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Onboards business plan

Summary
Onboards is a new skateboarding shop that caters to the youth and young adults in
Bucharest community.
Our intentions are to obtain 80% market share and become a central hub of shopping
activity for the local skateboarding population, as well as for others who would enjoy
wearing the latest trends and fashions.
Our conservative sales forecasts, based on solid market research, will yield a net profit
over $6,000 in the first year, increasing to almost $20,000 in year three.
Our intention is to enhance the skateboard culture in our communities, by promoting
drug-free and violence-free events in our communities.
We expect four stores located in superb retail areas by the end of year five.

Keys to success
The primary keys to success for Onboards are:
SELL products that provide the latest styles of boards, clothing and equipment
to our customers, and enable them to build a positive image identified with the
skateboarding culture.
PROVIDE custom services such as in-store grip application and tools to fix and
apply newly purchased parts so that customers are retained to generate repeat
purchases and send their friends.
COMMUNICATE with our customer base through print magazine, newspaper
advertising, and postcard mailings promoting skateboarder events, bringing in
pro and semi pro skaters sponsored by manufacturing companies. Our website
will be another avenue for marketing and sales.
ESTABLISH a visible, accessible, friendly, and dynamic storefront and website
to position us as the premier choice for our products and services within the
marketplace and beyond.
ENSURE through daily management practices the values of Onboards's mission
are followed so that a successful and growth-oriented business is developed and
maintained.

Start-up Summary
The company will start with three months' inventory on hand for apparel and
accessories, as this is the main revenue generator. The majority of the company's assets
will reside in inventory.
The purpose of this business plan is to secure a $50,000 small business loan. This
supplemental financing is required to work on site preparation, inventory, and
operational expenses.
The owners' cash investment of $5,600 will be applied towards any required
qualifications for small business loan and will be applied towards the start-up cost. The
owners will also contribute current assets consisting of racks, hangers, shelves, etc.
valued at approx. $1,200.

Company ownership
Onboards is organized as a partnership between Paris Iannis, Paun Stefan, Niculae
Bogdan and Miros Catalin. Paun Stefan and Paris Iannis will handle all merchandising
while Nicolae Bogdan and Miros Catalin will handle all administrative duties. All will
share managerial duties.

Products
Onboards will carry internationally-recognized brands. Our selections will cover
skateboarding, snow boarding, and surfing. We will be purchasing through sales
representatives and manufacturers in a variety of sizes, colors and style to fit our target
market base.
Management will rely on customer feedback, suggestions, and sales reports to
introduce or eliminate certain brands, styles and sizes.
Market Analysis Summary
The primary target customer of Onboards will be the teenager skaters and young
adults from the Bucharest area. As we are situated in the center of their residental
community we believe they will make up the largest percentage of our customer base.

Another target customer of our company will be, due to the popularity of the
store, curiosity seekers. We expect to see an assortment of local residents from the
community as well as seasonal purchasers during all boarding seasons.

Market Segmentation

Nowadays, skateboarding is a popular activity for the youth. We estimate a target


population of 2,500 junior high and high school-aged students, most of whom will
visit Onboards at least once, as the new cultural experience we are offering and
because is the one and only skate shop in this area.

Our secondary target market consists of students, who represent a growing


population of skateboarders and snow boarders who will shop outside of their
neighbourhood. The store is located in center of the city, accessible to customers by
car or bus.

The last area of potential customers is adults. There are hundreds of


avid skateboarders that are trying to find new ways of travel to work in this crowded
city. Other adults will bring their kids in to buy the most trendy shoes, boards,
accessories, and gifts, and may fund something for themselves while browsing. Our
ambience and customer service will make them loyal customers.
Potential customers

High-school students
University students
Adults
Kids

Market Analysis
Potential Growth Year 1 Year 2 Year 3 Year 4 Year 5
customers
High-school 15% 2,500 2,875 3,306 3,802 4,372
students
University 10% 1,200 1,320 1,452 1,597 1,756
students
Adults 15% 1,000 1,150 1,322 1,520 1,748
Kids 10% 700 770 847 931 1,024
Total 15% 5,400 6,115 6,927 7,850 8,900

Target Market Segment Strategy

Skateboarding has become a new and fast growing industries in Romania today.
Boarding is no longer a fad or a pastime but is here to stay. Movies, magazines, X-
Games, Olympics, television, and video games all feature boarding sports. Onboards
is a part of this growing industry.

Our sales strategies rely on a further differentiation in our target markets. Our
younger customers can be generally classified as either trendsetters or trend followers:
Trendsetters keep up with online chats about boards, manufacturers, new
wheel technology, and new maneuvers. They are willing to spend a great deal
of money to be on the cutting edge, and in most circumstances, do this by ordering
online or direct from the manufacturer to access items unavailable in the local area.
Our challenge with these customers is to direct them to our custom-ordering
capabilities, and to let them feel they have "discovered" a new trend on their own.

Trend Followers, on the other hand, are anxious not to be seen as too far out of
the mainstream, which means playing a constant game of "catch-up" with the
trendsetters, requiring regular purchases of new equipment and clothing.. Our
challenge with this group is to stay on top of local trends so as to keep in stock a
good array of colors and accessories for the style-of-the-month.

Older customers choose merchandise based on more personal needs - preferred


styles and manufacturers generally outweigh "trendiness." Although we do not have
the expertise to serve older customers as a font of skateboarding experience, we hope
that our convenient location will draw them in, and our selection and flexibility, with
custom-ordering, will generate repeat business.

Competition

There are two to four competitors in the general area. After surveying many
potential customers, we have found that the general trend is people feel that they have
no alternative but to go to one of these stores. Many indicate that they would welcome
an alternative in their locality. This particular population of customers is growing.

Our intention is to gain 80% of this market share by focusing on our niche
positioning, neighborhood location, popular brands, and special promotions.
Marketing Strategy

Our marketing strategy will focus heavily on sales promotion, niche positioning in
the market and customer service with loyalty and retention in sales.

The marketing budget will range from 15% to 20% of our gross annual sales.

Our promotions will always stay in tune with our company objectives and
mission statement.

Initial marketing will begin with flyers and leaflets in the skate park for two
months before we open, to alert our potential customers to our new store.

Sales Strategy

We will utilize a retail software with every sales transaction. With each
purchase, the software will record and maintain in its database the customer's
name, address and purchases. This information will be used with our direct
mailing program to focus on the top 50% of our customers.
We will offer a 14 day return/exchange policy to build trust with our customers
and maintain retention and loyalty.

Sales by year (in thousands of dollars)

20
18
16
14
12
Skateboards
10
Accessories
8 Shoes
6
4
2
0
Year 1 Year 2 Year 3 Year 4 Year 5
Web Plan Summary
Onboards plans to develop a Web presence in the first year. We will add e-
commerce to the business model at the end of the first year. Onboards's website will be
a secondary channel of business serving as advertisement for the company, as well as
its online "home."

The website will showcase the available products for purchase. Additional tips and
inspirational ideas will focus on gifts and gift giving. To further show off our expertise,
the website will provide a resource area, offering articles, research, product
information and website links of interest to our customers.

Ongoing Costs

Website name registration - $70 for 2 years.


Site Hosting - $22.95 per month.
Search Engine Registration - $200 per year.

Management Summary
Employees will be encouraged to work within their creative, physical, and intellectual
boundaries. All duties will be divided and delegated according to strengths and
weaknesses. At Onboards we will expect a high degree of customer service skills and
personality as this is essential to our success. The group will use their combined
experience in administration to jointly manage the store and its employees. Bogdan
will generally have responsibility for inventory ordering and management, and
accounting, while Catalin will be responsible for marketing and sales, and will directly
manage the store's employees.

Bogdan and Catalin will assess the productivity and perform informal evaluations of
all employees every six months. These bi-annual evaluations are conducive to the
continued growth of our small business
Personnel Plan

The personnel plan is included in the following table below. In addition to the inital
team, there will be one full-time employee and one part-time employee working 10-20
hours per week. The full-time employee will be paid at a rate of $10.00 per hour and
the one part-time employee will be paid at a rate of $8.00 per hour. All employees will
benefit from a one day paid holiday on their respective birthdays and one week of paid
vacation after twelve months of employment. We anticipate a 5% pay increase
annually based upon performance.

At this time medical benefits will not be offered to employees. As profits increase,
medical benefits will be offered to all employees, probably by year three.

The group plan to draw only a minimal salary in the first few years.

PERSONNEL PLAN YEAR 1 YEAR 2 YEAR 3


OWNERS $15,500 $21,500 $21,500
FULL-TIME $21,000 $21,800 $22,000
PART-TIME $9,200 $9,550 $9,784
OTHER $0 $0 $0

TOTAL PEOPLE 0 0 0
TOTAL PAYROLL $45,700 $52,850 $53,284

Financial Plan
Onboards growth will be moderate and the cash balance will always be positive. As a
retailer, we will not be selling on credit. We will accept cash, checks, and all major
credit cards. TeleCheck Services will be used as the check guaranty system to help
reduce the percentage of loss on bad checks. Marketing and advertising will range
from 15% to 20% of sales. We will continue to reinvest residual profits into company
expansion, and personnel.
Important Assumptions

Onboards does not sell on credit; however, layaway is an option. We accept cash and
checks, Visa, MasterCard, Discover and American Express. All sales paid via credit
cards will be deposited in our business checking account within 48 hours. Our business
checking account will be with a local bank. Our assumptions about loan and tax rates
are listed below.

GENERAL YEAR 1 YEAR 2 YEAR 3


ASSUMPTIONS
PLAN MONTH 1 2 3
CURRENT 10.00% 10.00% 10.00%
INTEREST
RATE
LONG-TERM 30.00% 30.00% 30.00%
INTEREST RATE
TAX RATE 10.00% 10.00% 10.00%
OTHER 0% 0% 0%

Break-even Analysis

Our break-even analysis is summarized by the following chart and table. With average
monthly fixed costs for the first year of $7,284, we need to sell $13,243 of
merchandise each month to break even. We will surpass this minimum amount in most
months of the first year.

BREAK-EVEN ANALYSIS -
MONTHLY REVENUE BREAK-EVEN $13,200
ASSUMPTIONS -
AVG PERCENT VARIABLE COST 45.5%
ESTIMATED MONTHLY FIXED COSTS $ 7000

Projected Profit and Loss

The following chart and table indicate our projected profit and loss. We expect to make
a modest profit in the first year, as we build name recognition and a loyal local
clientele, with higher profits thereafter, despite increasing the personnel payments for
all employees and offering health insurance by year 3.
Monthly profit:
Yearly profit:
Gross margin yearly:

PRO FORMA YEAR 1 YEAR 2 YEAR 3


PROFIT AND LOSS
SALES $165,000 $173,000 $182,000
COST OF DIRECT $59,000 $63,000 $70,000
SALES
OTHER $0 $0 $0

TOTAL COST OF YEAR 1 YEAR 2 YEAR 3


SALES
GROSS MARGIN $100,000 $110,000 $120,000
GROSS MARGIN % 55.00% 55.00% 55.00%
EXPENSES - - -
PAYROLL $45,000 $48,300 $49,900
MARKETING/PROMOT $9,500 $10,000 $11,234
ION
DEPRECIATION $0 $0 $0
RENT $21,300 $22,221 $23,120
UTILITIES $3,000 $3,932 $4,532
INSURANCE $634 $634 $634
PAYROLL TAXES $0 $0 $0
TELEPHONE $1,230 $1,230 $1,230
TOTAL OPERATING $80,644 $86,317 $90,650
EXPENSES
PROFIT BEFORE $19,230 $24,324 $31,321
INTEREST AND
TAXES
EBITDA $19,230 $24,324 $31,312
INTEREST EXPENSE $4,231 $2,123 $932
TAXES INCURRED $4,643 $5,834 $8,133
NET PROFIT $10,356 $16,367 $22,256
NET PROFIT/SALES 6.27% 9.46% 12.22%

Projected Cash Flow

The following table shows projected cash flow. It includes repayment of the short-term
loan principal, but does not list owners' dividends - these are included as regular
payments in the personnel table, for the purposes of this plan.

PRO FORMA CASH YEAR 1 YEAR 2 YEAR 3


FLOW
CASH RECEIVED
CASH FROM
OPERATIONS
CASH SALES $185,232 $192,321 $210,211
SUBTOTAL CASH $185,232 $192,321 $210,211
FROM
OPERATIONS
ADDITIONAL CASH - - -
RECEIVED
SALE $0 $0 $0
TAX,VAT,HST/GST
RECEIVED
NEW CURRENT $0 $0 $0
BORROWING
NEW OTHER $0 $0 $0
LIABILITIES
NEW LONG TERM $0 $0 $0
LIABILITIES
SALES OF OTHER $0 $0 $0
CURRENT ASSETS
NEW INVESTMENT $0 $0 $0
RECEIVED
SALES OF LONG $0 $0 $0
TERM ASSETS

SUB TOTAL CASH $185,232 $192,321 $210,211


RECEIVED
EXPENDITURES YEAR 1 YEAR 2 YEAR 3
EXPENDITURES
FROM
OPERATIONS
CASH SPENDING $44,321 $51,212 $58,521
BILL PAYMENTS $85,121 $122,123 $163,523

SUBTOTAL SPENT $126,213 $221,211 $263,212


ON OPERATIONS
ADDITIONAL CASH - - -
SPENT
SALES TAX $0 $0 $0
PRINCIPAL $16,321 $16,531 $16,631
REPAYMENT OF
CURRENT
BORROWING
OTHER $0 $0 $0
LIABILITIES
PRINCIPAL
REPAYMENT
LONG-TERM $0 $0 $0
LIABILITIES
PRINCIPAL
REPAYMENT
PURCHASE OTHER $0 $0 $0
CURRENT ASSETS
PURCHASE LONG- $0 $0 $0
TERM ASSETS
DIVIDENDS $0 $0 $0

SUBTOTAL CASH $152,211 $162,512 $172,211


SPENT
NET CASH FLOW $37,211 $821 $6,812
CASH BALANCE $39,231 $39,121 $46,316

Projected Balance Sheet

The following table shows the projected balance sheet. It shows a steadily increasing
net worth, as we gain market share and pay off our loan.

PRO FORMA BALANCE SHEET

Year 1 Year 2 Year 3


Assets
Current assets
Cash $36.000 $39.532 $48.000
Inventory $7.000 $7.222 $32.212
Other current assets $1.500 $1.600 $2.000
TOTAL CURRENT $44.500 $48.354 $82.212
ASSETS
Long-term assets $0 $0 $0
Accumulated $0 $0 $0
depreciation
TOTAL ASSETS $44.500 $48.354 $82.212
Liabilities
Current liabilities
Accounts payable $9.000 $11.000 $10.000
Current borrowing $37.000 $16.000 $12.500
Other current liabilities $0 $0 $0
TOTAL CURRENT $46.000 $27.000 $22.500
LIABILITES
Long-term liabilities $0 $0 $0
TOTAL LIABILITIES $46.000 $27.000 $22.500
Paid in capital $6.200 $6.200 $6.200
Retained earnings ($14.200 ($3.200) $12.000
)
Earnings $10.00 $16.200 $24.231
Total capital $2.000 $19.200 $42.431
Total liabilities and $48.000 $46.200 $19.931
capital
Net worth $2.000 $16.200 $12.000

Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios, for
comparison, are based on the Standard Industrial Classification (SIC) code 5941,
Sporting Goods and Bicycle Shops.

RATIO ANALYSIS

Year 1 Year 2 Year 3 Industry


profile
Sales Growth 0.00% 14.01% 13.50% 4.63%

Percent of Total Assets


Inventory 13.52% 14.91% 14.07% 36.51%
Other Current Assets 2.60% 2.52% 2.09% 25.52%
Total Current Assets 100.00% 100.00% 100.00% 77.61%
Long-term Assets 0.00% 0.00% 0.00% 22.39%
TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%
Current Liabilities 92.28% 59.58% 22.96% 35.84%
Long-term Liabilities 0.00% 0.00% 0.00% 15.20%
Total Liabilities 92.28% 59.58% 22.96% 51.04%

NET WORTH 7.72% 40.42% 77.04% 48.96%

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 55.00% 55.00% 55.00% 30.04%


Selling, General & Administrative 47.89% 44.52% 41.65% 19.81%
Expenses
Advertising Expenses 0.00% 0.00% 0.00% 1.28%
Profit Before Interest and Taxes 10.70% 11.99% 15.43% 0.66%

Main Ratios
Current 1.08 1.68 4.35 1.90
Quick 0.94 1.43 3.74 0.74
Total Debt to Total Assets 92.28% 59.58% 22.96% 56.14%
Pre-tax Return on Net Worth 432.95% 116.44% 80.56% 1.41%
Pre-tax Return on Assets 33.44% 47.06% 62.06% 3.22%

Additional Ratios Year 1 Year 2 Year 3


Net Profit Margin 5.92% 7.55% 10.56% n.a
Return on Equity 303.07% 81.51% 56.39% n.a
Activity Ratios

Inventory Turnover 5.97 14.03 14.00 n.a

Accounts Payable Turnover 10.19 12.17 12.17 n.a


Payment Days 27 27 28 n.a
Total Asset Turnover 3.95 4.36 4.12 n.a
Debt Ratios

Debt to Net Worth 11.95 1.47 0.30 n.a


Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $3,564 $19,274 $44,195 n.a
Interest Coverage 4.77 9.97 43.71 n.a

Appendix
Sales Mont Mont Mont Mont Mont Mont Mont Mont Mont Mont Mont Mont
Forecas h1 h h3 h4 h5 h6 h7 h8 h9 h 10 h 11 h
t 2 12
Sales $3,63 $4,32 $5,56 $6,31 $6,53 $5,75 $5,36 $6,78 $7,42 $6,63 $4,53 $5,12
4 1 4 2 2 5 4 5 1 2 1 3
Appare $2,13 $3,31 $2,14 $2,82 $3,21 $3,63 $3,82 $3,92 $3,72 $3,53 $3,81 $4,21
l 2 2 2 1 2 2 1 1 1 1 2 2
Shoes $3,52 $3,82 $3,72 $3,21 $3,82 $4,65 $4,62 $4,82 $3,82 $3,64 $3,81 $3,72
3 1 1 3 1 1 1 1 1 3 2 3
Boards $5,21 $4,74 $4,92 $5,21 $5,31 $5,82 $5,98 $6,21 $3,42 $2,92 $2,73 $2,51
3 3 1 2 2 1 2 3 1 1 2 2
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total
sales