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 Californias 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 NFLs 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 Westfields
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

Figure 2.1 Sports Zone is located in the heart of a strategic triangle marked at the vertices 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 Zones 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 seasons 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. Womens apparel
will be displayed on the stores 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
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 As
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 companys charismatic culture, and
administrating the business capital allocation and expenditures. As the CEO of this new startup, Angela Wang will adopt a collaborative management decision style and will be involved
with all aspects of the business, including interaction with all employees. Wangs daily tasks
will range from decisions on critical adjustments with her Board of Directors and confidential
investors to allocating goods with Sport Zones 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. Yus primary engagements will consist of expediting Sports
Zones advancements and increasing the companys profit margin on a quarterly basis. Yus
other tasks will include overseeing the development and execution of Sports Zones 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.

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 companys 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 clients 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 Zones 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 Joses 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 Zones 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 Zones 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 Zones 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 Zones 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 Zones 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 Zones
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
companys 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

Property + Utilities
Staff Training and Wages
Store Events
Incidental Expenses

Cost

$425,000
$200,000
$300,000
$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

10

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.

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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. Sperlings 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>.

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