Business Plan Sample


 

Executive Summary

The Year 1 season will be a great one for women looking for distinctive outdoor clothing online. Liquid Culture will eliminate the middle man and offer creative outdoor clothing that is both functional and beautiful. The savings are passed on to our customers who will be paying a fraction of what they normally do for current retreated fashion in stores.

Liquid Culture’s Year 1 line consists of the best fabric, designs and styling on the market. Larry Wilson and Maggie Granger, co-owners of Liquid Culture, have fifteen years of experience between them in the outdoor garment industry. Maggie has been a senior clothing designer for Manic Woman Clothing for the past seven years.  Larry has been the website administrator for South Face the past eight years.

Another strength of Liquid Culture is that it will not maintain any clothing inventory. Liquid Culture has contracted with Magic Clothing Company, located in Los Angeles, California, to produce and ship all Liquid Culture clothing.  Our design team will work closely with the Magic’s Indonesian-based manufacturing facilities. The Magic Clothing Company will maintain the inventory and will produce sufficient product to meet the planned demand.

1.2 Keys to Success

  • Accessible website that is entertaining to surf. Like a trip to your favorite store where you always find something new that you want.
  • Establishing a strong advertising campaign in a traditional media vehicle; i.e. magazines.
  • Excellent vendor relationship that will facilitate quality manufacturing of Liquid Culture’s clothing and quick shipment of orders.
  • Acquiring an excellent design staff.

Company Summary

Liquid Culture will offer creative women’s outdoor clothing, online, that is both functional and beautiful. Larry Wilson and Maggie Granger, co-owners of Liquid Culture, will create a cost-effective operation that will eliminate the cost of inventory by having a third-party, Magic Clothing Company, handle all manufacturing and shipping of clothing to the customer. Liquid Culture will process the order and collect the payment online. The order will then be sent to Magic Clothing Company to be filled and shipped. Liquid Culture will focus on clothing design and marketing of its products.

2.1 Start-up Summary

Liquid Culture’s start-up costs consists mostly of design and marketing. Liquid Culture has $260,000 in investments and $200,000 in a short-term loan.

Start-up Funding
Start-up Expenses to Fund

$58,500

Start-up Assets to Fund

$401,500

Total Funding Required

$460,000

Assets
Non-cash Assets from Start-up

$0

Cash Requirements from Start-up

$401,500

Additional Cash Raised

$0

Cash Balance on Starting Date

$401,500

Total Assets

$401,500

Liabilities and Capital
Liabilities
Current Borrowing

$0

Long-term Liabilities

$200,000

Accounts Payable (Outstanding Bills)

$0

Other Current Liabilities (interest-free)

$0

Total Liabilities

$200,000

Capital
Planned Investment
Investor 1

$130,000

Investor 2

$130,000

Other

$0

Additional Investment Requirement

$0

Total Planned Investment

$260,000

Loss at Start-up (Start-up Expenses)

($58,500)

Total Capital

$201,500

Total Capital and Liabilities

$401,500

Total Funding

$460,000

 Start-up
Requirements
Start-up Expenses
Legal

$1,000

Stationery etc.

$500

Brochures

$0

Consultants

$5,000

Insurance

$0

Rent

$2,000

Leased Office Equipment

$10,000

Computer Equipment/Software

$30,000

Website

$10,000

Other

$0

Total Start-up Expenses

$58,500

Start-up Assets
Cash Required

$401,500

Start-up Inventory

$0

Other Current Assets

$0

Long-term Assets

$0

Total Assets

$401,500

Total Requirements

$460,000

2.2 Company Ownership

Liquid Culture is owned by Larry Wilson and Maggie Granger.

Products

Liquid Culture will sell women’s outdoor clothing online. We will offer outdoor clothing  for almost every type of active use. We will focus on the seasonal clothing demands of our customers including the following:

  • Fleece outerwear.
  • Rain gear, waterproof breathables, as well as coated nylon.
  • Synthetic clothing for outdoor activities.
  • Hats.
  • Shorts.
  • Pants.
  • Shirts.

Market Analysis Summary

In the past 15 years, women’s outdoor wear has grown into a billion dollar niche in the clothing industry. The popularity of the Internet has launched a number of online stores for women’s outdoor wear but no company is exclusively selling their products online.  There are a number of reasons for this but the strongest is that the concept is new and untested.  Will customers buy something that they wear that can only be seen online?  We believe they will, if the process is fun and the products are great and cheap.

The key is marketing our target customers in the traditional advertising medium for fashion, i.e. women fitness magazines.

The ads will focused on the eliminating the middle man in your clothing budget and stepping up to the distinctive style of Liquid Culture. The company logo will also be an important marketing tool in bringing customers to our website.

4.1 Market Segmentation

Liquid Culture will be focusing on two distinct groups of women that purchase outdoor clothing:

  • Women 17-25 years of age: Youth drives the market so this is the important group to attract to the website.  They have less money than the older group so we must give them what they want for less.  The key is to have inexpensive selections in each clothing group that have the popular cut. The company’s logo attractiveness to this group can not be stressed strongly enough. The initial small purchases will grow larger over time.
  • Women 26-40 years of age: They are the core group that will drive Liquid Culture’s success.  This target group is responsible for the growth of outdoor women’s wear.  They will be harder to pull into the website. Once there, the key will be promoting the quality, attractiveness and savings.  In addition, we will have to assure that the purchase will fit the way the customer wants it to.  It will be crucial that the return policy is hassle-free and speedy.

Strategy and Implementation Summary

Liquid Culture will win market share in the women’s outdoor clothing niche by aggressively pursuing visibility with its target customers.

5.1 Competitive Edge

Liquid Culture’s competitive edge is its focus on the process than on product.  The website is just the endpoint of an entire marketing program to drive customers’ interest in Liquid Culture.  Though we have confidence in the quality and attractiveness of our products, we know that building the road to the website is our most important job.

Larry Wilson’s experience with South Face is pivotal to the success of Liquid Culture’s website.  South Face’s website averaged five million hits a year and is considered one of the most accessible and attractive websites in the clothing industry.  His experience is invaluable in assuring customers’ satisfaction with the shopping experience online.

Larry will introduce a new clothing measurement feature that is fun to use and will reduce customers confusion on how the clothing will fit.  This will increase customer satisfaction and reduce returns.

Maggie Granger will be in charge of the clothing design team. As senior clothing designer for Manic Woman Clothing, she watched the Manic Woman’s sales grow by 20% for the past five years.  Her clothing designs have been praised in the industry and have spawned many imitators.  With Liquid Culture, Maggie is ready to change how quality women’s outdoor clothing is sold.

Liquid Culture’s agreement with Magic Clothing Company is another strong competitive advantage.  Our design team will work closely with the Magic’s Indonesian-based manufacturing facilities. The Magic Clothing Company will maintain the inventory and will produce sufficient product to meet the planned demand. This will keep production costs low for products and put a cap on Liquid Culture’s overhead.

5.2 Marketing Strategy

Liquid Culture’s marketing strategy is a simple one.  In women’s fitness magazines like Self, Shape and Strive, Liquid Culture will introduce customers to their products and website. We will also advertise in CosmoGirl and Ellegirl magazines.

For the first two months, Liquid Culture will offer 10% off for all purchases under $100 and 15% off all purchases over $100. We will offer the same discount strategy three more times during the year when new seasonal clothing is introduced.

5.2.1 Pricing Strategy         

Liquid Culture’s pricing strategy is to pass on most of the store mark-up to the consumer in reduced price for clothing.  This advantage has no negative impact on our sales profit and will also absorb some of the initial cost of offering discounts during our first three months of operation.

5.3 Sales Strategy

Liquid Culture will launch a $245,000 ad campaign targeted at our core customer groups. The focus of the ads will be to “keep the money you give to the middleman” and use it to get outdoors and enjoy life.  Liquid Culture’s attractive logo will be heavily displayed in these ads. We estimate it will take most of the year to build our sales to the point where we begin to show a profit.

Liquid Culture will offer discounts at various times of the year to even out seasonality and build initial awareness of the website.

5.3.1 Sales Forecast

We expect sales to increase at a steady rate for the first year. It will begin slow as we open, but will quickly pick up as our customer base increases. Liquid Culture will see a sales increase of 38% between the first and second year. We feel that we can accomplish this steady goal and maintain this amount of sales.

 Sales Forecast

Year 1

Year 2

Year 3

Sales
Clothing

$2,170,000

$3,000,000

$4,300,000

Other

$0

$0

$0

Total Sales

$2,170,000

$3,000,000

$4,300,000

Direct Cost of Sales

Year 1

Year 2

Year 3

Clothing

$1,249,000

$1,800,000

$2,580,000

Other

$0

$0

$0

Subtotal Direct Cost of Sales

$1,249,000

$1,800,000

$2,580,000

Management Summary

Larry Wilson will manage the marketing team, as well as the development and administration of Liquid Culture’s website.  Maggie Granger will be in charge of the clothing design team. She will also manage the production of the designs by Magic Clothing Company.

6.1 Personnel Plan

Besides Larry and Maggie, Liquid Culture will have a staff of eight:

  • Three member clothing design team.
  • Web administrator.
  • Two member marketing team.
  • Office manager.
  • Accountant.
Personnel Plan

Year 1

Year 2

Year 3

Marketing/Website Director

$84,000

$90,000

$95,000

Design Director

$84,000

$90,000

$95,000

Designers

$144,000

$156,000

$166,000

Web Administrator

$48,000

$52,000

$56,000

Office Manager

$36,000

$39,000

$42,000

Marketing Staff

$96,000

$104,000

$112,000

Accountant

$39,600

$44,000

$48,000

Other

$0

$0

$0

Total People

8

8

8

Total Payroll

$531,600

$575,000

$614,000

Financial Plan

The following is the financial plan for Liquid Culture.

7.1 Break-even Analysis

Our break-even analysis is based on running costs, the costs we incur to keep the business running, not on theoretical fixed costs that would be relevant only if we were closing. Fixed costs include payroll, rent, utilities, and marketing costs

 Break-even Analysis
Monthly Revenue Break-even

$177,248

Assumptions:
Average Percent Variable Cost

58%

Estimated Monthly Fixed Cost

$75,228

7.2 Projected Profit and Loss

The following table and chart are the projected profit and loss for three years.

 

 

Pro Forma Profit and Loss

Year 1

Year 2

Year 3

Sales

$2,170,000

$3,000,000

$4,300,000

Direct Cost of Sales

$1,249,000

$1,800,000

$2,580,000

Other Production Expenses

$0

$0

$0

Total Cost of Sales

$1,249,000

$1,800,000

$2,580,000

Gross Margin

$921,000

$1,200,000

$1,720,000

Gross Margin %

42.44%

40.00%

40.00%

Expenses
Payroll

$531,600

$575,000

$614,000

Sales and Marketing and Other Expenses

$265,000

$340,000

$440,000

Depreciation

$0

$0

$0

Leased Equipment

$0

$0

$0

Utilities

$2,400

$2,400

$2,400

Insurance

$0

$0

$0

Rent

$24,000

$24,000

$24,000

Payroll Taxes

$79,740

$86,250

$92,100

Other

$0

$0

$0

Total Operating Expenses

$902,740

$1,027,650

$1,172,500

Profit Before Interest and Taxes

$18,260

$172,350

$547,500

EBITDA

$18,260

$172,350

$547,500

Interest Expense

$17,574

$13,281

$8,801

Taxes Incurred

$206

$47,721

$161,610

Net Profit

$481

$111,349

$377,089

Net Profit/Sales

0.02%

3.71%

8.77%

 


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