbies
- Typically spend five - 10 hours a week training.
- Have only recently (within the last few years) began to get serious in aerobic activities.
- 54% have undergraduate schooling or a degree.
Market Analysis
|
|||||||
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
|||
Potential Customers
|
Growth
|
CAGR
|
|||||
Hardcore Athletes
|
8%
|
8,097
|
8,745
|
9,445
|
10,201
|
11,017
|
8.00%
|
Newbies
|
9%
|
13,223
|
14,413
|
15,710
|
17,124
|
18,665
|
9.00%
|
Total
|
8.62%
|
21,320
|
23,158
|
25,155
|
27,325
|
29,682
|
8.62%
|
4.2
Target Market Segment Strategy
The strategy for
segmenting the market is based on the fact that the two different groups have
distinct buying patterns. The hardcore athletes have a decent amount of sport
specific clothing. When they shop for new stuff it is generally a replacement
piece here and there.
They are typically buying
the latest and greatest on the market. Although they do not need more products
it is this group that most appreciates the subtle improvements that the new
products bring. They therefore are likely to buy a piece or two if the product
shows improvement in design over what they currently own.
This differs from the
newbies who are new to aerobic activities, or at least to the level that they
currently participate at. This group is more likely to make less frequent but
larger purchases. This group is particularly exciting because it allows Arena Store to have a significant impact on the outfitting of these
people.
4.3
Industry Analysis
Arena Store participates in
the men's retail clothing industry, specifically in the sports clothes niche.
The sports clothing market is a RM10 million industry.
Arena Store is well poised in
Johor Bahru, Johor, a sports minded town. Athletes can participate in any
number of activities, all within a 20 minute drive from Johor Bahru.
Additionally.
Products in this industry
are purchased either through a local retailer or mail order. At the local
retail outlet, there are either sport specific stores or larger general
retailers that carry a wide assortment of different sports/human powered
activities.
Products are also
purchased via mail order companies. Within the mail order arena, there are also
retailers that offer sport specific clothing as well as mail order retailers
that sell a wide assortment of sports.
Management Summary
5.1
Personnel Plan
Syahmi will begin
operations with a few key positions:
- Syahmi: He will wear multiple hats within the organization. Some of his functions include, but are not limited to: sales, marketing, procurement, business development.
- Sales staff: Initially Gear Wear will have a maximum of three sales people on the floor at any one point. The sales staff will double as customer service agents if any problems arise. The first six months will generally have no more than two staff members.
- Support staff: Gear Wear will use two support staff agents to assist in the unpacking, inventory introduction, and merchandising of the products. These employees will work primarily behind the scenes, except when it comes to the merchandising functions.
- Bookkeeper/Accountant: This will be a part-time position where the employee comes in several time a week and performs the necessary bookkeeping duties. Every two to four weeks the financials will be reviewed by a local CPA firm.
Personnel Plan
|
|||
Year 1
|
Year 2
|
Year 3
|
|
Syahmi
|
RM24,000
|
RM 30,000
|
RM 33,000
|
Sales staff
|
RM 27,000
|
RM 35,000
|
RM 40,000
|
Support Staff
|
RM 22,500
|
RM 27,000
|
RM 29,000
|
Bookkeeper
|
RM 19,700
|
RM 24,000
|
RM 28,000
|
Total People
|
6
|
8
|
9
|
Total Payroll
|
RM 93,200
|
RM 116,000
|
RM 130,000
|
Financial Plan
The following sections
will outline the key Financial Strategy for Male Gear Wear.
6.1
Important Assumptions
The following table
details important Financial Assumptions.
General Assumptions
|
|||
Year 1
|
Year 2
|
Year 3
|
|
Plan Month
|
1
|
2
|
3
|
Current 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
|
0
|
6.3 Projected
Profit and Loss
The following table and
charts show the Projected Profit and Loss.
Pro Forma Profit and
Loss
|
|||
Year 1
|
Year 2
|
Year 3
|
|
Sales
|
$133,893
|
$322,005
|
$470,831
|
Direct Cost of Sales
|
$53,557
|
$128,802
|
$188,332
|
Other Costs of Goods
|
$0
|
$0
|
$0
|
Total Cost of Sales
|
$53,557
|
$128,802
|
$188,332
|
Gross Margin
|
$80,336
|
$193,203
|
$282,498
|
Gross Margin %
|
60.00%
|
60.00%
|
60.00%
|
Expenses
|
|||
Payroll
|
$93,200
|
$116,000
|
$130,000
|
Sales and Marketing and Other
Expenses
|
$6,000
|
$6,000
|
$6,000
|
Depreciation
|
$1,800
|
$1,800
|
$1,800
|
Rent
|
$10,800
|
$11,000
|
$11,000
|
Utilities
|
$3,600
|
$3,600
|
$3,600
|
Insurance
|
$3,900
|
$4,500
|
$4,500
|
Payroll Taxes
|
$13,980
|
$17,400
|
$19,500
|
Other
|
$2,400
|
$2,400
|
$2,400
|
Total Operating Expenses
|
$135,680
|
$162,700
|
$178,800
|
Profit Before Interest and Taxes
|
($55,344)
|
$30,503
|
$103,698
|
EBITDA
|
($53,544)
|
$32,303
|
$105,498
|
Interest Expense
|
$0
|
$0
|
$0
|
Taxes Incurred
|
$0
|
$9,151
|
$31,110
|
Net Profit
|
($55,344)
|
$21,352
|
$72,589
|
Net Profit/Sales
|
-41.33%
|
6.63%
|
15.42%
|
6.4
Projected Cash Flow
The following table and
chart presents the Projected Cash Flow.
Pro Forma Cash Flow
|
|||
Year 1
|
Year 2
|
Year 3
|
|
Cash Received
|
|||
Cash from Operations
|
|||
Cash Sales
|
RM133,893
|
RM322,005
|
RM470,831
|
Subtotal Cash from
Operations
|
RM133,893
|
RM322,005
|
RM470,831
|
Additional Cash Received
|
|||
Sales Tax, VAT, HST/GST Received
|
$0
|
$0
|
$0
|
New Current Borrowing
|
$0
|
$0
|
$0
|
New Other Liabilities
(interest-free)
|
$0
|
$0
|
$0
|
New Long-term Liabilities
|
$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
|
RM133,893
|
RM322,005
|
RM470,831
|
Expenditures
|
Year 1
|
Year 2
|
Year 3
|
Expenditures from Operations
|
|||
Cash Spending
|
RM93,200
|
RM116,000
|
RM130,000
|
Bill Payments
|
RM89,861
|
RM193,772
|
RM270,272
|
Subtotal Spent on
Operations
|
RM183,061
|
RM309,772
|
RM400,272
|