Saturday 26 May 2012

Business Plan

 
 
Executive Summary

              Mahogany Western Wear is a new apparel store that caters to the African-American cowboy community in Houston, Texas. As our name suggests our focus is to provide western wear apparel and accessories, and position ourselves as the top retail store servicing this particular market.

             We are the first and only African-American owned western apparel store in the city of Houston. Our intentions are to obtain 80% market share and become a central hub of shopping activity for the local African-American cowboy population as well others who enjoy wearing western apparel.

             Mahogany Western Wear will be located at 13328 1/2 Almeda Rd., Houston, TX in southwest Houston, TX. Mahogany Western Wear has centralized itself directly in position to the residental location and social activities of our target market. We believe that this is critical to our initial success and long-term growth.

Objectives

  1. To create a shopping environment that caters to the apparel needs of the urban African-American cowboy and cowgirl.

  2. To earn 80% market share and become the number one ethnic western wear apparel store in southwest Houston, TX and achieve name recognition in the local cowboy community.

  3. To receive a 50% profit margin within the first year.

  4. To have a customer  base of 1,000 by the end of the first operating year.

  5. To achieve a net profit of $75,000 by year two and $100,000 by year three.

  6. To be an active and vocal member in the community supporting agricultural events, and equestrian organizations working with children.

Mission

Mahogany Western Wear's mission is to offer quality, name brand western wear in an assortment of sizes and styles to accommodate all varying body styles and shapes. 

Keys to Success

In order to succeed in the western wear apparel industry Mahogany Western Wear must:
  • Carry an assortment of sizes to fit the more ample frames of their African-American target customer base.

  • Provide customers with top notch personalized customer service in an atmosphere of southern hospitality.

  • Advertise and promote in areas that our target customer base will learn about our store.
  • Continuously review our inventory and sales and adjust our inventory levels accordingly. 

    Company Summary

    Mahogany Western Wear is organized as a partnership among the two partners of Chandra E. Miller and Derrick L. McCoy.

    We will be located at 13328 1/2 Almeda Rd, Houston, TX, being the epi-center of the African-American cowboy community on the south side of Houston.

    The hours of operation will be Monday - Tuesday 10 a.m. - 6 p.m., Wednesday - Saturday 10 a.m. - 8 p.m., and Sunday 12 p.m. - 6 p.m. There will be extended special hours designated during The Houston Livestock Show & Rodeo season and during the Christmas holiday shopping season.

         All merchandise will be purchased according to the company's mission and      customer focus of outfitting all sizes including women's plus sizes and men's big and tall.

Company Ownership

Mahogany Western Wear is organized as a partnership among the two partners of Chandra E. Miller and Derrick L. McCoy. Chandra E. Miller will handle all administrative and managerial duties while Derrick L. McCoy acts as a silent partner. 

Start-up Summary

Mahogany Western Wear's incorporation costs are listed below. The company will start with three months inventory on hand for apparel and accessories as this is the main revenue generator. The majority of the company's assets will reside in inventory. The opening days cash on hand balance will be $384.

The purpose of this business plan is to secure a $16,700 ACCION loan. This supplemental financing is required to work on site preparation, inventory, and operational expenses. The loan amount appears in the long-term liability row of the start-up summary. Other financing will include an owners investment of $5,100 and a short term revolving line of credit of $2,000 for inventory replenishment during months of high receipts.

     Successful operation and building a loyal customer base will allow Mahogany Western Wear to be self sufficient and profitable in year two.

Start-up



Requirements



Start-up Expenses

Rent
$1,606
Grand Opening Event
$400
Telephone & Utilities (3 months)
$1,575
Travel - Dallas Market Buying Trip
$350
Business Insurance
$600
Advertising & Promotion
$1,010
Store Fixtures/Decorations
$1,500
Computer/Cash Register
$950
Signage (Including Permits)
$400
Organizational Dues & Subscriptions
$125
Business/Office Supplies
$400
Other
$500
Total Start-up Expenses
$9,416


Start-up Assets

Cash Required
$384
Start-up Inventory
$14,000
Other Current Assets
$0
Long-term Assets
$0
Total Assets
$14,384


Total Requirements
$23,800

Company Locations and Facilities

Mahogany Western Wear will be located at 13328 1/2 Almeda Rd., Houston, TX 77045. This space has 1,020 square feet and has been leased for two years. This location is central to the geographical location for the African-American cowboy community in the southern part of Houston, TX. We feel it is essential to our initial and ongoing success that we locate ourselves in the heartbeat of the community. We also strive to create an atmosphere of acceptance and community, as well as a retail environment where individuals can identify and bond with their culture.

All business deliveries and shipments will be handled through the store. The company office will also be housed at this location.

Products

Mahogany Western Wear will carry nationally recognized American western wear brands (see list below). Our selection will range from the basics of Wrangler to the trendy western style of Western Ethics. We will be purchasing through sales representatives and manufacturers in a variety of sizes, colors and style to fit our target market base. The greatest percentage of merchandise will be in apparel, followed by accessories, hats, and gifts. 

Management will rely on customer feedback, suggestions, and sales reports to introduce or eliminate certain brands, styles and sizes.

Product Description

Mahogany Western Wear will provide a selection of brands that fall within our mission statement. Our goal is to carry a selection of labels from the hardcore western wear to the more sophisticated southwestern styles.
Some of the labels we will carry are listed below: 

Cinch
Rouchrider of Circle T
Circle Y of Yoakum
Silver Strike Buckles
Cowboy Hardware
Sunbody Hats
Hat 'N' Hand
20X by Wrangler
Lawman Jeans
Urgent Gear
Panhandle Slim
Western Ethics
Rocky Mountains
Wrangler


Competitive Comparison

Mahogany Western Wear has a number of advantages that will allow us to build our brand identity, add value to our merchandise and build a loyal customer base  while standing apart from our competitors. 
  • We will be the first African-American-owned western wear apparel retailer in Houston, TX.

  • The 'Mahogany Shopper Card' will entitle customers to a 15% discount after ten purchases.

  • We will offer clothing to fit plus-size women and big and tall men.

  • We will create a sense of culture and bonding with the community by offering products that combine both the African-American and cowboy cultures.

  • Our location is central to our target customer base.

  • We will maintain a detailed record on each customer, logging addresses, their purchases, size, and brand for customer follow-up and in-house promotional purposes.

    Sales Literature 

  • Mahogany Western Wear will use a targeted advertising and sales program to generate publicity and build a customer base.
  • 2,500 full-color postcard flyers with a 10% coupon will be distributed throughout southwest Houston area: local zydeco and cowboy dance halls and clubs, rodeos, trail riding events, two weeks prior to the grand opening event.

  • 200 grand opening invites will be mailed to potential new customers two weeks before the grand opening in June, 2002. The invitation will also include a promotional 10% coupon off a customer's first purchase. The customer mailing list has been compiled from contacts the owners have made while in the community.

  • 5,000 business cards with a Mahogany Frequent Shopper Card on the reverse side entitling the customer to a 15% discount on the eleventh purchase after ten purchases.

Technology

Retail apparel establishments have a tendency to have a high number of SKU's because of the level of inventory. It is imperative that an advanced inventory and point of sales program be utilized to maintain stock levels and track sales. Mahogany Western Wear will utilize Peachtree Accounting software for all financial and accounting purposes. For inventory management and point of sale transactions we will utilize Retail I.C.E. (Inventory Control Expert) software. This product is a Windows-based software that allows the small, single store retailer to manage their inventory and point of sale functions all in one.

Future Products

As we achieve and exceed our sales and profitability goals, Mahogany Western Wear will add western boots to the product line and our own personal in-house label of clothing that will include Mahogany t-shirts for women and shirts for men. We will  expand our line of brands with those that have been repeatedly requested by our customers. An e-commerce website will also be created to increase our distribution channels and expand our customer base to a national level.

Our business plan will be generated and reviewed on a bi-annual basis using the most updated version of Business Plan Pro from Palo Alto Software and reviewed quarterly to ensure all financial goals and objectives are being reached. Palo Alto's companion software, Marketing Plan Pro, will allow us to make the most of our limited marketing budget by focusing our communications on our target markets and enhancing our marketing knowledge. 

Market Analysis Summary

The primary target customer of Mahogany Western Wear will be the African-American cowboys located in the southern part of Houston, TX.  As we are situated in the epi-center of their residental community we believe they will make up the largest percentage of our customer base.

The secondary target customers are the Hispanic community in the area. As the Hispanic population continues to grow rapidly in the south central area we expect to receive the patronage of Hispanics as they are very loyal to western apparel.
The last target customer of Mahogany is listed as other. As popularity about the store increases we expect to see an assortment of curiosity seekers, and local residents from the community as well as seasonal purchasers during rodeo season.

 

Market Needs

There are several important needs in the western wear apparel business that are being either underserved or not met at all. Mahogany Western Wear plans to meet and service those needs. 

  • Mahogany will provide a large assortment of sizes to compliment the various body shapes and sizes of the ethnic community. This is a size segment that is missing throughout the larger western wear apparel retailers in the city.

  • Focus and attention to customer's personal preferences and customer retention will be given high priority. Because of the high rate of employee turnover at major mass retailers, customer service and personal detail has been  lost.

Market Trends

Millions of people around the world instantly recognize and identify with western apparel. It is synonymous with America and is a true classic.
Western wear has survived many eras. Modern cowboys herd cattle in helicopters but they still wear the same jeans, boots and hats their grandfathers wore. There will always be a future for western apparel. Within the last two years the southwestern and western look has made a comeback in the fashion industry. Mahogany Western Wear intends to use its place in the community to heighten the awareness of the African-American cowboy culture in Houston, TX.

With the increase of participation by professional African-American cowboys such as five-time World Champion professional calf roper Fred Whitfield from Houston, TX more people are becoming aware of African-Americans role and contribution in the cowboy community.

Industry Analysis

Western wear apparel retailers are made of several kinds of stores:

  • Small Speciality Stores: The majority of western wear apparel is sold through small family-run speciality stores that are located in or near neighborhood communities. 85% of the purchasing statistics for western apparel is derived from these locations.

  • Large Multi-owned Western Wear Retailers: These large stores mass market and sell to hardcore enthusiasts as well as the local tourists and those who purchase only during rodeo season.

 

Strategy and Implementation Summary

Mahogany Western Wear's goal is to provide apparel to the under served market of the African-American cowboy community.The major western apparel retailers have left a hole in this market by not providing a larger assortment of sizes.
Our intention is to gain 80% of this market share by focusing on our niche positioning, neighborhood location, brand that we sell, southern hospitality and special promotions. 

Marketing Strategy

Our marketing strategy will focus heavily on sales promotion, niche positioning in the market and customer service with loyalty and retention in sales.
  • The marketing budget will not exceed 5% of our gross annual sales.

  • Our promotions will always stay in tune with our company objectives and mission statement. 

     Pricing Strategy 

    Mahogany Western Wear will maintain a flexible pricing strategy. We base the product lines that we carry on their reputation and quality as western wear apparel. Most of our lines come with a suggested retail price that we will follow. We will also utilize the standard practice of key stoning as well. 

    Promotion Strategy

    Mahogany Western Wear will follow an aggressive yet creative promotional plan. This will allow us to focus directly on our target customer while still being conservative with our advertising dollars. 

  • A press release kit will be sent to all major media outlets in Houston, TX highlighting the grand opening of the first African-American owned western wear apparel retailer in the city. This kit will include a press release, pictures of the interior space, color postcard/flyer, and a business card.

  • 5,000 4x5 color flyers/postcards will be distributed throughout the city at local zydeco and cowboy dance halls and clubs, trailrides and rodeos.

  • Spot radio advertisements on two local FM radio stations, KMJQ Majic 102 and KTSU 90.9.
  • A direct mail program that will further focus on and target the top 50% customer base with special in-house sales and promotions.  

    Sales Forecast

    The following table and chart give a highlight on forecasted sales. We expect sales to start off conservatively and increase extensively during the Christmas holiday shopping season and during the months of The Houston Livestock Show and Rodeo. 

    Mahogany Western Wear has planned for a rate of growth at 15% for the first year as we build name recognition and status in the community. In the second and third year we look to see an increase of revenue of 20% as we gain a larger percentage of the market share and increase our customer base beyond the southwest part of the city. 
     
     

     
     

    Milestones

    The accompanying milestone chart highlights our plan with specific dates. This schedule reflects our strong commitment to organization and detail.
     

    Chart: Milestones

     

    Management Summary

    Employees will be encouraged to work within their creative, physical, and intellectual boundaries. All duties will be divided and delegated according to strengths and weaknesses. At Mahogany we will expect a high degree of customer service skills and personality as this is essential to our success.
    Chandra Miller will assess the productivity and perform informal employees evaluations of all employees every six months. These bi-annual evaluations are conducive to the continued growth of our small business.

    Management Team

    Chandra E. Miller, co-owner and general manager will be responsible for all administrative functions, purchasing, inventory control, and promotions. She will also act as a part-time sales representative. She has spent over 10 years in accounting, finance and operations management. She was also the owner of Tattletale's, an e-commerce toy store for three years. She has extensive background in purchasing, inventory control, and marketing.

    Personnel Plan

    The personnel plan is included in the following table below. There will be one full-time employee and two part-time employees working 20-30 hours per week. The full-time employee will be paid at a rate of  $10.00 per hour and the two part-time employees will be paid at a rate of $8.00 per hour. All employee's will benefit from a one day paid holiday on their respective birthdays and one week of paid vacation after twelve months of employment.

    At this time medical benefits will not be offered to employees. As profits increase in the future medical benefits will be offered to all employees. 

    Table : Personnel


    Personnel Plan








     Year 1
     Year 2
     Year 3
    Owner
    $11,475
    $12,623
    $13,885
    Full-time postion
    $20,400
    $22,440
    $24,684
    Part-time position
    $12,240
    $13,464
    $14,810
    Total People
    3
    3
    3








    Total Payroll
    $44,115
    $48,527
    $53,379

    Financial Plan

    The growth of Mahogany Western Wear will be moderate and the cash balance will always be positive. Being a retail environment we will not be selling on credit. We will accept cash, checks, and all major credit cards. TeleCheck Services will be used as the check guaranty system to help reduce the percentage of loss on bad checks. Marketing and advertising will remain at or below 5% of sales. We will continue to reinvest residual profits into company expansion, and personnel.

    Important Assumptions

    Mahogany Western Wear does not sell on credit nor do we offer layaways at this time. We accept cash and checks, Visa, MasterCard, Discover and American Express. All sales paid via credit cards will be deposited in our business checking account within 48 hours. Our business checking account will be with Washington Mutual. They have reported the interest rate as those listed below.

    Table: General Assumptions 

     

    Projected Profit and Loss

    The following chart and table will indicate projected profit and loss.

    Chart: Profit Yearly


    Table: Profit and Loss

    Pro Forma Profit and Loss




     Year 1
     Year 2
     Year 3
    Sales
    $284,200
    $369,460
    $480,290
    Direct Cost of Sales
    $142,100
    $184,730
    $240,145
    Other Production Expenses
    $0
    $0
    $0
    Total Cost of Sales
    $142,100
    $184,730
    $240,145




    Gross Margin
    $142,100
    $184,730
    $240,145
    Gross Margin %
    50.00%
    50.00%
    50.00%








    Expenses



    Payroll
    $44,115
    $48,527
    $53,379
    Sales and Marketing and Other Expenses
    $15,448
    $15,523
    $15,834
    Depreciation
    $0
    $0
    $0
    Telephone / Pagers/ Cell
    $1,800
    $1,800
    $1,836
    Utilities
    $4,500
    $4,800
    $4,896
    Payroll Taxes
    $4,412
    $4,853
    $5,338
    Other
    $0
    $0
    $0




    Total Operating Expenses
    $70,275
    $75,502
    $81,283




    Profit Before Interest and Taxes
    $71,826
    $109,228
    $158,862
    EBITDA
    $71,826
    $109,228
    $158,862
      Interest Expense
    $1,491
    $1,175
    $845
      Taxes Incurred
    $21,100
    $32,416
    $47,405




    Net Profit
    $49,234
    $75,637
    $110,612
    Net Profit/Sales
    17.32%
    20.47%
    23.03%

     
    Projected Cash Flow
    The following table explains projected cash flow.

    Table: Cash Flow

    Pro Forma Cash Flow




     Year 1
     Year 2
     Year 3
    Cash Received







    Cash from Operations



    Cash Sales
    $284,200
    $369,460
    $480,290
    Subtotal Cash from Operations
    $284,200
    $369,460
    $480,290




    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
    $284,200
    $369,460
    $480,290




    Expenditures
     Year 1
     Year 2
     Year 3




    Expenditures from Operations



    Cash Spending
    $44,115
    $48,527
    $53,379
    Bill Payments
    $174,454
    $248,835
    $317,235
    Subtotal Spent on Operations
    $218,569
    $297,361
    $370,613




    Additional Cash Spent



    Sales Tax, VAT, HST/GST Paid Out
    $0
    $0
    $0
    Principal Repayment of Current Borrowing
    $0
    $0
    $0
    Other Liabilities Principal Repayment
    $0
    $0
    $0
    Long-term Liabilities Principal Repayment
    $3,300
    $3,300
    $3,300
    Purchase Other Current Assets
    $0
    $0
    $0
    Purchase Long-term Assets
    $0
    $0
    $0
    Dividends
    $0
    $0
    $0
    Subtotal Cash Spent
    $221,869
    $300,661
    $373,913




    Net Cash Flow
    $62,331
    $68,799
    $106,377
    Cash Balance
    $62,715
    $131,514
    $237,890

    Chart: Cash

     

    Projected Balance Sheet

    The following table explains the projected balance sheet.

    Table: Balance Sheet

    Pro Forma Balance Sheet




     Year 1
     Year 2
     Year 3
    Assets







    Current Assets



    Cash
    $62,715
    $131,514
    $237,890
    Inventory
    $13,365
    $22,014
    $28,617
    Other Current Assets
    $0
    $0
    $0
    Total Current Assets
    $76,080
    $153,527
    $266,507




    Long-term Assets



    Long-term Assets
    $0
    $0
    $0
    Accumulated Depreciation
    $0
    $0
    $0
    Total Long-term Assets
    $0
    $0
    $0
    Total Assets
    $76,080
    $153,527
    $266,507




    Liabilities and Capital
     Year 1
     Year 2
     Year 3




    Current Liabilities



    Accounts Payable
    $15,762
    $20,872
    $26,540
    Current Borrowing
    $0
    $0
    $0
    Other Current Liabilities
    $2,000
    $2,000
    $2,000
    Subtotal Current Liabilities
    $17,762
    $22,872
    $28,540




    Long-term Liabilities
    $13,400
    $10,100
    $6,800
    Total Liabilities
    $31,162
    $32,972
    $35,340




    Paid-in Capital
    $5,100
    $5,100
    $5,100
    Retained Earnings
    ($9,416)
    $39,818
    $115,455
    Earnings
    $49,234
    $75,637
    $110,612
    Total Capital
    $44,918
    $120,555
    $231,167
    Total Liabilities and Capital
    $76,080
    $153,527
    $266,507




    Net Worth
    $44,918
    $120,555
    $231,167