SAMPLE BUSINESS
PLAN
GOOD SPIRIT REGIONAL
ECONOMIC DEVELOPMENT
AUTHORITY INC.
EXECUTIVE SUMMARY
ABC Company is the chosen name for a new business venture in the town of Anywhere, SK. Mr. X., with Mr. Y acting as a silent partner and managerial resource, will manage this partnership between Mr. X and Mr. Y. Target opening date is mid-April in order to enter the market at the beginning of the busy season. The address for the business will be:
ABC Company
Box 1000
Anywhere, SK
S0A 000
Phone: (306)540-0000
The partnership is seeking financing in the amount of $36,000 for the purchase of a building and equipment. Mr. X. brings the equity of $2,100 in contributed assets to the business while Mr. Y’s contribution is to act as co-signer on the loan. The anticipated breakeven will be in July, with the business being fully developed within two years.
ABC Company will specialize in smaller forestry, yard and garden equipment and supplies. Though they will stock other similar supplies they will maintain their focus on the under-serviced portion of the small equipment market in their area.
Anywhere, located on the fringe of Saskatchewan’s richest forestry resource, is an ideal location for a venture such as this. To the south the community is surrounded by smaller farming communities and to the north by the forestry industry. Both of these markets are the major target of the ABC Company. The total population in the immediate target region is approximately 5,700.
Mr. X is committed to serving his community and the growing industry to yard and garden care. An experienced retailer, Mr. X brings skill, experience and drive to this venture.
ORGANIZATIONAL STRUCTURE
The business will operate as a partnership between Mr. X and his brother, Mr. Y. Mr. X will assume all management responsibilities with Mr. Y. acting as a silent partner. Mr. X will be responsible for all mechanics, book keeping, sales and other necessary duties. Compensation will be a monthly drawing of $1000, which will be partially provided through a $280.00/month supplement provided through the Saskatchewan Employment Supplement Program.
PROFESSIONAL SUPPORT
Accountant:
123 Accounting
Anywhere, SK
Phone: (306) 540-1111 or
(306) 511-1111
Banker:
ABC Credit Union
Anywhere Branch
Phone: (306) 540-3322
Fax: (306) 540-2222
Lawyer:
XYZ Law Firm
Anywhere, SK
Phone: (306) 540-3222
Fax: (306) 540-3333
Insurance:
Anywhere Union Aid
Consultant:
Mr. Z
Phone; (306) 590-0000
PRODUCTS AND SERVICES
Within the Anywhere region there is a definite need for small engine products, specifically garden, yard and forestry products. Traditionally, these needs have only been met by purchasing outside of the region. Service on these products has been provided through local retired farmers working out of their garages. ABC Company will provide the following products and services.
Sales:
ABC Company will stock a full line of forestry products such as chainsaws, clearing saws, and safety equipment The garden and yard equipment line will include tillers, saws and safety equipment. The garden and yard equipment line will include tillers, trimmers, hedgers, pruning shears and tools, etc. The store will be a retail outlet for the Jonsered line of products. This specifically manufactured line is an emerging leader in the small engine and forestry products market. The product is high quality and well worth repairing unlike the lesser lines. With available maintenance and repair the products will become a strong seller. Stihl, an established product line, and Consolidated Turf are also potential suppliers and will be visiting our location to discuss their product lines. All new products will come with a manufacturer’s warranty while previously owned equipment will have a limited dealer warranty.
Service:
Secondary, but of equal importance to the sales component of the business, is the service and repair area. The presence of a full service and repair shop will differentiate ABC Company from other sales outlets in the area, increase buyer confidence and provide an added incentive to make the store the number one source of small engines, service and repair. It is our intent to establish ourselves not only as the number on retailerof small engines, but also as a service center for other outlets in the area.
THE MARKET
The market area encompasses a region with the boundaries of Wheretown, Purpletown, Whoville and Otherville, MB. Within the region are the following communities:
- Anywhere 1230
- Everywhere 183
- Otherville 3000
- Whoville 2368
- Somewhere 677
- RM of Anywhere 1223
- Bluetown 505
- RM of Red 835
- Hereville 100
- RM of Yellow 976
- Thereville 119
- RM of Orange 592
- Greentown 208
- Total 12016
MARKETING AND PROMOTIONS
A primary marketing tool will be newspaper ads and signage. Jonsered offers a 50% cooperative advertising package that will assist the dealer in advertising the current product specials.
THE COMPETITION
The main competitors in the small engine lines are the True-Value Hardware, Co-op Farm Supply and the Sears outlet. All of these businesses sell yard and garden equipment but tend to focus on the lower end products. These products are economical to purchase, but do not have the life expectancy of higher quality lines. Though these dealers have the advantage of a greater capital base to work from and can offer lower prices, they can not offer their customers warranty service or repair of the products they sell.
John Deere is the local distributor of garden tractors and riding mowers but they have recently discontinued push mowers, trimmers and other small engines from their line. It is not our intent to market garden tractors etc at this time because of the capital outlay required and the anticipation difficulties in entering this competitive market.
ABC Company’d primary advantage is that we will be in a position to warranty and service what we sell and will be in a position to service other product lines from our competitors. This will present us with the opportunity to build relationships with the local consumer and establish confidence in our lines for future purchasing. Unlike our competitors, we will restrict our business to cash and credit card sales as we are not in a position to offer store credit to our customers. We don’t consider this to be an insurmountable challenge for the sales component of our business as we will be competing on quality products and customer service as opposed to low price.
THE LOCATION
ABC Company will be located in the Town of Anywhere in an existing building conveniently located beside the Sears Outlet. The building is well-constructed, well-maintained, archrib building on a concrete foundation with concrete, radiant heated flooring. Assessed at over $27,000 by the local realtor, the location requires little in the way of renovations and is basically ready to go. Purchase price of the building is negotiated at $27,000. There is a possibility that a twelve-month lease can be arranged to decrease the start-up debt load and minimize risk of the venture. If this arrangement is an available option then purchase of the building would be deferred one year pending the results of year one’s business.
Features of the building include:
Heating- Hot water radiant flooring Natural gas furnace
Septic system is on the town water system, as is the drinking water
Air conditioning will ensure comfortable shopping and work environment
Located on a large, 56’ x 125’ lot, there is plenty of room for outdoor storage
Residential streets do not closely border location, which is ideal for this business
OPERATIONS
STAFFING:
The store will be owned and operated by Mr. X. For the time being there will be no support staff though there is potential to hire a staff person through the Partners In Employment Program. This program enables employers to hire and train new staff with 50% subsidization from Human Resource Development.
It is anticipated that about two thirds of the work flow will be dedicated to shop work, engine repair and service, while the remaining time is dedicated to merchandising and selling.
HOURS OF OPERATION
The store will operate from 8:00 a.m. to 5:00 p.m. Monday to Friday year round. Periodically, during the off season, the shop will need to be closed so that staff can attend supplier’s schools. Jonsered usually holds four, one-day schools per year to ensure that authorized dealers are kept abreast of the latest marketing and maintenance information. There will be anticipated rushes in the spring and fall, which are traditionally peak times for the small engine business. It is not anticipated that the business will garner much of the Christmas trade though opportunities will be explored for marketing gift giving ideas.
CREDIT POLICY:
ABC Company will work on a cash or credit card sales system. The business will not be in a position to offer store financing/credit. MasterCard, Visa and Agriline will all be accepted at the store.
FINANCIAL INFORMATION
Start-Up Costs:
Land & Building $27,999
Legal Fees 500
Renovations 500
Cash Register, Phone & Fax 500
Crane Frame & Work Platform 1,000
Misc. Specialty Tools 500
Signage 500
Mr. V. Godwill 700
Start-up Inventory Jonsered 7,000
Consolidated Turf 5,000
Mr. V 1,800
Insurance 200
Shop Supplies 500
Stationary 300
Working Capital 1,000
Total Start-up Cost $47,999
PROJECT FUNDING
Owner Equity Contributed:
Cash $ 0.00
Contributed Assets $2,100.00
Total Assets $2,100.00
Capital Required:
Land & Building Mortgage $27,000
Equipment & Start-Up $ 9,000
Line of Credit-Inventory $ 12,000 (Supplier’s Cash)
Total Funding Required $48,000
CASH FLOW ASSUMPTIONS
General Assumptions
Cost of goods on retail is 70%
Cost of goods on services is 0%
The company will opt not to participate in worker’s compensation program
The owner will complete the day to day bookkeeping with income tax preparation being handled by the accountant. Budgeted amount is $300 paid in Feb.
50% of retail sales will be made by credit card. Credit Card charges will be at 4%
Cash flow figures were rounded up to the next dollar figure resulting in a slight variance in totals
Operating costs have been estimated high and sales on the low side in order to develop a conservative estimate of income and expenses
Owners drawings have been estimated low in order to maintain provincial supplement through the Building Independence Program
Loan Details:
Start-up loan of $27,000 for building purchase will be amortized over 20 years at 9%. Payments will be $300 per month
Equipment Loan will be amortized over 5 years at 9% with payments being $185 per month
Monthly Operating Expenses:
Legal fees are estimated to be low with the exception of start-up costs. Estimated figure is $15 per month
Monthly equipment maintenance will be estimated at $75.00 per month
Vehicle expense related to vehicle licensing and maintenance and will be budgeted at $90.00 per month
The dealers will provide operating line of credit. Their terms are net 60 with 1.5% financing per/month after the 60 days
ABC Company will operate on a 120 day repayment cycle, maximizing on the dealer credit
Building and Inventory insurance will be $235 paid annually
Shop materials will be estimated at $50.00 per month
Office expenses, including paper supplies and credit card supplies, are estimated at $130.00 per month
Utilities will be:
Power $120.00
Natural Gas $ 85.00
Water $ 25.00
Telephone $125.00
Total Utilities $335.00
Property Taxes: $100.00 per month
Advertising allocation is $100.00 per month
Personal Drawings will be $1000.00 per month
If the business opts to lease the building, for cash flow purposes we will estimate the lease amount at $300.00/month (the same as mortgages amount would be).
Year Two
Personal Drawings will increase to $1,250.00 monthly
Sales will increase to $24,000.00 retail and remain at $29,120 for repair services
Operating costs will increase by 5%
Year Three
Personal drawings will remain at $1250 monthly
Sales will increase to $26,000 retail and repair services will increase to $32,760
Operating costs will increase by 5% over year 2
Three Year Cash Flow Forecast
Year 1 Year 2 Year 3
Estimated Sales
$47,120 $53,120 $56,760
Cash from Sales
$18,000 $24,000 $26,000
Cash from Service
$29,120 $29,120 $32,760
Personal Investment
- - -
SES Program Funding
$3,360 $2,832 $2,832
Total
$50,480 $55,952 $61,592
Disbursements
Cost of Goods Sold-Retail 70%
$7,812 $15,204 $17,638
G.C.S. Service (Shop Supply)
$600 $600 $720
Credit Card Changes
$360 $480 $520
Wages-Employees -
$820 $730
Personal Drawings-Owner
$12,000 $15,000 $15,000
Utilities and Phone
$4,260 $4,500 $4,620
Property Taxes
$1,200 $1,260 $1,320
Insurance Taxes & Licenses
$235 $245 $260
Advertising
$1,200 $1,260 $1,380
Vehicle Expenses
$1,080 $1,140 $1,260
Equipment Maintenance
$900 $960 $1,080
Professional Fees
$180 $180 $240
Office Expenses
$1,560 $1,680 $1,680
Line of Credit-Changes
$288 $390 $518
Building Lease/Mortgage
$3,600 $3,600 $3,600
Loan Repayment-Equipment
$2,220 $2,220 $2,220
Total
$37,495 $49,539 $52,786
Net Cash
Total Cash Receipts
$50,480 $55,952 $61,592
Total Cash Disbursements
$37,495 $49,539 $52,786
Net Surplus/Deficit
$12,985 $6,413 $8,806