PART-5

NEW PROJECT

1) Information about the New Project

The new project of Botas will be to expand its network in Berlin, Germany. It will
be able to do so by opening a new company operated store in Berlin. Botas
already sells its products from 3rd party stores in Leipzig, Germany. Further details
of the project are as follows:
 Opening of the project - January 2019
 Location - Oranienburger Strasse
 Total Area – 150 sq meter
 Expected opening of store – February 2019
 Total amount of loan –
Opening a new store in Berlin will be a good decision for Botas as it has a huge
inflow of tourists who constantly looking to shop for goods made in Europe. If the
store is successful in Berlin then it will provide a way for Botas to expand its store
in other areas.
We decided to choose Oranienburger Strasse as our stores location because it is
one of the traditional shopping streets in Berlin-Mitte and connects Hackescher
Markt with the northern end of Friedrichstrasse. The Hackesche Markt itself is
one of the most popular places in Berlin with tourists and locals. Numerous shops,
trendy cafés and restaurants around Hackescher Markt invite both international
visitors and locals to linger.
Total area of the store is 150 sq meter which is quite a big area. Our store will
feature a large window in the front which will provide best presentation
possibilities. The back area of the store will be used to store the inventory of
shoes.

2) Cost of the Project

Operating Expenses
The cost of the project is divided into various segments and they are as follows:
 Prepaid Inventory – 150,000 Euros
We are assuming that we will pay for the inventory in the beginning of the store.
Shoes comes in different varieties, colors and sizes so maintaining a large
inventory will be necessary to fulfill the demands of customers. Depending upon
the sales per month the required inventory can be stocked up again.
 Rent of the store – 78000 Euros
Renting a place of 150sq meter at an area like Oranienburger is costly. The per
month rent is 7,200 which sums up to 78000 yearly.
 Staff expenses – 86,400 Euros
We estimated the average salary of 1 worker to be 1,800 Euros. In total we
decided to keep 4 workers. To maintain a store this huge 4 workers will be
required. The monthly salary of 4 workers will be 7,200 and in total it will sum up
to 86,400 Euros yearly.
 Electricity expenses – 3000 Euros
We assume electricity expenses to be 250 Euros monthly so in total it sums up to
3000 yearly.

3) Revenue from the project

Based on the knowledge of the collection of Botas we estimated the average price
of per shoe to be 65 Euros. Botas has a wide variety of shoe ranging from casual
to high end skating shoes. We assume that the store will be able to sell 8-12 shoes
per day depending on the inflow of customers.
Monthly approximate sales of the store – 20000 Euros
Yearly – 240,000 Euros
The next year we expect the revenues (and costs) to increase by 7%.
 4) SWOT analysis of the project

STRENGTHS
 Long-time experience and skillfulness of shoemakers from Skuteč result in
high quality of BOTAS products. These high-quality goods are sold at
reasonable prices.
 Botas shoes has vibrant and rich designs which appeal to the taste of all
consumer types.
 Opening a new store in a popular area will increase the competitiveness of
Botas and will help in maintaining a strong capital base.
WEAKNESS
 Because the project demands to have a large inventory there is FINANCIAL
RISK involved with the project. In case the store fails to attract attention of
consumers we run the risk of defaulting on the loan.
 As Botas will be a new in Berlin it will have weak brand reputation.
Customers will not be familiar with the brand so it will take some time to
build brand reputation in a new place.
OPPORTUNITIES
 Opening a new store in a new area will pave the way for Botas to expand its
physical stores in rest of Europe.
 Opening a new store will cause increased media attention and create a new
buzz among consumers for a few days. If Botas becomes successful in
capturing this attention then it will create loyal consumer base.
 It will generate extra revenue for the company and will also provide job
opportunities to the people of that area.
THREATS
 Rise in the price of rent. If the landlord decides to increase the rent of the
store then it will be difficult for the store to remain profitable.
 Increase in wages will also decrease the revenue of the store and runs the
risk of making it less profitable.
5) Bank loan details
  Loan amount – 250000 Euros
 Interest rate – 5 %
 Maturity period – 5 years
 Payment structure – Quarterly
 Creditor – Komercni Banka
 First installment – March 2019
 Last installment – December 2023
 Collateral – Company Assets

6) Project Financing
The project will be financed by taking out a loan from bank of 250000 Euros. The
loan will be used to cover the following:
 Rent: Rent for 1 year which is 78000 Euros will be covered by the loan.
 Inventories: The cost of maintaining inventories of 150000 will be
covered by the loan.
 Salaries: The remaining 32000 Euros will go towards the payment of
salaries to the workers.
The loan will be paid quarterly and the interest per year is 5%. The remaining
salaries and other costs will be financed through the revenues of the store. Total
amount of the loan will be repaid in 5 years including the interest. The annual
loan payment will be 56,820 Euros.
The repayment structure of the loan will be as follows :