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Monta Vista High School California Business Financial Plan 2011-12

Monta Vista High School California Business Financial Plan

2011-12

Executive Summary

In the past few decades, many local, professional and college teams and programs have established themselves in the heart of California’s Silicon Valley, San Jose. The local hockey team, the San Jose Sharks, has consistently been the Pacific Division champions in the National Hockey League for recent years, increasing fan following and ticket sales for their games in their home HP Pavilion Stadium. The NFL’s San Francisco 49ers and the local soccer team, the San Jose Earthquakes, are both building new stadiums in the Santa Clara area. The 49ers’ new stadium will cost roughly $1.02 billion, while the Earthquakes stadium will cost $67 billion. The stadiums will hold 75,000 and 18,000 spectators, respectively. In addition, the Earthquake stadium will feature field-level suites costing $70,000 per season.

Description of business

Sports Zone Inc. is an independent retail store dedicated to providing quality and fashionable spirit clothing, merchandise and sports memorabilia to discriminating sports fans. Sports Zone hopes to fulfill the insatiable need of affluent clientele involved in the sports market for prestigious sports merchandise in an area associated avidly with local, college and professional sports programs, including NFL, NBA and MLB franchises.

Assumptions

The construction of sports stadiums and increase in ticket sales in the valley are economic indicators for the strong surge of sports interest. Sports Zone assumes the accelerating growth in this affluent market will allow the company to thrive the current economic environment.

Strategies to obtain loan

As a start-up business in the technologically advanced and affluent Silicon Valley, Sports Zone understands that receiving a generous loan package from the local banks may not be economically viable. Instead, Sports Zone will rely in its incipience on fiscal payments from friends and family. The average listed housing price in Silicon Valley is $2.6 million; thus, each of the three partners in the business will invest $300,000 obtained after mortgaging their homes in the business, resulting in $900,000 in working capital for the first year. The partners will then request a $100,000 loan from Wells Fargo, the leading financial service company in supporting start-up businesses. In addition, each partner will withdraw an additional $200,000 from their line of credit their homes to account for variable costs.

Table of Contents

  • 1.0 Company Description........................................................................................3

    • 1.1 Legal form of business

    • 1.2 Company governance

    • 1.3 Company location

    • 1.4 Long- and short-term goals

  • 2.0 Operations and Management...........................................................................5

    • 2.1 Business facilities

    • 2.2 Management and organization

    • 2.3 Workforce

  • 3.0 Market Analysis..................................................................................................7

    • 3.1 Target market

    • 3.2 Market risks

    • 3.3 Solution to market risks

  • 4.0 Financial Institution..........................................................................................9

    • 4.1 Rationale

  • 5.0 Loan Request.......................................................................................................9

    • 5.1 Loan type, amount, and purpose

    • 5.2 Itemized expenditures

    • 5.3 Repayment

    • 5.4 Projections for future stability of company

  • 6.0 Supporting Documents...................................................................................15

    • 6.1 Works cited page

  • 1.0 Company Description

    Sports Zone Inc. is an independent sports memorabilia retail store that operates in the sporting goods market. Sports Zone hopes to not only become an industry leader in providing a wide assortment of quality sporting goods by providing the customer with the best shopping experience possible, but also establish itself as a hub of sporting activity that will continue to foster interest in the athletic world for consumers. An example of providing the clientele with memorable experiences is the Zone Bar, a bar that will focus on providing career advice and sports education to aspiring athletes and to professional players who are eager to step up their game. The Zone Bar bartenders will be experienced athletes specializing in at least one sport so that they may be effective resources for to provide customers with needed advice.

    • 1.1 Legal form of business

    Sports Zone Inc. is registered as a Subchapter S corporation in the state of California to ensure the instillation of company values and culture important to the founders of the company. The founders of the company chose this form of business to acquire the benefits of a corporation and limited liability while being exempt from the double taxation that comes with other forms of business.

    • 1.2 Company governance

    Sports Zone will be chiefly governed by the board of directors which has direct influence upon the Chief Executive Officer. The CEO of the company will have broad power to maintain and maneuver the company on a daily basis but must gain approval from the board of directors for major decisions. Below the CEO will be three functioning branches of the company, headed by the Chief Marketing Officer, Chief Operations Officer and the Chief Financial Officer who will be directly subordinate to the CEO.

    • 1.3 Company location

    Sprts Zone Inc. will be located on Santana Row, an upscale shopping complex in San Jose, California. Sports Zone will rent 6500 square feet in Santana Row, where it would be conveniently located in the center of a sports hub triangle marked by Stanford University, San Jose University and Santa Clara University, all within 75 miles of the retail store. This optimal location will not only be accessible to the three NCAA colleges, but also to the HP Pavilion, the San Jose Airport and the new Earthquakes Stadium. Santana Row itself is across the street from Westfield’s Valley Fair Mall, which is a popular shopping destination for youths. Sports Zone will be located right next to Hotel Valencia in Santana Row, of which 50% of its clients are business

    associates who visit the valley and whose companies occupy the box seats in the San Jose stadiums.for youths. Sports Zone will be located right next to Hotel Valencia in Santana Row, of which 50% of its clients are business associates who visit the valley and whose companies occupy the box seats in the San Jose stadiums.

    1.4 Long- and short-term goals

    associates who visit the valley and whose companies occupy the box seats in the San Jose

    Figure 2.1 Sports Zone is located in the heart of a strategic triangle marked at the ver- tices by the three NCAA colleges in the area, Stanford, San Jose State, and Santa Clara Universities.

    Sports Zone Inc. will undergo a three-phase process to achieve its long- and short-term goals. Phase one consists of the initial processes necessary to establish the company and construction of the retail store. Phase two involves the focus on gaining market share. The first two phases are defined as the short-term plan. The final phase will be an expansionary phase that will endeavor to define Sports Zone as not merely a retail store but a sports experience.

    Phase One: The initial focus iss on establishing Sports Zone as a brand name company. The infrastructure of the retail store is planned, manufacturing companies are contacted and contracts are defined. After obtaining a $100,000 loan from Wells Fargo, Sports Zone will penetrate the sporting goods market by hosting a grand opening, sponsoring nearby games and creating discounts. The first employees for the retail store are hired and a solid company culture of sports enthusiasts is cemented into place. Once procured, the property is briefly inspected and has necessary repairs, remodeling and maintenance tasks carried out. In addition, the online website is made in order to grant customers easier access to merchandise purchases and convenience for ordering equipment.

    Phase Two: The latter short-term focus will be on securing at least a 40% market share by the second year and of developing strong, loyal relationships with customers and manufacturers to create a reputable and prestigious brand name in the local area. Throughout this process, additional personnel will be recruited to help improve and enhance the Sports Zone business.

    Phase Three: The final phase will focus on Sports Zone’s presence in the community and to define the brand as a sporting experience. Sports Zone will host charitable signing events or tailgate parties, in which profits would be given to local sporting programs to help campaign

    against youth obesity. Weekly events such as Monday night football games will be watched at the Sports Zone retail store to provide an environment for social activity. In addition, Sports Zone will focus on promoting its Zone Bar. Located on the fourth floor, the Zone Bar will provide a quality customer experience by allowing fans to learn and discuss their favorite sports with others while enjoying healthy refreshments.

    2.0 Operations and Management

    2.1 Business facilities

    Sports Zone is on Santana Row, 368 Santana Row San Jose, CA 95128. It is 6500 square feet, 4 stories high, with each floor being 30 X 60 feet.

    Only the first and second floor will have five fitting rooms per gender and two restrooms per gender on the fourth floor. The first floor will feature the season’s current sports; for example, basketball season will features basketball equipment, apparel such as basketball jerseys for both genders, and memorabilia. The equipment and memorabilia will be located in the center, while the apparel will be split according to gender on the two sides. Women’s apparel will be displayed on the store’s left and men apparel on the right. Fitting rooms will be available on each side of the room.

    The second floor will follow a similar floor plan to that of the first floor, carrying only apparel, with women on the left and men on the right. The apparel will include spirit clothing for the local colleges such as Stanford and Santa Clara University and high schools like Monta Vista and

    against youth obesity. Weekly events such as Monday night football games will be watched at the

    Figure 3.1 Sports Zone is comprised of three floors.

    Palo Alto High Schools. Also, Sports Zone will supply uniforms for recreational leagues and professional teams in the area, like AYSO , DACA, NJB, and All Stars, Golden State Warriors, 49ers, San Francisco Giants, Oakland A’s and the Earthquakes. Though the second floor will not carry equipment or memorabilia, it will include a sales section and fitting rooms for both genders on each respective side.

    Next, the third floor will be occupied with equipment and memorabilia, such as baseball bats, basketball hoops, stuffed animals of team mascots, and team jerseys. A special component of the third floor will be the Nutrition Bar where portable and packaged health food will be sold.

    Finally, on the fourth floor will be the Zone Bar, a lounge area, an office, and the employees’ room. The Zone Bar will serve non-alcoholic drinks and healthy snacks, establishing a suitable social environment for families and youths alike. Delectable refreshments can be purchased packaged on the third floor in the Nutrition Bar. The lounge area will be designated for the clients to enjoy the penthouse feel of the fourth floor, which over looks the beautiful Santana Row, and to be able to watch sports games or any sports channel. The office will be used for the officers and directors. The employees’ room will be used at the employees’ disposal during breaks and meal hours. The office and employees’ room will strictly be for personnel use only.

    2.2 Management and organization

    Chairman and Chief Executive Officer (CEO) Angela Wang will be responsible for maintaining the business visions and strategies, cultivating the company’s charismatic culture, and administrating the business’ capital allocation and expenditures. As the CEO of this new start- up, Angela Wang will adopt a collaborative management decision style and will be involved with all aspects of the business, including interaction with all employees. Wang’s daily tasks will range from decisions on critical adjustments with her Board of Directors and confidential investors to allocating goods with Sport Zone’s suppliers.

    Chief Financial Officer (CFO) Chris Ma will be responsible for all the financial record-keeping, including income statements, cash flow projections, balance sheets, sources of funding, investment approvals made in the company, and other fiscal documentation.

    Chief Marketing Officer (CMO) Crystal Yu will be in charge of sales management, merchandise pricing and market research. Yu’s primary engagements will consist of expediting Sports Zone’s advancements and increasing the company’s profit margin on a quarterly basis. Yu’s other tasks will include overseeing the development and execution of Sports Zone’s marketing strategies and coordinating with the media team.

    Director of Business Relations Tyler Eidelberg will maintain business partnerships with all appropriate corporations. He will oversee all business liaisons, emphasizing on ordering and managing shipments of merchandise necessary, as well as preserving relationships with merchandising partners. Director of Public Relations Jeremy Waters will work to build a brand image and name for Sports Zone. He will manage the organization of promotional events, issue press releases and represent the company at professional events.

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    Director of Information Technology Ashwin Kumar will oversee the development and updating of the company website, which will be the primary forum for order placements and a center for promotional information. Kumar will also manage the internal computer system that processes all of the order placements and inventory stock.

    • 2.3 Workforce

    Sports Zone will hire eight employees, not including officers and directors, who will work to build the company’s brand image and provide sports fans with the best service possible. Select employees will run the in-store Zone Bar, a health-advocating refreshments bar which will provide advice on sports equipment and opportunities for future athletes. Other employees will help serve clients by taking merchandise orders, supervising the fitting rooms, placing merchandise onto the regulated areas, and enhancing and personalizing each client’s experience in Sports Zone. Criteria for the new employees include ability to serve the customers with quality, understanding of each product being sold, and athletic experience in one or more type of sport.

    During expansion, Sports Zone will employ ten employees per year, until the store has a total of forty employees. As the company develops, Sports Zone hopes to allow employees to take on senior positions and tasks, in order to allow the three partners to adequately focus their attention on external store affairs. New employees will be expected to continue cultivating the company culture and to remain loyal to their original duties.

    • 3.0 Market Analysis

    Sports Zone is located in San Jose, a city with fairly healthy growth and development despite the current economic situation. The average listing price of housing in the San Jose is $509,497, with a median income of $70,921; the California listing price average is $50,000. Also, San Jose is the this the third largest city in California, following San Diego and Los Angeles and is the tenth largest city in the United States, with a population of 958,789, proving an existence of a largely untapped market with huge potential for growth.

    • 3.1 Target market

    Primary Market: Sports Zone’s primary market is centralized on young people of both genders around the age of eighteen to twenty four, who are most likely to be on a specific college sports team and have expendable capital. According to San Jose’s Fact Sheet: History and Geographic, 10% of the population is made up of eighteen to twenty-four year olds, allowing Sports Zone the opportunity to appeal to 10% of the current San Jose population. Sports Zone

    focuses on the segment of the market that serves avid and dedicated sports fans and athletes and provides luxury sporting goods and merchandise to satiate its customers’ needs. Market research conducted by Sports Zone yielded that 58% of young adults age between eighteen to twenty-four would be willing to spend more than the average amount of money on sporting equipment if the experience in the particular store was enhanced through personal attention such as professional advice on excelling or starting in a sport, an aspect of business that Sports Zone emphasizes.

    Secondary Market: Sports Zone’s secondary market is made up of young couples who may not have married or started their own family. These customers, apart from also being dedicated sports followers or athletes, seek to enhance their sporting experience by assimilating it into their new social lives. The secondary market is 30% of the San Jose population as stated by the US Census Bureau. The young couples that make up Sports Zone’s secondary market also have substantial amounts of income to dispose of and come usually from the upper-middle or upper class families.

    • 3.2 Market risks

    Sports Zone’s market risks include competition from specific franchise stores, such as the Giants store at Westfield mall, that may have lower prices than Sports Zone. Other risks include sporting booths at the sports stadiums of particular teams and general sporting stores such as Big 5 Sporting Goods or Sports authority. In addition, websites like Amazon, are competitors for Sports Zone’s online purchasing services, due to their offers for free shipping and tax deductibility.

    • 3.3 Solutions to market risks

    The marketing risks listed above can be resolved due to Sports Zone’s unique selling proposition and differentiation, as well as its focus on a specific niche in a vast market. Sports Zone defines itself as a special sporting culture through the hosting of special events and promotions. Among these, Sports Zone offers customers chances to receive two covered trips to the Super Bowl store and access high-profile athletes. The sporting experiences appeal to Sport Zone’s female customers by providing them with live viewings of sports games as well as passes to after parties and and luxurious services including limousine rides. Sports Zone wishes to allow customers to gather memorable sporting experiences in the store and externally as well.

    4.0

    Financial Institution

    • 4.1 Rationale

    In order for Sports Zone to grow and develop effectively, the store will take out several loans. The loans will cover the costs of property rent and utilities, as well as staff payroll. In addition, an additional loan will be needed to cover inventory costs. Ideally, the loans will not only be flexible and reliable, but also competitively priced with the lowest interest rate possible. Thus, fixed-rate loans will be more suitable than adjustable loans despite the cheaper initial cost of the latter.

    Possible sources for the loan are angel investors, venture capitalists, and commercial banks. Angel investors provide the most flexibility, but may not be as reliable as Sports Zone would like due to the adjustable nature of their loans. Venture capitalists, on the other hand, provide reliability but not as much flexibility as the risk of losing control of the company through an IPO or through acquisition increases. Thus, the most fitting source for a loan is the commercial bank.

    The commercial bank selected by Sports Zone is Wells Fargo and Company, chosen for its low fixed interest rates, strong lines of credit, diversity of loans offered, as well as its financial advising and its reputation as the number one bank in the nation for small-business loans.

    The loan to provide the capital necessary to pay for inventory will be avoided entirely through the use of floor plan financing. Through this system of loan, the vendor will evaluate the floor space, design a floor plan and fill the space with displays and shelves. The merchandise will be advanced and will be paid for 90 days after the loan is made, with the merchandise itself serving as collateral. During this 90 day period, revenue from the sale of product will be used to pay off overhead costs such as rent and loan payments.

    • 5.0 Loan Request

    In order increase company development and expansion, Sports Zone will host store events and publicize itself through the use of social media and viral marketing. A loan package will be used to carry out this plan effectively and ensure a increasing growth even into the company’s future. The loan package will be partitioned into phases to better accommodate the needs of Sports Zone. All expenses will be monitored to ensure the responsible and effective usage of capital. The complete loan package is essential to the success of the store, as well as to maintaining its competitiveness and profitability. Sports Zone will uphold its positive credit

    by making loan repayments in a timely and consistent fashion to Wells Fargo Bank.

    • 5.1 Loan type, amount, and purpose

    Because Sports Zone is a new business and is yet unproven, the company will be requesting a $300,000 home equity loan at a fixed interest rate of 6.49% APR on the homes of each of the three business partners, amounting to a total of $900,000 in loans.

    In addition to the mortgage, Sports Zone is requesting a SBA 7(a) term loan of $100,000 at a fixed interest rate of 5.25%. The loan will be taken from the Small Business Association through Wells Fargo and Company, and sports low fixed interest rates, equity financing, financial advising, as well as variable term rates. The loan will cost 3% ($15,000) in SBA guarantee fees, $1,000 in Wells Fargo packaging fees, and a minimum of $50 in filing fees for a total of $16,050 in fees. These fees will be paid out of pocket.

    The complete loan package, totalling $1,000,000, will be used to pay for the rent and utilities costs of the 6,500 square foot store space. It will also pay for staff payroll, as well as finance store events to generate publicity.

    • 5.2 Itemized expenditures

    Item

    Cost

    Property + Utilities

    $425,000

    Staff Training and Wages

    $200,000

    Store Events

    $300,000

    Incidental Expenses

    $75,000

    • 5.3 Repayment

    Sports Zone will take out two loans from Wells Fargo, one being a set of mortgages amounting to $900,000 and the second being a SBA 7(a) term loan in the amount of $100,000. Thus, the total loan package to be repaid amounts to $1,000,000, plus fixed interest. The home equity loans will be repaid over a 7-year period by monthly fixed-rate payments. The SBA 7(a) term loan will be repaid similarly over a period of 5 years. Sports Zone will work with Wells Fargo to ensure timely and proper repayment with reasonable terms, preventing any undue financial burdens on either of the involved parties.

    The first repayment will be made at the end of the first fiscal year on December 31, 2012. This will include repayments on both loans taken. The estimated expenditures have been planned

    and a reasonable amount of unspent money has been set aside for emergency expenses, as seen in Section 6.2. The spending of capital has been documented and explained in Section

    6.1.

    5.4 Projections for Future Stability of Company

    In order to achieve and maintain stability, Sports Zone will need to acquire a sufficient and sustainable customer base. This will provide a steady source of income that will prevent the company from defaulting on outstanding loans and will allow the company stay profitable.

    Based on the partners’ strong credit score and expected return on investments, as well as their continuous commissioned research on the market industry and risk management strategy, Sports Zone has confidence in its capacity to overcome initial start-up costs and expand profitably in the years to come.

    Income Statement

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    Income Statement 12
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    6.0 Supporting Documents

    6.1 Works Cited Page

    “Best Places to Live in San Jose (zip 95117), California.” Sperling’s Best Places. Best Places to Live & Retire, Homes for Sale, 2010. Web. 5 Feb 2012. <http://www.bestplac

    es.net/zip-code/california/san_jose/95117>.

    “Business Advisory Services.” Wells Fargo. Wells Fargo, 2012. Web. 5 Feb 2012. <https://www.wellsfargo.com/theprivatebank/oursolutions/specializedwealthsolu tions/business-advisory-services>.

    deMause, Neil. “Earthquakes stadium funding gap resolved?.” Field of Schemes. Neil deMause, 27 Sept 2011. Web. 5 Feb 2012. <http://www.fieldofschemes.com/news/ar

    chives/2011/09/4681_earthquakes_sta.html>.

    Lepper, Geoff. “New Earthquakes stadium to feature field-level suites.” MLS Network. MLS, 29 Nov 2011. Web. 5 Feb 2012. <http://www.mlssoccer.com/news/article/2011/11/29/ new-earthquakes-stadium-feature-field-level-suites>.

    “San Jose Sharks Tickets.” SB Nation. Sportsblogs, Inc., 2011. Web. 5 Feb 2012. <http://tickets.fearthefin.com/Sharks-tickets>.

    “San Jose Sharks.” Wikimedia Foundation, Inc., 2012. Web. 5 Feb 2012. <http://en.wikipedia.org/wiki/San_Jose_Sharks>.

    “Santana Row.” Homes Point 2. Point2, 2011. Web. 5 Feb 2012.

    <http://homes.point2.com/Neighborhood/US/California/Santa-Clara-County/San-

    Jose/Santana-Row-Demographics.asp&xgt;.

    “Santana Row Partnership Opportunities.” . Santana Row, n.d. Web. 5 Feb 2012. <http://www.santanarow.com/files/SRPrtnersBrochure.pdf>.

    “Saratoga Jobs.” Simply Hired. Simply Hired, Inc. , 2012. Web. 5 Feb 2012. <http://www.simplyhired.com/a/local-jobs/city/l-Saratoga, CA>.