You Are an Entrepreneur
Essay Preview: You Are an Entrepreneur
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William Worth
Assignment 2: Entrepreneur
Financial Accounting; ACC 557
Dr.Sumadi
November 18, 2012
Assignment 2: You Are an Entrepreneur!
My wife Stacie is studying fashion design and has been sketching designs for years. It has always been her dream to have a boutique in California. To make her dream a reality we will have to secure funding with a solid business plan. We also plan to have an online presence which replicates the stores merchandise and services. Stacie is currently completing her degree in fashion merchandising and design. Part of our business plan will be the accounting practices, accounting system, and internal controls. We realize that we will have to wear many hats and be so many different things. One of the biggest parts of being a successful buyer is forecasting trends so you know what to buy. We plan to think backwards and watch the runway. This will ensure we have the required raw materials to respond to customer requests and have current trends in our store. We also plan to subscribe to predictive fashion industry magazines like the Doneger Group and Throug. These services allow the designer to see all the silhouettes, themes, patterns and colors that are predicted to be in style, up to two years in advance.
The boutique, EN TÊTE À TÊTE , is focused on women who love to shop. We will offer one-of-a-kind dresses tailored to the individual customer. This will be our niche in the market. These will be for formal occasions, parties, balls, galas, etc. Every woman wants to be the only one in the dress she selects. We will make them all Cinderella. We will offer some bargains but will cater to the high end. The merchandise available to the public will be very feminine, classy and affordable. The general demographic will cater to women ages 25 to 55 years old.. We will include accessories (jewelry, handbags, and shoes). This will be minimal and really just to complete the looks of the dresses for sale. The fashions will be our own as well as other local designers and a few major brands. We plan to use minimal staffing at first. Stacie and a few teenage girls will work the register, perform measurements, set-up displays, and deal with the inventory. The tailoring will be based on a ticket/voucher system in which they can go to a local tailor to have their dresses adjusted if off the shelf. The individual designs will be designed and fitted in the store or on a at call basis. Purchases from the internet will receive the voucher system to get it done locally or by simply returning it for any needed adjustments.
Because the inventory is very specialized and only a few items we dont feel the need to employ more than 1-2 teenager girls to assist. We may add a seamstress if needed. They will have to be trained to perform the various duties. My wife and I will be able to perform the ownership and other business functions, sales, marketing, accounting, human resources. Marketing will be critical to our success. We plan to use pamphlets and mailers as well as some well placed adds that hit our target market. The location will be in an upscale location with lots of shops to draw foot traffic. We feel this will be our second biggest cost beyond payroll and inventory. Stacie will serve as the Manager of the store and the head of the business. I will serve as an advisor and perform the recruiting for employees, accounting, and financing functions. She will do marketing and run the day to day operations. We feel this uses each others strengths to support the business. Below is a sample personnel plan and associated payroll. We paid ourselves (Owner, Assistant Manager) and included one style concierge and added another at the end of year one.
The biggest expenses will be start-up cost. We feel these will involve several items with the majority being the leased property, visual merchandising (mannequins, displays, lighting, paint, cases, racks etc), advertising/marketing. Start-up costs include inventory for the first month, and are estimated at $132,700 of which the owner will inject 31.4%. Current owner investments are documented at approximately $41,700, of which $12,700 is in savings and checking. An additional injection of approximately $8,700 will occur by July 15 of Year 1.
Cash flow will reduce the cost and transition the business into normal operations. We project annual gross sales to grow from $513,000 in the first year to over $600,000 by Year 3, with approximately 10% from customer special orders. These Sales forecasts are approximately three-quarters the average of benchmarked Los Angeles boutiques (www.lafashion,com). Net profits are expected at approximately 6% through 2015, with reinvestment of 5% for growth initiatives. The Cost of Goods Sold is roughly 39% of sales revenues; we intend to maintain this approximately 61% markup throughout the next five years. Due to the demand for up-to-date fashions, inventory turns are projected at 5, which is higher than the industry average of 4. Our objectives or metrics are to turn inventory five times and generate $800 in sales per square foot; maintain profit margins at 15-20% through close attention to expenses and cost of goods sold. The profit margins allow us to enter a very competitive market with our one of a kind niche, local designer focus, and green production.
Marketing, Advertising and Visual Merchandising represent substantial costs in year one. To drive awareness and build sales through mentions in both local print and the nations top fashion magazines. In addition we ill use cutting edge visual merchandising techniques. This will include lighting, window treatment and displays, tn store displays, a media center with rotating fashion pictures, in store signage. The marketing will be supported by a website to take special orders and also sell our merchandise. The development cost will be needed to get the business up and running with the online presence at start-up/opening. The development requirements are as follows:
Site Design – $3,000.
Site Implementation – $2000
Operating Costs
Domain registration for the website for 5 years – $95
Site Hosting – $30 per month with SBC Yahoo!
Search Engine Registration – $200 per year
Site Design Changes – Changes in the site, such as photography costs (estimated at $150-$200 per shot), are considered to be part of Marketing and Advertising.