Retail Store Business Plan
Retail Store
Business Plan 2006
Prepared by:
Adele McIntosh
Shanda Sedgwick
Lorelei Gress
Karen Bowditch
Ag. Ec. 495.3 Agribusiness Venture Management
College of Agriculture and Bioresources
University of Saskatchewan
Acknowledgments
We would like to give a special thanks to our professor Bill Brown for his support and guidance in the completion of this business venture.
Another special thanks to Mr. X and the RETAIL STORE staff for their time, efforts and support.
Executive Summary
The Retail Store(RETAIL STORE) is a small,retail business selling locally made products. The store has been in operation for two years. RETAIL STORE mainly sells products on a consignment basis, these products consist of the majority of the sales.
The store was created to promote producers and their products. There has been a need for this market which displays products from the province in one central location. The locally made products displayed in the store appeal to residents and their loyalty to the province of Saskatchewan. The products exhibit a sense of pride due to their homegrown, Saskatchewan appeal.
Over a ten year period this is a feasibile business with an Internal Rate of Return of 41.2 percent and an External Rate of Return of 24.6%.There is a certain amount of risk associated with the business’s critical variables; price and units sold of consignment. If the critical variables decrease by even 5% the IRR decreases to a unprofitable return. There is concern that RETAIL STORE will outgrow the Saskatchewan producers or that the producers may stop production altogether.RETAIL STORE has the potential to be a feasible business by increasing their sales and developing a strategically viable marketing plan.
Table of Contents
Acknowledgments
Executive Summary
Table of Contents
List of Figures
List of Tables
Introduction
1.0 Operations Plan
1.1 Organizational Structure
1.2 Site Plan and Ten Year Development Plan
1.3 Building and Floor Plan
1.4 Work Plan and Flow of Work
1.4.1 Basket Production
1.4.2 Flow of Work
1.5 The Capital Budget
1.6 Working Capital Planning and Management
1.6.1 Cost of Sales for Retail
1.6.2 Administration, Marketing and General Expenses
1.6.3 Cash Management
1.6.4 Inventory Management
1.6.5 Accounts Receivable
1.6.6 Accounts Payable
1.6.7 Cash Conversion Cycle
2.0 Human Resource Plan
2.1 Job Descriptions
2.2 Compensation
2.3 Planned Additions or Deletions of Positions
2.4 Training Programs
2.5 Human Resource Strategy
2.6 Shareholders’ or Partnership Agreements
3.0 Marketing Plan
3.1 The Marketing Mix (4 P’s)
3.1.1 Products and Services
3.1.2 Pricing
3.1.3 Promotion
3.1.4 Place
3.2 Segmentation, Targeting and Positioning
3.2.1 Segmentation
3.2.2 Targeting
3.2.3 Positioning
3.3 S.W.O.T Analysis
3.3.1 Internal Strengths and Weaknesses
3.3.2 External Opportunities and Threats
3.4 Market Analysis
3.4.1 Past Performance
3.4.2 The Market
3.4.3 Competition
3.4.4 Customers
3.4.5 Target Markets
3.4.6 Product/Service Features
3.4.7 The Opportunity
3.5 Marketing Strategy
3.5.1 Sales and Profit Objectives
3.5.2 Channels of Distribution
3.5.3 Pricing Policy
3.5.4 Select Markets/Products/Service Mix
3.5.4 Selling and Advertising
3.5.5 Marketing Plan Budget
4.0 Financial Plan
4.1 Economic Forecast
4.2 Equity and Pricing
4.3 Revenues
4.4 Cost of Goods Manufactured
4.5 Cost of Sales
4.6 The Capital Budget
4.7 Debt Repayment Schedules and Dividend Policy
4.8 Income Taxes
4.9 Ratio Analysis
4.9.1 Liquidity Ratios
4.9.2 Investment Utilization Ratios
4.9.3 Leverage Ratios
4.9.4 Profitability Ratios
4.10 Financial Feasibility & Overall Financial Performance
4.11 Risk Analysis
4.11.1 Critical Variables
4.11.2 Breakeven Analysis
4.11.3 Scenario Analysis
5.0 Conclusion
6.0 References
Appendix A
Appendix B
Appendix C
Appendix D
List of Figures
Figure 1 Retail Store Site Plan – Saskatchewan.
Figure 2 Retail Store Floor Plan
Figure 3 Canadian retail sales: seasonally adjusted and general trend
Figure 4 Dollars spent on the retail trade
Figure 5 Age Distribution of the Saskatchewan Population as of 2001
Figure 6 Breakeven Analysis for Ten Year Period
List of Tables
Table 1 Product breakdown of owned and consignment products
Table 2 The Capital Budget for Retail Store
Table 3 Cost of Sales Forecast for 2007
Table 4 Operating Expenses
Table 5 Overview of the S.W.O.T
Table 6 Dollars spent in retail trade by industry within Canada
Table 7 Retail Store vs. competitors, strengths and weaknesses
Table 8 Ten year planned sales for RETAIL STORE
Table 9 RETAIL STORE's Marketing Plan Budget
Table 10 RETAIL STORE Owners Equity
Table 11 Manufacturing Overhead Costs for 2007
Table 12 Cost of Sales
Table 13 CCA Expenses Estimated for the ten year plan
Table 14 Ratio Analysis for Ten Year Period
Table 15 Ten Year Summary of Financial Results
Table 16 Critical Variables for RETAIL STORE
Table 17 Scenario Analysis for 2007 for RETAIL STORE
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AgEc 495.3 College of Agriculture and Bioresources, University of Saskatchewan
Retail Store Business Plan
1
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AgEc 495.3 College of Agriculture and Bioresources, University of Saskatchewan
Retail Store Business Plan
Introduction
Retail Store was created by the Saskatchewan Food Processors Association (SFPA) to help promote products made in Saskatchewan. The SFPA was created in 1990 and is a non-profit organization which is dedicated to helping push the prospective products and business aspirations of Saskatchewan Food Processors (SFPA Membership Directory, 2007). In 2004, the SFPA formed the Retail Store to take a more hands on approach to promoting Saskatchewan Products. The business currently provides a market for over 200 local Saskatchewan producers.The purpose of this plan is to outline the feasibility of this business venture in a niche market with a large number of potential consumers.
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AgEc 495.3 College of Agriculture and Bioresources, University of Saskatchewan
Retail Store Business Plan
1.0 Operations Plan
1.1 Organizational Structure
Figure 1Organizational Chart of Retail Store
There is a Board of Directors for the SFPA (Appendix A). Currently the board consists of fourteen members in which nine of these members are elected. Three seats are appointed by government agencies; Sask. Industry & Resources. Sask. Ag, Food & Rural Revitalization, Agriculture & Agri-FoodCanada. The remaining two seats are reserved for associate members. Associate members do not have voting rights and can never serve on the Board of Directors executive, although the associate members are entitled to membership benefits and services. The Board of Directors is structured this way because the SFPA is an association, and therefore needs representation for its members.
The Chief Operating Officer (COO) reports to the Board of Directors. All other positions, except the full-time and part-time staff, report back to the COO. The COO oversees all aspects of the business, regarding finances, human resources, and personal relations.
The Controller manages the company’s finances as an accountant and provides accounting support to the COO on financial matters.
The Store Manager reports to upper managementand runs the day-to-day store operations. The manager’s duties include: shipping and receiving product, placing orders, banking, customer service, etc. The full and part-time staff members are responsible for helping the manager run a successful store. Their duties include: stocking shelves, customer service, basket production, etc. The staff members report to the Store Manager.
At this time there are no plans to reorganize the organizational structure. However, if the business grows more staff will need to be hired, and possibly an assistant manager.
1.2 Site Plan and Ten Year Development Plan
Within year one the shipping and receiving area will receive a wider shipping door to improve the efficiency and timeliness of product handling. The computer will need to be upgraded within this plan. More shelving may also be added within the store to showcase more members’ products and maximize the buildings square footage.
1.3 Building and Floor Plan
Figure 1 Retail Store Site Plan –Saskatchewan.
Figure 2 Retail Store Floor Plan
1.4 Work Plan and Flow of Work
RETAIL STORE has minimal technical procedures and processes, as it is a retail business. The procedures and processes that RETAIL STORE must follow are: efficiently ordering product from vendors and constantly evaluating the in-store stock of products and goods. Producing various baskets is a process that is done on a regular basis within the store; however the exact design is not specifically structured due to the various different styles and sizes available. Many of the baskets are specifically ordered by customers, which make it difficult to have one structured template.
1.4.1 Basket Production
RETAIL STORE creates the gift baskets filled with all sorts of products that consumers can chose from to purchase as unique, creative assortments. The store always has baskets on hand and sells many throughout the year. The baskets are a strategic way to promote RETAIL STOREproducts from many producers as well as provide a new product for retail sale.
Throughout the year,RETAIL STORE employs one part-time basket designer to organize, design and put together baskets, filled with various combinations of goods from the store. The main production and sale of baskets takes place in the Christmas season, thus the designer increases her hours and the store employs two additional seasonal workers. These two seasonal employees work from the beginning of November until the beginning of January, after which the scheduled term position ends as planned. The seasonal workers each put in 20 hours a week helping the designer, making baskets, serving customers, stocking shelves and counting inventory at the end of the term.
The actual baskets are purchased from various sources and filled with unique selections of products from RETAIL STORE producers. The different combinations can follow certain themes or trends depending on the designer’splan. Some producers supply their own baskets or bundles, such as Riverbend, Prairie Berries and Chatty’s Indian Spices.
Each item in the basket has the RETAIL STORE logo on it and the finished baskets are wrapped in plastic, and tagged with a “RETAIL STORE” gift card. Once RETAIL STORE has created a basket, the store purchases the products within the basket at retail price. For further explanation refer to the Marketing section in Pricing3.1.2).
1.4.2 Flow of Work
A typical day at the RETAIL STOREinvolves recording member’s products that need to be replaced as well as receiving wholesale orders from customers. Monitoring the product inventory and stocking shelves is a daily task, which is crucial for the business’s success. Deposits and accounting transactions are apart of the stores day-to-day activities as well as making various baskets. Although the processes and procedures are similar each day they can also vary and change on a daily basis depending on the time of year and time of day. The store is open seven days a week from 10am-6pm Monday to Friday, 10am-9pm Thursday and 12-5pm on Sunday.
Weekly activities include placing purchase orders for needed inventory from members. Inventory is counted on a quarterly basis, with year-end being December 31st. An average year will begin with inventory counting and reordering and replacing product on the shelves after the Christmas rush. From that point until the end of August, RETAIL STORE maintains a steady customer flow in and out of the store. During the month of September the manager and staff diligently begin placing orders and increasing inventory to prepare for their busiest season, Christmas. Basket production is increased significantly to keep up to the customer demand of basket orders that are needed in November and December. Two additional staff are required during the months of November and December to help make baskets and deal with increased customer flow throughout the store. Therefore resumes are read and interviews are usually conducted before the busy season, in the fall months.
1.4.2.1 Quality Control
There are no environmental, ISO or HACCP quality control programs that RETAIL STORE must follow because no product is actually produced within the store. However, Saskatchewan Food Processors Association (SFPA) members are required to strictly follow such programs and meet industry standards.
1.4.2.2 Supply and Service Analysis
RETAIL STORE has several deliveries out of province as well as within. Internet orders are transported via Canada Post and all other orders are transported by courier services. Couttes Courier delivers goods to Saskatchewan customers, Tiger Courier delivers product to customers out of the province, and DHL delivers product both in and out of the province. There are approximately 49 food vendors and 51 non-food vendors supplying products to RETAIL STORE. The products are sorted into 11 distinct categories containing numerous items.
Table 1 Product breakdown of owned and consignment products
1.5 The Capital Budget
The capital budget for the next few years will not change substantially. RETAIL STORE is currently leasing to own a portion of the store’s shelving, two of the freezers, the telephones and the fax machine. Within one year from now the lease will be bought out and RETAIL STORE will own this equipment. As shown in Table 2 RETAIL STORE does not have much overhead, decreasing their required capital.
Table 2 TheCapital Budget for Retail Store
* Shipping door is listed at cost
1.6 Working Capital Planning and Management
1.6.1 Cost of Sales for Retail
The beginning inventory for RETAIL STORE includes; corner Gas products (ex. tee-shirts, mugs, hats), RETAIL STORE products (ex. tee-shirts, and hats), promoting Saskatchewan products (ex. tee-shirts, mugs, hats, postcards, pencils, flags etc.) and gift baskets. The gift baskets contribute to a large percentage of the sales. The gift baskets include products from the store that are purchased at retail as well as an additional $18 dollars to cover production costs and materials.
Table 3 Cost of Sales Forecast for 2007
* This information is also available in the financial plan model (Appendix C).
1.6.2 Administration, Marketing and General Expenses
The companies operating expenses are fairly small due to the fact that they do not need much overhead in order to run this business. Their largest expense are the administration and marketing salaries, wages and benefitsas well as the lease on the building, which in a retail business this is expected to be the company’s greatest cost. The overhead costs include: utilities, telephone and communications, repairs and maintenance, miscellaneous expenses, lease on building and equipment, and insurance. The marketing expenses include: advertising and promotion. Salaries, wages and benefits includes: salary, hourly pay and contracted services of RETAIL STORE employees.
Table 4 Administration, Marketing and General Expenses
Note: Refer to Appendix C for breakdown of costs
1.6.3 Cash Management
The company does not needto keep significant amounts of cash on hand because 70% of all transactions are paid with credit card or debit. The actual baskets and basket supplies are bought and paid for from a cash account. These supplies are purchased as needed.
RETAIL STOREuses efficient methods when monitoring their cash. Accounts payable and accounts receivable run on a net 6 basis.RETAIL STORE also keeps their inventory level low and only order product as needed.
1.6.4 Inventory Management
The only inventory currently sold by the RETAIL STORE is the Corner Gas line, the RETAIL STORE apparel line, and various products promoting the province of Saskatchewan. The rest of the products within the store work on a consignment basis and are not considered inventory. RETAIL STORE also makes gift baskets filled with the stores consignment products. Because all of the products within the gift baskets are priced at retail price, the gift baskets are included within RETAIL STORE’s inventory.
The inventory turnover for the Corner Gas and gift baskets are three weeks and three days respectively. The inventory turnover for the Saskatchewan and RETAIL STORE apparel products is one year; these products are in the store not to turn a huge profit but to act as advertising and promotional products for the company.
1.6.5 Accounts Receivable
RETAIL STORE has very few customers that pay on credit. They are: Pharmachoice, Peg’s Legs, Delloy Pasta and Value Drugs. Giving the customers a discount such as 2/10 net 30 would not be beneficial to RETAIL STORE due to the small amount of customers that pay on credit and the small amount of money that is owing to them. Cash flow is not a problem for RETAIL STORE because of minimal receivables.
Accounts receivables on a net 6 basis and are calculated as follows. The only items that are purchased on accounts receivable are the gift baskets sold to Alberta retailers such as Value Drugs and Pharmachoice at a net 30 basis. Approximately 20% of total gift baskets are sold to these Alberta stores, therefore net 30 X 20% = 6 days.
1.6.6 Accounts Payable
The company‘s accounts payable include;AffinityInsurance, BellMobility, Bowden'sventures, CanadaPost, CustomCourier, DHL(Loomis), CityofSaskatoon, CamguardSecurity, CJWW, Dynamex, DirectWest, SaskTel, CTV, GlobalTelevision, RPBcourier, SaskEnergy, Staples, WalcoEnterprises, SaskatoonSign, Bruzer,and Harvard Broadcasting. The majority of accounts payable are large businesses which have incentives to pay early and so a 6 day pay period is all that is required. Since the accounts payable is small RETAIL STORE does not have a problem paying their creditorsRETAIL STORE’s current ratio is 7:1 ($61,262/$8,643). This shows that they have no problem paying their short-term debt such as Bruzer, CTV, CJWW, and Harvard Broadcasting.