Male Gear Wear

Executive Summary 

Male Gear Wear (Gear Wear) is a men’s aerobic sports retailer based in Ashland, Oregon. Gear
Wear offers the most comprehensive selection in town and arguably on the Internet/mail order
as well.

By offering the most complete selection as well as a knowledgeable support staff, Gear Wear
will quickly gain market share.

Ashland was chosen because of its diverse, active culture. It is not uncommon for people to
make a job sacrifices in exchange for quality of life gains, and the active, outdoor lifestyle is the
majority in Ashland. Gear Wear is a Oregon based L.L.C. primarily owned by Stan Gearboy.

Keys to Success
Gear Wear has identified three keys to success that they believe will be instrumental in reaching
sustainable profitable. The first is the need to meet the customer’s needs by offering the most
comprehensive selection and knowledgeable staff. The second key to success is the need to
monitor the competitive environment in an effort to ensure differentiation. The last is related to
the accounting systems of the organization. Gear Wear has identified the need to design and
adhere to strict financial controls.

Competitive Edge
Gear Wear’s competitive edge is its unsurpassed selection and sales staff knowledge. This will
be a significant edge because no other store offers the comprehensiveness within multi-sports
as Gear Wear. The type of athletes that participate in a variety of aerobic sports do so as a part
of their lifestyle. It is a part of their life, an activity that they enjoy and look forward to. While the
activities may be somewhat painful when you are doing them, depending of course on the
intensity that you reach, overall it is quite enjoyable. This would also explain why they particate
in so many different ones. One on hand some of the sports are seasonal, on the other hand,
you cannot get enough of just one.

Management
Gear Wear is being lead by Stan Gearboy, a veteran of the outdoor sport industry. While in
undergraduate school, Stan was an active member of two different sport teams. This was his
first introduction to his passion of aerobically challenging sports.

Following his degree, Stan went to work for R.E.I., a successful outdoor retailer (both brick and
mortar as well as mail order). Stan spent years at R.E.I. learning from the best. While Stan was
quite comfortable in the retail environment, he realized that if he wanted to pursue his dreams of
operating a retail store, he needed to build his skill set. Stan studied for his Masters with the
goal of opening his own store within the outdoor industry. Through a combination of passion,
experience, and education, Stan is the right person to lead Gear Wear to success.
Gear Wear has conservatively forecasted explosive sales by the end of year two, escalating
continually in year three.  The net profit margin will be low in year two and increase modestly in
year three.  While this appears to be fairly low for a retail operation, Gear Wear has sufficient
cash to weather the first few years with the goal of building a sound foundation for the business,
including a loyal customer base. 

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1.1 Objectives

 Become the premier men’s aerobic sports clothing retailer in Ashland.

 Increase market penetration to 10% by year three.
 Reach profitability within the second year.

1.2 Mission

It is Gear Wear’s mission to become the premier men’s sports clothing retailer in Ashland. This
will be accomplished by offering fair prices, the best selection, and a knowledgeable staff to
assist customers in any way. Gear Wear will strive to exceed all of their customer’s
expectations.

1.3 Keys to Success

 Meet the customer’s needs by offering a comprehensive selection and knowledgeable

staff.
 Monitor the competitive environment ensuring differentiation.
 Employ strict financial controls.
Company Summary 

Gear Wear is a Ashland, Oregon based retailer of men’s aerobic sports clothing. Gear Wear will
concentrate on running, cycling, cross country skiing and snowshoeing apparel.

Currently, there are local retailers that offer these types of garments, however most retailers are
sport specific, such as a bicycle shop or a running store. The few retailers that have a wide
range of sports have limited inventories. This company was founded on the premise that most
aerobic sport athletes participate in more than one type of activity.

2.1 Start-up Summary

Gear Wear is in the process of starting up the company. Legal counsel was consulted for a
variety of issues including business organization formation, contract negotiations, and etc. Gear
Wear also utilized a business consultant to gain insight into business issues that were not
intuitive to Stan. Gear Wear will incur $10,000 of build out expenses for the space. The following
equipment will be needed for start-up:

 Cash register and bar code scanner.

 Computer system with printer, scanner, and Internet connection.
 Assorted display racks, shelves, mirrors, etc.
 Stereo system.

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Start-up Funding

Start-up Expenses to Fund $17,900

Start-up Assets to Fund $82,100

Total Funding Required $100,000

Assets

Non-cash Assets from Start-up $9,000

Cash Requirements from Start-up $73,100

Additional Cash Raised $15,000

Cash Balance on Starting Date $88,100

Total Assets $97,100

Liabilities and Capital

Liabilities

Current Borrowing $0

Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $0

Other Current Liabilities (interest-free) $0

Total Liabilities $0

Capital

Planned Investment

Investor 1 $45,000

Investor 2 $25,000

Investor 3 $45,000

Additional Investment Requirement $0

Total Planned Investment $115,000

Loss at Start-up (Start-up Expenses) ($17,900)

Total Capital $97,100

Total Capital and Liabilities $97,100

Total Funding $115,000

Start-up

Requirements

Start-up Expenses

Legal $3,000

Stationery etc. $300

Brochures $200

Consultants $2,500

Rent $900

Research and Development $1,000

Other $10,000

Total Start-up Expenses $17,900

Start-up Assets

Cash Required $73,100

Start-up Inventory $0
Other Current Assets $0

Long-term Assets $9,000

Total Assets $82,100

Total Requirements $100,000

2.2 Company Ownership

Gear Wear is an Oregon L.L.C. founded by Stan Gearboy in late 2002.

Products

Gear Wear sells a wide variety of male-only clothing for aerobic sports such as cycling, running,
cross country skiing, and snowshoeing.

The main common element of the products for sale is NO cotton. Cotton is the worst possible
fabric to make sportswear out of, PERIOD. Cotton absorbs and holds water which is
undesirable because when saturated with water clothing loses almost all of its insulating
characteristics. It also becomes much heavier because of the water weight.

Lastly, when a garment is wet friction is significantly increased. This is most evident in socks
where blisters are almost guaranteed when running in cotton socks. Gear Wear’s mantra is
“friends do not let friends wear cotton.” The following is by no means an exhaustive list of the
products that are for sale:

 Shorts
 Long and short sleeve shirts
 Tights
 Water repellant shells
 Assorted fleece wear (jackets, pants, vests, hats, gloves)
 Socks
 Briefs, including wind briefs (with a wind resistant front panel)

Market Analysis Summary 

Gear Wear has segmented its market into two distinct segments. The first distinguishable
segment is hardcore athletes. These are people who live and breathe to push their body harder
and harder in aerobic activities. This market segment is present in Ashland, however, they will
not be the largest source of revenue as they already have most of the pieces of clothing for their
activities as they have been doing it for a long time.
They are more likely to pick up a piece here and there. The second market segment is the
newbies, these are people who are relatively new to aerobic activities. While their purchases
may not be quite as frequent, their number of potential customers is higher and they will have
larger ticket amounts.

Each group will be targeted with a different strategy, recognizing the fact that these groups,
although they are participating in the same sports have different demographics. The competitive
industry can be broken down into sport specific retailers and all encompassing sports/outdoor
retailers.

The sport specific retailers have a lot of clothing, but for only one sport. The all encompassing
retailers have a wide selection but not comprehensive selection. Lastly, serving this market
should be a steady, profitable endeavor simply because most people that participate in these
type of activities tend to for life.

4.1 Market Segmentation

Gear Wear’s market can be broken down into two distinct segments: hardcore athletes and
newbies. Each group has distinctive demographics which are detailed below:

Hardcore Athletes

 Typically spend seven – 15 hours per week on their training/activities.

 Regularly participate in two to three different aerobic sport activities.
 61% have at least an undergraduate degree.
 Have on average at least a $45,000 household income.

Newbies

 Typically spend five – 10 hours a week training.

 Have only recently (within the last few years) began to get serious in aerobic activities.
 54% have undergraduate schooling or a degree.
 > $47,000 of household income.
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Market Analysis

Potential Customers Growth CA

Hardcore Athletes 8% 8,097 8,745 9,445 10,201 11,017 8.00%

Newbies 9% 13,223 14,413 15,710 17,124 18,665 9.00%

Total 8.62% 21,320 23,158 25,155 27,325 29,682 8.62%

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4.2 Target Market Segment Strategy

The strategy for segmenting the market is based on the fact that the two different groups have
distinct buying patterns. The hardcore athletes have a decent amount of sport specific clothing.
When they shop for new stuff it is generally a replacement piece here and there.

They are typically buying the latest and greatest on the market. Although they do not need more
products it is this group that most appreciates the subtle improvements that the new products
bring. They therefore are likely to buy a piece or two if the product shows improvement in design
over what they currently own.

This differs from the newbies who are new to aerobic activities, or at least to the level that they
currently participate at. This group is more likely to make less frequent but larger purchases.
This group is particularly exciting because it allows Gear Wear to have a significant impact on
the outfitting of these people.

4.3 Industry Analysis

Gear Wear participates in the men’s retail clothing industry, specifically in the outdoor aerobic
sports clothes niche. The aerobic sports clothing market is a $765 million dollar industry.

Gear Wear is well poised in Ashland, Oregon, a sports minded town. Athletes can participate in
any number of activities, all within a 20 minute drive from Ashland. Additionally, people can
participate in both fall and winter (snow) activities at the same time.

Products in this industry are purchased either through a local retailer or mail order. At the local
retail outlet, there are either sport specific stores or larger general retailers that carry a wide
assortment of different sports/human powered activities.

Products are also purchased via mail order companies. Within the mail order arena, there are
also retailers that offer sport specific clothing as well as mail order retailers that sell a wide
assortment of sports.

4.3.1 Competition and Buying Patterns

Gear Wear faces competition from several sources:

 Run Pro: A running-only store that stocks a decent variety of running-specific clothing.
 Two Wheel Drive: A bicycle shop that has the best selection of cycling-specific clothing.
 Assorted ski retailers: There are two ski retailers that sell a variety of clothing, primarily
outerwear and base layers that could be used for cross country skiing.
 R.E.I.: A Seattle-based retailer and mail order company with many regional/local
stores that sells a wide variety of different men’s and women’s clothing. While the variety
is great in terms of sports, there are not a lot of choices within sport specific clothing.
 Performance Bike Shop: A mail order, cycling-specific retailer of clothing, bicycles,
equipment, components, and accessories. Their selection is great, however, it is cycling
specific and being mail order, you cannot try on the products.
 California Running: The leading running-specific mail order house. The pluses and
minuses are similar to Performance Bike Shop.
The buying patterns for the hardcore athletes are that they typically will go to a sport specific
store (or mail order) to make a purchase. This is because they use the clothing so much and
appreciate the technical aspects of the products that they notice the subtleties between the
different products and appreciate the wider selection.

The newbies are more likely to make their purchases from a general retailer because of the
wide range of products that they offer.

Strategy and Implementation Summary

Gear Wear will reach the road to profitability by exploiting its competitive edge of an incredible
selection. Gear Wear offers true one-shop stopping. Gear Wear’s marketing strategy will be
multifaceted, one facet for each market segment.

For the hardcore athletes, Gear Wear will market themselves as the most complete source of
products. For the newbies Gear Wear will be marketing themselves as the knowledgeable
source for all different sports. Newbies are in search information in addition to the gear for their
new activities and they are more likely to value a salesperson to help inform them.

5.1 Competitive Edge

Gear Wear’s competitive edge is its unsurpassed selection. It is able to offer the same complete
selection as the sport specific stores, but Gear Wear has multi sports all under one roof. This
creates a truly one stop shopping option where a customer can stop by and have the most
complete selection available.

As the demographics indicate, the target customers participate in more than one sport so the
value in being able to go to one store and find a anything you might want or need is of
tremendous value. While having a large selection is not an inherent sustainable advantage, for
now there are no indicators that would suggest that any other competitors are going to try to
enter this same space. The retail space seems to be content in not getting too specialized in
any one or groupings of activities.

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5.2 Marketing Strategy

The marketing strategy that Gear Wear will employ takes into account the two different market
segments. Gear Wear will market itself to the hardcore user group as the complete resource for
all the different types of male sports clothing.

Gear Wear will use a combination of magazine/journal advertisements to reach this group. In
addition to the advertisements, Gear Wear will also be quite visible at the different competitions
that the athletes participate in. They will be sponsoring the events as well as handing out flyers
as a way to develop visibility for the hardcore athletes.

The marketing strategy for the newbies will a bit different, in addition to advertising itself as a
complete source/selection of clothing, Gear Wear will stress the fact that in addition to the
selection it offers unprecedented knowledge/advice from its sales people. This will be attractive
to the newbies who are just getting into the different sports and could use knowledge and
guidance regarding their new activities. Gear Wear will rely on advertisements in the local
outdoor sports journals as a way to reach this target audience.

5.3 Sales Strategy

Gear Wear’s sales strategy will be to supplement its outstanding selection with salespeople who
can provide good information about the different features of the clothing and the differentiation
between all the products. Having just the clothing out on display will not in itself sell the
products, there must be supporting staff that can explain the relative differences between the
products as well as discuss the need for purchasing the gear. Most newbies will just assume
that they can use their traditional cotton workout clothing and they need to be educated as to
why specialized clothing makes all the difference in the world.

The sales staff will be well trained in knowing the technical details of the different fabrics and
products as well as proper fitting. This training will occur before the staff reaches the sales floor.
It is presumed that having the sales staff properly trained will have a significant effect on making
the conversion from a casual shopper into a qualified customer.

5.3.1 Sales Forecast

It is forecasted that the first three months will not have any significant sales activity. The first two
months will be used to set the business up to be ready for retail. The third month will have a
trickle of sales activity. This is to be expected as the business is just opening its doors and there
are not a lot of people that are familiar yet with Gear Wear. Sales are expected to grow slowly
during first year. Profitability should occur by month 26 with sales revenue escalating continually
through year three.

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Sales Forecast

Sales

Hardcore athletes $63,157 $151,889 $222,090

Newbies $70,736 $170,116 $248,741

Total Sales $133,893 $322,005 $470,831

Direct Cost of Sales Year 1 Year 2 Ye

Hardcore athletes $25,263 $60,756 $88,836

Newbies $28,294 $68,046 $99,496

Subtotal Direct Cost of Sales $53,557 $128,802 $188,332

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5.4 Milestones

 Completion of business plan

 Securing retail space
 First month the doors are open
 Profitability
 Explosive sales revenue

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Milestones
Milestone Start Date End Date Budget Manager Departm

Completion of business plan 11/1/2002 1/15/2003 $0 Stan Marke

Securing retail space 1/1/2003 2/1/2003 $0 Stan Departm

First month the doors are open 1/1/2003 3/1/2003 $0 Stan Operati

Profitability 1/1/2003 2/28/2006 $0 Stan Operati

Sales revenue >$200,000 1/1/2003 12/30/2005 $0 Everyone Sa

Totals $0

Management Summary 

Stan Gearboy received his undergraduate degree form the University of Oregon. While at the
University Stan was on both the cycling and the cross country ski team. It was in college where
Stan began to realize that he truly enjoyed pushing his body and mind aerobically.

After school Stan worked at R.E.I., initially on the sales floor for two years, moving to a
managerial position soon thereafter. Stan worked at R.E.I. for five years getting a complete
picture of the retail outdoor market. Stan had always had the dream to own his own business
but felt that he did not have a complete enough skill set to risk his own money so he thought it
would be prudent to go back to school for a Masters in Business.

Stan chose Southern Oregon University in Ashland based on its active culture and proximity to
the mountains. While at school Stan knew in the back of his mind that he wanted to open a retail
establishment. Stan recognized that there was no need for a bicycle shop as there were plenty
in the city. What Stan did realize was that there was a true lack of sources of men’s aerobic
sports clothing retailers.

After his first year in school Stan knew this was the category that he wanted to work in. He went
through his second year of school with this idea in mind, formulating parts of the business plan
while he was still in school. Two months after graduation, after applying and receiving a
significant loan through the school’s entrepreneurship program, Stan began to work full time on
Gear Wear.
6.1 Personnel Plan

Stan will begin operations with a few key positions:

 Stan: He will wear multiple hats within the organization. Some of his functions include,
but are not limited to: sales, marketing, procurement, business development.
 Sales staff: Initially Gear Wear will have a maximum of three sales people on the floor
at any one point. The sales staff will double as customer service agents if any problems
arise. The first six months will generally have no more than two staff members.
 Support staff: Gear Wear will use two support staff agents to assist in the unpacking,
inventory introduction, and merchandising of the products. These employees will work
primarily behind the scenes, except when it comes to the merchandising functions.
 Bookkeeper/Accountant: This will be a part-time position where the employee comes
in several time a week and performs the necessary bookkeeping duties. Every two to
four weeks the financials will be reviewed by a local CPA firm.

Personnel Plan

Stan $24,000 $30,000 $33,000

Sales staff $27,000 $35,000 $40,000

Support Staff $22,500 $27,000 $29,000

Bookkeeper $19,700 $24,000 $28,000

Total People 6 8 9

Total Payroll $93,200 $116,000 $130,000

Financial Plan 

The following sections will outline the key Financial Strategy for Male Gear Wear.

7.1 Important Assumptions

The following table details important Financial Assumptions.

General Assumptions

Plan Month 1 2

Current Interest Rate 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00%

Tax Rate 30.00% 30.00% 30.00%

Other 0 0 0

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7.2 Break-even Analysis

The break-even Analysis indicates what is needed in monthly revenue to reach the break-even
point.

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Break-even Analysis

Monthly Revenue Break-even $18,844

Assumptions:

Average Percent Variable Cost 40%

Estimated Monthly Fixed Cost $11,307

7.3 Projected Profit and Loss

The following table and charts show the Projected Profit and Loss.

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Pro Forma Profit and Loss

Sales $133,893 $322,005 $470,831

Direct Cost of Sales $53,557 $128,802 $188,332

Other Costs of Goods $0 $0 $0

Total Cost of Sales $53,557 $128,802 $188,332

Gross Margin $80,336 $193,203 $282,498

Gross Margin % 60.00% 60.00% 60.00%

Expenses

Payroll $93,200 $116,000 $130,000

Sales and Marketing and Other Expenses $6,000 $6,000 $6,000

Depreciation $1,800 $1,800 $1,800

Rent $10,800 $11,000 $11,000

Utilities $3,600 $3,600 $3,600

Insurance $3,900 $4,500 $4,500

Payroll Taxes $13,980 $17,400 $19,500

Other $2,400 $2,400 $2,400

Total Operating Expenses $135,680 $162,700 $178,800

Profit Before Interest and Taxes ($55,344) $30,503 $103,698

EBITDA ($53,544) $32,303 $105,498

Interest Expense $0 $0 $0
Taxes Incurred $0 $9,151 $31,110

Net Profit ($55,344) $21,352 $72,589

Net Profit/Sales -41.33% 6.63% 15.42%

7.4 Projected Cash Flow

The following table and chart presents the Projected Cash Flow.

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Pro Forma Cash Flow

Cash Received
Cash from Operations

Cash Sales $133,893 $322,005 $470,831

Subtotal Cash from Operations $133,893 $322,005 $470,831

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0

New Current Borrowing $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0

New Long-term Liabilities $0 $0 $0

Sales of Other Current Assets $0 $0 $0

Sales of Long-term Assets $0 $0 $0

New Investment Received $0 $0 $0

Subtotal Cash Received $133,893 $322,005 $470,831

Expenditures Year 1 Year 2 Ye

Expenditures from Operations

Cash Spending $93,200 $116,000 $130,000

Bill Payments $89,861 $193,772 $270,272

Subtotal Spent on Operations $183,061 $309,772 $400,272

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0

Principal Repayment of Current Borrowing $0 $0 $0

Other Liabilities Principal Repayment $0 $0 $0

Long-term Liabilities Principal Repayment $0 $0 $0

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

Subtotal Cash Spent $183,061 $309,772 $400,272

Net Cash Flow ($49,168) $12,233 $70,559

Cash Balance $38,932 $51,165 $121,724

7.5 Projected Balance Sheet

The following table shows the Projected Balance Sheet.

Pro Forma Balance Sheet

Assets

Current Assets

Cash $38,932 $51,165 $121,724

Inventory $9,422 $22,660 $33,133

Other Current Assets $0 $0 $0

Total Current Assets $48,354 $73,825 $154,857

Long-term Assets

Long-term Assets $9,000 $9,000 $9,000

Accumulated Depreciation $1,800 $3,600 $5,400

Total Long-term Assets $7,200 $5,400 $3,600

Total Assets $55,554 $79,225 $158,457

Liabilities and Capital Year 1 Year 2 Ye

Current Liabilities

Accounts Payable $13,798 $16,117 $22,760

Current Borrowing $0 $0 $0

Other Current Liabilities $0 $0 $0

Subtotal Current Liabilities $13,798 $16,117 $22,760

Long-term Liabilities $0 $0 $0

Total Liabilities $13,798 $16,117 $22,760

Paid-in Capital $115,000 $115,000 $115,000

Retained Earnings ($17,900) ($73,244) ($51,892)

Earnings ($55,344) $21,352 $72,589

Total Capital $41,756 $63,108 $135,697

Total Liabilities and Capital $55,554 $79,225 $158,457

Net Worth $41,756 $63,108 $135,697

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7.6 Business Ratios
The following table indicates key Business Ratios for this company as well as a relative
comparison with known industry averages, based upon the NAICS industry code 448190, for
Clothing Stores retailing lines of specialized clothes.

Ratio Analysis

Sales Growth 0.00% 140.49% 46.22% 5.27%

Percent of Total Assets

Inventory 16.96% 28.60% 20.91% 38.34%

Other Current Assets 0.00% 0.00% 0.00% 26.48%

Total Current Assets 87.04% 93.18% 97.73% 88.71%

Long-term Assets 12.96% 6.82% 2.27% 11.29%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 24.84% 20.34% 14.36% 37.92%

Long-term Liabilities 0.00% 0.00% 0.00% 12.86%

Total Liabilities 24.84% 20.34% 14.36% 50.78%

Net Worth 75.16% 79.66% 85.64% 49.22%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 60.00% 60.00% 60.00% 14.97%

Selling, General & Administrative Expenses 101.33% 49.59% 41.34% 6.56%

Advertising Expenses 0.00% 0.00% 0.00% 1.14%

Profit Before Interest and Taxes -41.33% 9.47% 22.02% 1.32%

Main Ratios

Current 3.50 4.58 6.80 2.10

Quick 2.82 3.17 5.35 0.86

Total Debt to Total Assets 24.84% 20.34% 14.36% 57.27%

Pre-tax Return on Net Worth -132.54% 48.33% 76.42% 4.00%

Pre-tax Return on Assets -99.62% 38.50% 65.44% 9.36%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin -41.33% 6.63% 15.42%

Return on Equity -132.54% 33.83% 53.49%

Activity Ratios

Inventory Turnover 10.91 8.03 6.75

Accounts Payable Turnover 7.51 12.17 12.17

Payment Days 27 28 26

Total Asset Turnover 2.41 4.06 2.97

Debt Ratios

Debt to Net Worth 0.33 0.26 0.17

Current Liab. to Liab. 1.00 1.00 1.00

Liquidity Ratios

Net Working Capital $34,556 $57,708 $132,097

Interest Coverage 0.00 0.00 0.00

Additional Ratios

Assets to Sales 0.41 0.25 0.34

Current Debt/Total Assets 25% 20% 14%

Acid Test 2.82 3.17 5.35

Sales/Net Worth 3.21 5.10 3.47

Dividend Payout 0.00 0.00 0.00

Appendix

Sales Forecast

Sales

Hardcore 40% $0 $0 $3,433 $4,412 $4,645 $5,323 $6,112 $6,687 $7,112 $7,4
athletes

Newbies 40% $0 $0 $3,845 $4,941 $5,202 $5,962 $6,845 $7,489 $7,965 $8,3

Total Sales $0 $0 $7,278 $9,353 $9,847 $11,285 $12,957 $14,176 $15,077 $15

Direct Cost of Month Month Month Month Month Month Month Month Month M
Sales 1 2 3 4 5 6 7 8 9

Hardcore $0 $0 $1,373 $1,765 $1,858 $2,129 $2,445 $2,675 $2,845 $2,9

athletes

Newbies $0 $0 $1,538 $1,977 $2,081 $2,385 $2,738 $2,996 $3,186 $3,3

Subtotal Direct $0 $0 $2,911 $3,741 $3,939 $4,514 $5,183 $5,671 $6,031 $6,3
Cost of Sales

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Personnel Plan

Stan 0 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $
%

Sales staff 0 $0 $0 $1,500 $2,000 $2,500 $3,000 $3,000 $3,000 $3,000 $3,000 $
%

Support 0 $0 $0 $1,500 $2,000 $2,200 $2,400 $2,400 $2,400 $2,400 $2,400 $

Staff %

Bookkeepe 0 $0 $1,000 $1,200 $1,500 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $
r %

Total 1 2 4 5 6 6 6 6 6 6 6
People

Total $2,000 $3,000 $6,200 $7,500 $8,700 $9,400 $9,400 $9,400 $9,400 $9,400 $
Payroll

General Assumptions

Plan Month 1 2 3 4 5 6 7 8 9 10 1
Current 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00
Interest % % % % % % % % % % %
Rate

Long-term 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00
Interest % % % % % % % % % % %
Rate

Tax Rate 30.00 30.00 30.00 30.00 30.00 30.00 30.00 30.00 30.00 30.00 30.00
% % % % % % % % % % %

Other 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss

Sales $0 $0 $7,278 $9,353 $9,847 $11,285 $12,957 $14,176

Direct Cost of $0 $0 $2,911 $3,741 $3,939 $4,514 $5,183 $5,671

Sales

Other Costs of $0 $0 $0 $0 $0 $0 $0 $0
Goods

Total Cost of Sales $0 $0 $2,911 $3,741 $3,939 $4,514 $5,183 $5,671

Gross Margin $0 $0 $4,367 $5,612 $5,908 $6,771 $7,774 $8,506

Gross Margin % 0.00% 0.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00%

Expenses
Payroll $2,000 $3,000 $6,200 $7,500 $8,700 $9,400 $9,400 $9,400

Sales and $500 $500 $500 $500 $500 $500 $500 $500
Marketing and
Other Expenses

Depreciation $150 $150 $150 $150 $150 $150 $150 $150

Rent $900 $900 $900 $900 $900 $900 $900 $900

Utilities $300 $300 $300 $300 $300 $300 $300 $300

Insurance $325 $325 $325 $325 $325 $325 $325 $325

Payroll Taxes 15% $300 $450 $930 $1,125 $1,305 $1,410 $1,410 $1,410

Other $200 $200 $200 $200 $200 $200 $200 $200

Total Operating $4,675 $5,825 $9,505 $11,000 $12,380 $13,185 $13,185 $13,185
Expenses

Profit Before ($4,675) ($5,825) ($5,138 ($5,388) ($6,472) ($6,414) ($5,411) ($4,679)
Interest and Taxes )

EBITDA ($4,525) ($5,675) ($4,988 ($5,238) ($6,322) ($6,264) ($5,261) ($4,529)

)

Interest Expense $0 $0 $0 $0 $0 $0 $0 $0
Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0

Net Profit ($4,675) ($5,825) ($5,138 ($5,388) ($6,472) ($6,414) ($5,411) ($4,679)
)

Net Profit/Sales 0.00% 0.00% - -57.60% -65.72% -56.84% -41.76% -33.01%

70.60%

Pro Forma Cash Flow

Cash Received

Cash from
Operations

Cash Sales $0 $0 $7,278 $9,353 $9,847 $11,285 $12,957 $14,176

Subtotal Cash $0 $0 $7,278 $9,353 $9,847 $11,285 $12,957 $14,176

from Operations

Additional Cash
Received

Sales Tax, VAT, 0.00% $0 $0 $0 $0 $0 $0 $0 $0

HST/GST
Received

New Current $0 $0 $0 $0 $0 $0 $0 $0
Borrowing

New Other $0 $0 $0 $0 $0 $0 $0 $0
Liabilities (interest-
free)

New Long-term $0 $0 $0 $0 $0 $0 $0 $0
Liabilities

Sales of Other $0 $0 $0 $0 $0 $0 $0 $0
Current Assets

Sales of Long-term $0 $0 $0 $0 $0 $0 $0 $0
Assets

New Investment $0 $0 $0 $0 $0 $0 $0 $0
Received

Subtotal Cash $0 $0 $7,278 $9,353 $9,847 $11,285 $12,957 $14,176

Received

Expenditures Month Month Month 3 Month Month Month Month Month

1 2 4 5 6 7 8

Expenditures from
Operations

Cash Spending $2,000 $3,000 $6,200 $7,500 $8,700 $9,400 $9,400 $9,400

Bill Payments $84 $2,530 $2,895 $9,226 $7,994 $7,723 $8,807 $9,564

Subtotal Spent on $2,084 $5,530 $9,095 $16,726 $16,694 $17,123 $18,207 $18,964
Operations
Additional Cash
Spent

Sales Tax, VAT, $0 $0 $0 $0 $0 $0 $0 $0

HST/GST Paid
Out

Principal $0 $0 $0 $0 $0 $0 $0 $0
Repayment of
Current Borrowing

Other Liabilities $0 $0 $0 $0 $0 $0 $0 $0
Principal
Repayment

Long-term $0 $0 $0 $0 $0 $0 $0 $0
Liabilities Principal
Repayment

Purchase Other $0 $0 $0 $0 $0 $0 $0 $0
Current Assets

Purchase Long- $0 $0 $0 $0 $0 $0 $0 $0
term Assets

Dividends $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash $2,084 $5,530 $9,095 $16,726 $16,694 $17,123 $18,207 $18,964
Spent

Net Cash Flow ($2,084) ($5,530) ($1,817) ($7,373) ($6,847) ($5,838) ($5,250) ($4,787)
Cash Balance $86,016 $80,486 $78,669 $71,296 $64,450 $58,611 $53,362 $48,575

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Pro Forma Balance Sheet

Assets Starting
Balances

Current Assets

Cash $88,100 $86,016 $80,486 $78,669 $71,296 $64,450 $58,611 $53,36

Inventory $0 $0 $0 $3,202 $4,116 $4,333 $4,965 $5,701

Other Current $0 $0 $0 $0 $0 $0 $0 $0
Assets

Total Current Assets $88,100 $86,016 $80,486 $81,871 $75,412 $68,782 $63,577 $59,06

Long-term Assets

Long-term Assets $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000

Accumulated $0 $150 $300 $450 $600 $750 $900 $1,050

Depreciation

Total Long-term $9,000 $8,850 $8,700 $8,550 $8,400 $8,250 $8,100 $7,950
Assets

Total Assets $97,100 $94,866 $89,186 $90,421 $83,812 $77,032 $71,677 $67,01

Liabilities and Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month

Capital

Current Liabilities

Accounts Payable $0 $2,441 $2,586 $8,960 $7,738 $7,430 $8,489 $9,235

Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0

Other Current $0 $0 $0 $0 $0 $0 $0 $0
Liabilities

Subtotal Current $0 $2,441 $2,586 $8,960 $7,738 $7,430 $8,489 $9,235

Liabilities

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0

Total Liabilities $0 $2,441 $2,586 $8,960 $7,738 $7,430 $8,489 $9,235

Paid-in Capital $115,000 $115,000 $115,000 $115,000 $115,000 $115,000 $115,000 $115,0

Retained Earnings ($17,900) ($17,900 ($17,900 ($17,900 ($17,900 ($17,900 ($17,900 ($17,90
 ) ) ) ) ) ) )

Earnings $0 ($4,675) ($10,500 ($15,638 ($21,026 ($27,498 ($33,912 ($39,32

) ) ) ) ) )

Total Capital $97,100 $92,425 $86,600 $81,462 $76,074 $69,602 $63,188 $57,77

Total Liabilities and $97,100 $94,866 $89,186 $90,421 $83,812 $77,032 $71,677 $67,01
Capital

1. Why did the owner choose the business?

So the owner chose that because his business will be different compared to the
businesses in his area, moreover maybe because there is no sports wear store in
that area and said there in the plan is for him to do more work because most in the
people living there are no jobs and the jobs available are not permanent.

2. How did he run the business?

Gear Wear has identified three keys to success that they believe will be instrumental
in reaching sustainable profitable. The first is the need to meet the customer’s needs
by offering the most comprehensive selection and knowledgeable staff. The second
key to success is the need to monitor the competitive environment in an effort to
ensure differentiation. The last is related to the accounting systems of the
organization. Gear Wear has identified the need to design and adhere to strict
financial controls.
3. Any possible growth?
As far as I understand, he has a main store and other people who also want to sell
his product make him a reseller or franchise another branch of his store.