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Indische Guitars

January 5, 2016

Contents
Executive Summary.................................................................................................... 3
The Company................................................................................................................ 3
Corporate Plan.............................................................................................................. 3
Introduction................................................................................................................ 4
Industry......................................................................................................................... 4
Mission Statement........................................................................................................ 5
Goals & Objectives........................................................................................................ 5
Store Hours................................................................................................................... 6
Location........................................................................................................................ 6
Floor Plan...................................................................................................................... 7
Business Cycles............................................................................................................ 8
Average Business Day............................................................................................... 8
Average Business Week............................................................................................. 9
Average Business Month............................................................................................ 9
Average Fiscal Year.................................................................................................... 9
Supply Analysis........................................................................................................ 10
Capital Budget............................................................................................................ 10
Table 1 – Capital Cost Expenditures............................................................................ 10
Operating Expenses.................................................................................................... 11
Table 2 – Monthly Operating Expenditures...............................................................12
General Manager........................................................................................................ 12
Sales & Repair Staf.................................................................................................... 13
Scheduling.................................................................................................................. 13
Labour Costs............................................................................................................... 13
Table 3 – Labour Cost Projections............................................................................. 14
Training....................................................................................................................... 14
Products & Services.................................................................................................... 15
Pricing......................................................................................................................... 15
Promotions.................................................................................................................. 16
Place........................................................................................................................... 16
Positioning, Targeting & Segmentation.......................................................................16
Specific Market Analysis............................................................................................. 17
Marketing Strategy..................................................................................................... 17
Page 1

................................................................................ 20 Financial Analysis.................................................................................... 19 Financial Structure...................................................................................................Marketing Budget............. 21 NOTES........................................................................................................................... 18 Table 4 . 20 Owner Compensation. 20 Sensitivity Analysis................................................................................................................................................................................................................................................. 25 Page 2 ....................................................... 2016 Selling & Advertising............................................................................................................Indische Guitars January 5................ 20 Conclusion.......

It serves as a proposal to the business and whether it is something worth pursuing. If the first few years prove successful. this company will look to attract guitarists of all sorts of ages and genres that are seeking a way to aford good quality guitars and their coveted sounds. The strong predictions and financial models look favorable when accompanied by sales and marketing experience. so it is important that we start with a proper goal in mind. We would currently be the only highquality electric guitar manufacturer in the city. marketing and key financial plans. We will use diferent advertising and promotional mediums to reach the desired target markets in the city. It must be worth the risk to them that there is solid chance of greater income in this business. 2016 Executive Summary The Company This new guitar production unit aims to penetrate the Kolkata/India music and guitar market by ofering new styles of guitars to hungry guitarists at competitive and afordable prices. Being incorporated. the business must provide the owners/managers with an income that is greater than what their opportunity cost could be in doing what they are currently doing. Page 3 . We want to have our workshop in place by second-quarter of 2016 in the location around suburbs of Kolkata. The following is a plan that explains everything necessary to the business including operations. The goal in the first couple of years is to remain feasible and operate with a positive cash flow to sustain growth in the subsequent years. then the company could look into expanding outside of just guitar inventory and obviously shifting into other instrument inventories as well. Corporate Plan Our goal is to supply the city/country with a guitar-specialized production unit that provides uniquely produced guitars that are of exquisite look and sound to customers looking to aford them. Financially.Indische Guitars January 5. Financial models will be attached in spreadsheet form to go along with this report.

Industry research done by us shows that musical instrument retailers achieved a third consecutive quarter of sales growth in the first quarter of 2015. This growth is being driven by guitars primarily due to its explosion in becoming the instrument of choice for young musicians as well as for musical schools. Each guitarist is unique and can create his/her unique sound for recreation. Rarely ever will a person hear a track recording that has not included the work of a guitar to some extent. The endurance of these instruments has made them a continuous powerhouse for instrument choice and continues to drive bands as well as music industry growth. brass. picks. especially for prospective small business entrepreneurs looking to enter the market. and more young players have begun to form bands once again since their school days. Figures compiled from all over India as well show growth in the industry with increases of between 50.000 guitars purchased in 2015 compared to 2010.Indische Guitars January 5. The guitar industry specifically narrows focus to electric and acoustic guitars.6% this past year. The reason for this being that these people now have disposable income that allows for easier purchases of guitars and equipment than a few years before. percussion and string instruments as well as their respective accessories and sound equipment requirements. pedals and respective accessories (strings. Music and guitars have always been an intriguing and popular hobby. 2016 Introduction Industry The musical instrument industry in Kolkata covers a vast amount of area including wind. The growth of the sales of budget fretted instruments have risen 3. even profession that has continued to attract both young and old to the art. cables and sheet music). Guitar is a skill that requires patience and work. Lower average prices for guitars have sparked a growth in guitar purchases by both ends of the age spectrum. It is a strong sign for guitar and music retailers to see consistent growth in the industry. hobby or even profession. There will always be those Page 4 . Demographics therefore have made for a larger and more expansive market for opportunity. Guitars have endured the test of time and are still a necessity for almost all music genres. More and more youth are starting out with guitars due to influences such as Guitar Hero. It is art that has many diferent styles and techniques that an individual can discover on their own. with results that open the door for so much musical opportunity. guitar amplifiers.000 and 200.

All of this through a friendly and knowledgeable-local staff dedicated to providing the best service to our customers. 25. 2016 both young and old who discover their love for the guitar’s catchy rifs and sweeping solos. meaning a market that will continue to endure over time. Mission Statement “Indische Guitars is committed to supporting the music sector within India by serving its new and distinguished guitarists through the supply of uniquely produced budget guitars.Indische Guitars January 5.000 by the 2 nd-3rd year of operation Become profitable and pass break-even by the second year of operation Page 5 .” Goals & Objectives  Efectively establish an image and brand that is well respected and known  among local guitarists Serve Kolkata’s guitarists with uniquely afordable guitars and necessary post-  sales service Help to increase the amount of aspiring guitarists in Kolkata and encourage other  musicians to also try guitar Support local guitarists and artists by providing them with some service and   equipment Maximize sales by the 3rd year of operation Achieve a consistent number of equal to or over 10 customers per week  spending on average Rs. Exquisite custom made guitars and repair servicing.

The location will be a commercial space of 2000 square feet that will be leased at current viable market rates per square foot including basic utilities. India. providing sales.Friday 10am – 7pm Saturday 10am – 4pm Sunday Closed We want to accommodate the high level of customer relations that Indische has aimed to achieve and we shall do that by having atleast two consistent employees working during hours of operation. Each of our unique backgrounds provides the skillset needed to efectively start-up and run the business. In total. Kolkata. at a commercial property. 2016 Operations Plan Indische Guitars will be both a direct sales company that will specialize in selling uniquely produced budget guitars and custom made higher end instruments to the established and prospective guitarists of Kolkata. With the need for excellent repair service for customers.Indische Guitars January 5. Our staf will be very hospitable to the customers as well as providing them with product knowledge and expertise. providing adequate space and excellent positioning for the start-up all for a Page 6 . the monthly cost for lease will be around Rs. Our instruments (be it budget or high-end) will aesthetically attract customers and close sales through easy navigation and informative product descriptions. 20. another employee with knowledge of guitar electronics and mechanics will be hired to conduct both repairs and additional sales service. The work will be divided to individual expertise to act as Luthier. Sales will be achieved through both in-store. Financial Flexibility – The location should be relatively inexpensive for the area. Location Indische Guitars will be located in the suburbs. We will choose this location based on the following reasons: 1. marketing and bookkeeping needs of the company. Workshop Hours Monday.000. personal contacts and endorsements.

The distance will allow for more freedom of movement in our marketing strategies and customer relations as there is and will be an established and developing customer base in that area of the city. Floor Plan Figure 1 The proposed floor plan for Indische Guitars is designed to have an appeal and feel that well-suits production. The building should provide the preferable size for inventories and space requirements as well. Instruments . finishing and setup experience. 3. 2. Convenience – The workshop would be situated in a convenient location for potential customers to visit and the area should provide the needed consumer traffic for the business’s sales goals.Indische Guitars January 5. 4. There will be a main production space where inventories will be held and viewed allowing for a very smooth-flow of Page 7 . 2016 price that will give the owner more flexibility in budgeting. Distance Relative to Competitors – Indische Guitars will be situated at a minimum 15 kilometers from its nearest competitor.

The weekend will conclude with another small meeting to update bookkeeping. This area will be located in a partitioned section from the main area. A separate room will be partitioned of to act as the setup and service area and a final room will be there to act as the business office. Weekends will be of lower workload to provide the staf with better and relaxed work environment. Production each day will commence with specific tasks involving choice and sorting of wood to what hardware to be used with which finish and details of such production targets will be put on specific tabulated forms to be displayed in the main production area for convenience of each workstation. marketing strategies and daily purchase orders for inventory as well as handling sales duties if any are needed. Raw materials like wood stocks will be held in racks for easy viewing and access. The advertisements and online updates will also need to be conducted by the owners/managers during the week in order to be prepared for the following week. Payroll will also need to be done bi-weekly. for only two staf. 2016 production traffic on the floor as shown in Figure 1 above. The schedule and target for the week will be set on every Monday morning with a short meeting. will be done before closure. Page 8 . All the employees must know the ins and outs of each instrument produced as Guitarists will have more respect for knowledgeable staf that are willing to spend time discussing the products in question. but. Time for the other sales/repair work that will have been brought in on earlier occasions will be allocated separately. equipment on a daily basis in order to make inventory delivery and payment staggered and easy to operate. There will also be a separate portioned room for spraying finishes. containing guitars and amplifiers.Indische Guitars January 5. The daily stock and equipment inventory will be maintained in promoting the sales of the inventory. The owners/managers will check over necessary inventory lists and store needs such as product placement. Business Cycles Average Business Day Typical business days at Indische will be very similar year-round. Average Business Week The owners/managers will have some major duties during a week’s time in the business month including inventory management and payroll. The cleanup and preparation of the work floor if necessary for the next day as well as making final inventory purchase orders based on inventory sold during the day. There will also be places where customers can test out guitars that they are interested in. it will be relatively quick and simple task. The owners/managers will have to be making inventory orders for guitars.

The detailed schedule of these costs is found in Table 1. Woods will be purchased specifically from reputed suppliers both local and overseas. Monthly sales and inventory analyses will need to be done for each month as to which guitars and product line were most popular with customers in order to stock accordingly for the next month. including computer equipment and custom design costs. Average Fiscal Year The year-end financial statements will need to be prepared by the owners/managers once a year. 2016 Average Business Month Moving from month to month will not involve much change required tasking. failures as well as an external demographic analysis.Indische Guitars January 5. All the required parts and electronic components will be purchased in bulk from wholesalers to reduce costs. successes. The complete business analysis will also be produced to examine sales. marketing eforts. most likely at year-end on March 31 of each year. Capital Budget The total capital requirement for Indische Guitars is Rs. Customer feedback will also be important in determining the type of guitars that will be stocked if they are available. it will help to remove inefficiencies within the business. This inventory cost breakdown can be found in Page 9 . 25000 per guitar cost and averaging prices for custom inventories. It will also be necessary for the owners/managers to conduct monthly environmental analyses of Kolkata and its demographics in order to plan marketing strategies accordingly. In a general sense. Since our business will not be seasonal. we do not have to worry about radically changing inventories that will be stocked. Supply Analysis All inventory in the line will be purchased from respected manufacturers that have strong reputation amongst the music and guitar industry. 2500000. product availability and overall service level. These year-end analyses will be the driver on necessary changes to the diferent divisions of the business. The owners/managers will produce statements indicating these results and will provide them to the shareholders. Inventories are estimated based on the Rs. allowing for better-spent finances and for more fruitful strategies/sales to be used.00. These manufacturers (suppliers) have been chosen based on brand. New suppliers will be proposed and analyzed by the staf to determine if they should become aligned with Indische. All products will be purchased directly from manufacturers which eliminates “middleman” costs. machinery. quality. improvements for the space assumed. stock. It will tease out strategies that are not yielding sales and inventory products that are not selling. This cost includes leasehold.

Page 10 . There will be no accounts receivable as all payments involving only cash will be accepted both in-shop. meaning that profits will increase high above purchase costs. we foresee high margins for the sale of guitars as we can increase price based on their cost to purchase raw materials in bulk. The liquidity value of these inventories after processing is much higher than their cost. For example. The bulk of the capital costing is attributed to inventories.Indische Guitars January 5.Appendix A. 2016 Cost of Goods Sold . Accounts payable is based on the purchase of these inventories from manufacturers.

00 Furniture and Fixtures: Computer Racks Shelving Stools Work Counter/Benches Office Supplies Printer Inventory Hangers Spraybooth Total Furniture and Fixtures 25000.00 2000.00 5000. 2016 Table 1 – Capital Cost Expenditures Description: Rent/Lease agreement Incorp. Expense Custom Stationary Machinery Total Business Space Costs Estimated Cost 200000.Indische Guitars January 5.00 8000. accident or weather conditions.00 15000.00 3000. Page 11 . As you can see. Parts and tools inventory supplies will be a continuous expense and will likely vary each month in connection with the amount and nature of sales and orders. We do anticipate that advertising expenses could rise if opportunity to reach more customers presents itself.00 Working Capital: Inventories Accounts Payable 500000.00 Total Net Working Capital Total Capital Requirements Operating Expenses Indische will be open 6 days every week for 52 weeks a year obviously excluding statutory holidays. The estimated monthly operating costs are listed as follows in Table 2.00 5000.00 20000. Insurance will be necessary for the inventories as there will always be risk of damage due to vandalism. monthly operating expenses are kept relatively low with wages and repair parts and tools taking up most of the cost.00 10000.

Indische Guitars January 5.00 1000.00 To be provided after 6 months . paints. glues) Internet Telephone Office Supplies Insurance (Space & Product) Advertising Consumables Other Variable Costs Total Sales/Floor Expenses HR Expenses: Employee Salaries Employee Benefits (15%) CCA Total HR Expenses Total Operating Costs Page 12 Estimated Costs 25000.00 25000.00 5000.00 300000 1000. 2016 Table 2 – Monthly Operating Expenditures Business Space: Building Lease/rent Production/Floor Expenses: (20 units) Electricity Guitar Parts Inventory Supplies (stains.00 2000.

wood.Indische Guitars January 5. low-budget instruments to a large consumer base. Pricing Indische will be entering a competitive music and instrument retail industry within Kolkata. In the city. (i. we will charge prices that equal to or just below are industry averages for repairs Page 13 . Epifone. Indische will be focused on selling uniquely produced guitars for a price that will create lots of margin whilst still creating a lot of value to the customers. knowledgeable and engaging staf and excellent service in Kolkata Indische will sell to a specific market carrying uniquely creative guitars making models with high quality configurations very afordable. there are a number of smaller music and guitar shops mostly located in the North and Central areas of the city. which provides an array of guitars as low-quality. hardware and electronics choices. etc) instrument influx from Chinese manufacturers. it is feasible to sell them at a cost-plus price. using a mix between penetration pricing and value-based pricing to enter the guitar retail industry in Kolkata. Notable competitors include Hobmer. The feasibility of the business is centered on this concept. and by providing unique guitars for them to purchase. Yemaha. we will create value for them and profit for our business. We will also provide the customers. Appendix B shows the current competitor analysis within Kolkata. 2016 Marketing Plan Products & Services Indische Guitars will be a unique value guitar manufacturer that will provide afordable products. finishing. sell at a margin of 12-25% over production costs). custom designed high-end instruments with them having complete control over creative decisions. as there are no lost margins for repairs. Ibanez. With the ability to produce these guitars as factorymade highgrade low priced instruments. etc.e. The strategy is much diferent than almost all usual music and guitar retail stores because it is based on the unique value of each guitar. Indische will look to target the influx of low-priced branded (Squire. The advantage of using this strategy is that guitarists especially take a personalized view to their guitars. Givson. The pricing strategy for repairs will be competitive pricing.

We will focus on our competitive advantage to get our name out to the market of guitarists and musicians. Kolkata is a breeding ground for up and coming musicians looking for good quality budget instruments and this financial constraint often limits them to a Chinese manufactured low-quality branded product. The current most selling brand is Ibanez in Kolkata with Squire coming a close second. We aim to be to be recognized as a unique guitar manufacturer that sells guitars that no one else will ever have. Page 14 . 18000-25000 and with our instruments ranging in the vicinity but with much higher quality of construction. Specifically. Specific Market Analysis The demographics of Kolkata also show that there is a growing customer base that is eager to get into music and specifically. we will aim at targeting people aged between 12 and 55 focusing on younger individuals who are up and coming guitarists who are searching for ways to aford popular guitar models and sounds and on middle-aged individuals-mainly men who have been playing for many years. Our segmentation will look to target this population as our primary customer base. with their most selling instruments ranging between Rs. This positioning statement communicates our intentions and ofering as well as how we diferentiate from other guitar manufacturers in the area. 2016 Promotions Indische’s promotion strategy will be based on the specific pricing and services strategies for the divisions of products. Indische Guitars provides excellent-sounding and uniquely manufactured guitars from the best-known woods and parts at afordable prices along with diligent after sales repair services. providing knowledgeable service and repairs for its customers as well. Positioning. guitars.Indische Guitars January 5. we are sure of reaching our target demographic. With our prior personal contacts eminent local guitarists will also be ofered various lucrative endorsement deals to further the sales and circulation of Indische guitars. Our positioning statement will read: For aspiring guitarists. hardware and electronics. Targeting & Segmentation The target market will be residents of Kolkata and all over India. With Indische producing top quality instruments at afordable prices and with a targeted marketing and circulation strategy we are sure to surpass sales for similarly priced lower quality Chinese products.

The advantage of a greater margin in guitars will be a strong advantage as these margins are not attainable for comparably priced guitars from competitors. new customers may enter the market over time. direct model of purchasing will be the most prominent for the business because customers will get to experience the quality of the Indische instrument as well as being able to try out the guitars first-hand against commonly available options. Exposure is key for the business. The sales predictions are fairly conservative with the base case in the first year being 10 customers per fortnight spending Rs. Indische wants to establish itself as the new. unique and quality guitar manufacturer in Kolkata. It must reach a sales level of 20 units per month in year one and increase it to 50 units per month by year 5. The location and new selling strategy will place Indische in a strong position within the market. 2016 Marketing Strategy The objectives of Indische’s sales and profits are respectively:    Maximize sales by year 5 Reach monthly sales of 15-20 guitars Earn an average owner compensation salary over the first 5 years. which will have to be continuously evaluated in order to maximize position on a consistent basis. advertising objectives will focus on cementing Indische’s brand in the minds of the city’s consumers. keeping in mind the first year’s extra equity will eventually have to be paid of There are two channels of distribution for Indische Guitars. Selling & Advertising The main advertising objective in the first two years of business will be to create awareness in the city and to persuade customers that we ofer unique and quality products as well as personalized customer service. in-store purchasing and personalized demos. Indische’s diferent methods of selling guitars will distinguish it among competitors and will be difficult to duplicate. so most of the advertising methods have been focused on creating more and more awareness. With the strategy and foreseen success for the business.Indische Guitars January 5. Our reputation will be built upon our ability to ofer personal and knowledgeable customer service as well as our uniquely produced guitar inventory provided to the customers. This is made more achievable by the repairs sector of the business. Page 15 . The in-store. 25000 each. In the following years. Indische can meet its objectives by achieving the forecasts shown in the financial model.

com where many guitarists from around the world can be exposed to the awareness for our brand Posters – Posters provide unique one-on-one advertising in strategic places around Kolkata.Indische Guitars January 5. These ads are inexpensive and can last for the duration of the 5-year plan changing with new oferings and promotions done by our store. Social media – The internet is obviously the largest and fastest growing advertising channel in the world. These posters will have eye-catching graphics as well as basic information about the competitive advantages. Indische aims to set up a professionally designed profile that will display info. Online Advertisements – In addition to having a website. Sponsorships – We will sponsor a few local musical events to create buzz. We will promote this long before it happens in order to have maximum awareness for the event. Consumers almost expect their prospective stores to have some sort of web presence where they can scout and purchase possible products from their home. products and promotions in an aesthetically appealing way. it will also be beneficial for our business to purchase advertisements on popular guitar websites such as ultimateguitar. The page also serves the purpose of boosting sales through the availability of online quotes and personalized chats. All of these associated costs are detailed in Table 4 the Marketing Budget Page 16 . 2016 The diferent advertising channels that will be used will include: Newspaper/Magazine Advertisements – This type of advertising specifically in newspapers and on newspaper sites that focus on the arts and music will reach some of the market we are targeting although large responses from these are not expected when compared to other mediums. Our primary focus is to place them in music venues and bars around the city where aspiring musicians and starter bands can learn about the new guitar store in the city that wants to form a relationship with them. We will ofer discounts on our products to sort of kick start our business in Kolkata.

Indische Guitars January 5. The large average compensation can be attributed to the high equity investment in the first year. Alternatively. The provided financial model will show these statements further. we will use a combination of equity and financing from proven willing backers to provide the equity who are in support of the business. A detailed financial analysis of this proposed business proves that Indische Guitars is feasible and has the opportunity to attain profits and deliver a quality service and product line to its customers. showing a strong position for the future years. Financial Analysis The large average owner compensation suggests that the business will be significantly profitable in future years. Indische Guitars plans to change the scene by ofering a unique type of guitar inventory that will attract guitarists from all around. As shown in the figure below. Projected cash flows indicate that costs will be covered especially inventory costs. 20 18 16 14 12 10 8 6 4 2 0 1 2 3 4 5 Conclusion The city of Kolkata is ripe for a specialized guitar manufacturer to enter its market. funds could be poured back into the company once there is a positive net income. they will loan the money and expect payment back in time with due profits. Owner Compensation The “dividend” of the company will primarily go out as owner compensation. 2016 Financial Plan Financial Structure To finance the near Rs. the breakeven for customers per day for the workshop can occur in between years 1 and 2. 2500000 required for start-up. making it a determinant of success for the company. Page 17 .

Indische Guitars January 5. 2016 Page 18 .

00 10000 Pickups 6000.00 produced per month) Logistics 500.m.00 Other incurred costs 250.Indische Guitars January 5.00 TOTAL 13650.00 6250 Gig Bag 300.00 50000 Machine Heads 1500. Body Blank 500.00 12500 Neck Blank 300. Page 19 .00 20000 Paint/Finish 250.00  Costs approximated as per bulk purchase and production for minimum of 20-25 units per month. parts costs 800.00 42000 Electronics 250.00 6250 Misc. 2016 Appendix A: Cost of Goods Sold Item Cost p.00 7500 Fretboard Blank 400.00 Electricity consumed (calculated as per 25 units 400.00 150000 Bridge (Floyd Licensed) 1700.

2016 Appendix B: Competitor Analysis Competitor Positioning Prices Squier Epiphone Cort Ibanez Page 20 .Indische Guitars January 5.

2016 Appendix C: Kolkata Age Demographics Median Age 2006 2014 (%) City of Kolkata 36.4 36.0 36.5 West Bengal 36.5 40.1 36.0 Kolkata Census Metropolitan Area 36.0 Page 21 .Indische Guitars January 5.5 India 39.

25000 Page 22 . 2016 NOTE S    Salaries of workers to be included as monthly operating expenses of the business. Rent estimate to be taken at around Rs.Indische Guitars January 5. Sales made to shops are to be considered as Credit Sales and amount to be added to Debtors under Current Assets.