CARTIER JEWELRY STORE BUSINESS PLAN ALEXANDRIA CREATED BY: MOHAMED IBRAHIM ABDOU AHMED ASHOUR PRESENTED TO:

DR/ SHERIF DELAWR

2014-02-12

1.0 Executive Summary The Jewelry Store Cartier, which is to be located in Alexandria, Agami Star Mall, is a new business. We will offer a great selection of gemstone jewelry in arious designs, colors and si!es. "ur jewelry will include bracelets, nec#laces, earrings and rings. All of the $ieces will be designed and created by the owner. The Cartier will stoc# a wide selection of jewelry and will offer a ser ice to ma#e custom $ieces for sho$$ers while they wait or sho$ in the mall. All sales for the business will be through this mall. After a$$roximately eight months of o$erations the owner $lans to hire a sales re$resentati e to handle customer interaction and some mar#eting. The $ur$ose of this business $lan is to de elo$ a blue$rint of the com$any%s ision and strategy and then use this $lan to as a guide to de elo$ and grow the business. This business $lan will also be used to align the arious elements of the com$any to create a coherent system of sustainable customer satisfaction and $rofitability. &gy$t is one of the three major jewellery $roducers in the Middle &ast using more than '(( tonnes )*.++ million o!, a year. -n +((', ./ tonnes )*.'( million o!, were used to ma#e gold jewellery $roducts, $redominantly for the &gy$tian home mar#et. Most of the jewellery manufacture is carried out in and around Cairo. There is also some manufacturing in Alexandria. A$$roximately *,((( $roduction units are engaged in ma#ing the jewellery but only a handful are industrial0style factories. The jewellery is $roduced in the main by small, two to three $erson wor#sho$s. The sta$le items are +' carat bangles and earrings, $urchased by the local $o$ulation as a store of alue. This is $articularly true for the $eo$le of 1$$er &gy$t and the millions of illagers who ha e migrated to Cairo. 2owe er, in line with modernisation and the deregulation of the economy, there has been a growing trend toward '3 carat, more &uro$ean style jewellery, which is $referred by the urban $o$ulations. Across the country, the brea#down is a$$roximately 4(5 in +' carat and *(5 in '3 carat. &gy$t has an official hallmar#ing system based on the 6ritish model and set u$ in the '.+(%s. The Assay "ffice in Cairo handles most of the jewellery olume. Titles admitted are +*.7 carat, +' carat, '3 carat and '8 carat, but most jewellery is in '3 or +' carat. The ma#ing charge is +( $iastres $er gram for local $roducts and /( $iastres $er gram for im$orted items. There is a sales tax on gold jewellery of +.( and '.+* &gy$tian $ounds on '3 and +' carat items res$ecti ely. The sales tax was widened in +((' to include both wholesale )Stage Two, and retail o$erations )Stage Three,. )6eforehand the sales tax had a$$lied to only the manufacturing sector, referred to a Stage "ne., The charges, noted abo e, are inclusi e of Stages "ne through to Three. 2owe er, to calculate the total charges, which jewellers face, income tax and stam$ing fees must be added to the abo e fees, which are 8(( $iastres for both '3 and +' carat $ieces. The &gy$tian gold jewellery mar#et ran#s amongst the to$ ten worldwide. Consum$tion in +((' stood at ''/ tonnes )*.4* million o!,, com$ared with '+3 tonnes )8.'+ million o!, the year before. " er the $ast decade, the share of im$orted jewellery of total consum$tion, has declined and last year stood at close to just /5.
+

Source: 9old :ields Mineral Ser ices Although &gy$t has a substantial tourist industry, gold jewellery sales to tourists do not constitute a major feature of the mar#et. The Jewelry Store Cartier will focus on one $rimary mar#et, women. We will concentrate our mar#eting efforts on $rofessional women, as well as those who li#e to dress u$ when going out for the e ening. We will sell to these customers by suggesting color combinations and styles for arious outfits and occasions demonstrating our #nowledge of fashion design and customer ser ice targeted at indi idual sho$$ers. -n this industry trends are in our fa or. 9emstones are $o$ular because of their uni;ue natural colors and features< they are affordable yet ideally suited for business attire and both informal and informal occasions. 9emstones com$lement and can dress u$ any outfit on a woman. 1.1 Business Objectives

The $rimary objecti es of the business $lan for The Jewelry Store Cartier are below= > To create a $roduct0based Cartier whose goal is to exceed customer%s ex$ectations in design styles, ;uality and customer ser ice. > To de elo$ a sustainable merchandising unit that sells gemstones and customi!ed jewelry to meet the needs of the $rofessional and outgoing woman. > To increase the number of $roducts sold by +(5 each year. > To introduce a minimum of three new designs wee#ly. 1.2 Mission Statement The Jewelry Store Cartier%s mission is to design, ma#e and sell high ;uality fashionable jewelry designed $rimarily around gemstones. The Jewelry Store Cartier will offer an exce$tional le el of customer ser ice and $ersonali!ed fashion recommendations tailored to the indi idual customer. We exist to attract and maintain customers through our uni;ue combination of designs, ;uality, and customer ser ice and fashion recommendations.

1.3

Guiding rinci!"es

1. ?assion 0 We will always ha e, and show, our $assion for using jewelry as a com$onent of an entire outfit focusing on the combination which best fits the $erson, their clothes, $ersonality and occasion. 2. 2a$$iness @ 6y showing our feelings of ha$$iness and well being at all times through our Aalways smilingB a$$earance and u$beat con ersations our ha$$iness will be contagious to our customers. 3. :airness @ 6e fair to all< offer exce$tional ser ice and $roducts at fair $rices, res$ect and accommodate customerBs wants and needs, and be fair in all business $ractices both internal and external to the Jewelry Store Cartier. 1.# $eys to Success -n order to succeed in the jewelry industry the Jewelry Store Cartier must= > Showcase an assortment of si!es, colors and designs to fit the needs of our target customer base. > > ?ro ide customers with high ;uality $ersonali!ed customer ser ice. ?ro ide rele ant fashion design recommendations to our customers.

> Continuously re iew our in entory and sales and adjust our in entory le els accordingly. > ?ro ide for the satisfaction of '((5 of our customers and em$loyees. 6oth are ery aluable to us and we will design a customer care $lan to manage com$laints, im$lement em$loyee and customer feedbac#, manage su$$lier accounts, and $redict $otential conflicts. 2.0 %om!any &escri!tion The Jewelry Store Cartier is a newly established business located inside Agami Star Mall. The Jewelry Store Cartier is owned and o$erated by -brahim Ashour. We will offer a ariety of $remade and custom made gemstone jewelry $roducts that are designed and created by the owner on site as well as at home. All our $ieces are designed for the $rofessional and sociable woman. The hours of o$eration will model the mall hours of Monday 0 Saturday. 2.1 O'ners(i! -brahim Ashour is the sole owner of the jewelry store Cartier business. -brahim Ashour has o er +( years ex$erience designing and ma#ing jewelry. 2.2 )ocation and *aci"ities The Jewelry Store Cartier, which is to be located in Alexandria, Agami Star Mall. There are branches in the mall and the jewelry stored in the main branch. 3.0 roducts The Jewelry Store Cartier will s$ecifically carry gemstone jewelry that is designed for the $rofessional and sociable woman. "ur selection will range in arious colors, si!es and styles to meet the uni;ue needs of the e eryday woman.

Management will rely on customer feedbac# and sales re$orts to eliminate or introduce $articular si!es, colors and styles. 3.1 roduct &escri!tion "ur jewelry store Cartier will carry wide selection gemstone jewelry with arious styles and $rice ranges. &ach $iece of jewelry will focus on designs which accent and bring focus on the gemstones in that $iece. The jewelry will be designed for casual, business and formal occasions. We will offer gemstone jewelry that includes nec#laces, rings, bracelets, and earrings. Customers can $urchase $remade jewelry or re;uest a customi!ed $iece designed for them onsite. 3.2 %om!etitive %om!arison Some of the most well #nown com$etitors seen in the jewelry retail industry are Ca!urde, &gy$t 9old and Damas. Although we ha e many com$etitors in this s$ace, we will set oursel es a$art by solely concentrating on gemstone $roducts, gold, sil er, offering customi!ed $ieces, $ro iding hel$ful dress and jewelry style ad ice and setting fair $rices.

3.3

roduct Sourcing

Eaw jewelry ma#ing su$$lies will be sourced from countries such as -ndia, 6ra!il and China. The owner of the business has contacts in these countries for $urchasing ;uality gemstones and su$$lies not only at wholesale $rices, but also $ro iding credit arrangements and flexibility in $ayment terms. This in turn $ro ides some flexibility in the ownersB day to cash flow re;uirements. "rders of su$$lies which are small in si!e and weight will be air shi$$ed< whereas, larger and hea ier orders will be shi$$ed CCC )Cess than a Container Coad,. All $roducts and su$$lies will be stored at the ownerBs residence. While custom designs will be made on site while the customer waits, the standard selection of $remade designs will be made at the ownerBs residence. 3.# +nventory Management -n order to run the Cartier successfully in in entory is re;uired. This in entory will be stored at the ownerBs residence. The owner will utili!e bins to store and organi!e jewelry su$$lies. :inal jewelry $roducts will be #e$t at the Cartier. Since this is a small business with limited in entory, all in entory will be managed in a s$readsheet.

3.,

-are(ousing and *u".i""ment

Since jewelry and jewelry su$$lies tend to be small items a warehouse is not re;uired for the business. All su$$lies will be warehoused in the ownerBs basement, final jewelry $roducts will be #e$t at the Cartier in the mall. 3./ *uture roducts0Services 6y its nature, jewelry is a constantly changing business. As trends and styles change from year to year, and season to season, it is necessary to #ee$ flexibility in our $roduct lines. Since all jewelry will be designed and made by the owner of the business, the $roduct line will ;uic#ly change with changing styles and trends. As the business matures we may add ser ices that com$lement our jewelry such as cleaning and care $roducts as well as ser ice and re$air. 2owe er, the focus of our $roducts will remain gemstone jewelry. #.0 Mar1et 2na"ysis The Jewelry Store Cartier is s$ecifically targeting women. Women in the wor#$lace, as well as women that are sociable in the e enings )i.e., e ents, $arties, etc., are the $rimary focus for the Jewelry Store Cartier%s high fashion gemstone , gold and sil er $roducts. Des$ite the recent recession , $eo$le still ha e an a$$etite for beautiful things. Women can a$$reciate how easy it can be to change their loo# with jewelry without the ex$ense of $urchasing a whole new outfit. #.1 Mar1et Si3e Annual re enue from jewelry stores is about F*( billion. There are about +3,((( s$ecialty stores selling jewelry. #.1.1 +ndustry artici!ants Major $artici$ants include City center, San stefano, Agami Star Mall. Carge jewelry chains account for less than half of the industryBs total re enue #.1.2 Main %om!etitors &gy$t 9old 0 This com$any has a largest mar#et share . -t currently sells 9old and sterling sil er $endants, gemstones 0 young and old styles. The median $rices range from F+( to F'((. Ca!urde 0 This com$any sells 9old and sterling sil er .+7 $endants and earrings in a large #ios# $riced at F+7. -t also has sa$$hire and ruby gemstones from F7(( to F*(((. Damas 0 This large Wholesale is Saudian owned and offers -ndian styles in gold chains $endants, watches, belly rings, gemstones and rings. Their $rices range from F'(( to F*((. Target Mar#et Segment Strategy We are targeting women in the Agami in Alexandria. This is a so$histicated community and there is no doubt that the community is the center$iece of stylish sho$$ing. -n addition, since women are the $rimary end consumers of jewelry, it%s

natural for our Jewelry Store to s$end most of its mar#eting resources targeting this largest mar#et. #.2.1 Mar1et 4eeds The jewelry we will mar#et will meet the needs of woman who are loo#ing to dress u$ their outfit with ;uality gemstone jewelry. The jewelry will be suitable for both formal and informal e ents. #.2.2 Mar1et 5rends "ne of the most trendy and fashionable ty$es of jewelry on the mar#et is gemstone jewelry. 9emstone jewelry is made in arious designs, colors, and styles with a design, which contains one or more beautiful gemstones as a focal $oint. While arious ty$es of gemstone jewelry are $o$ular, there are different gemstone jewelry trends each year. "ne year it may be considered extremely fashionable to wear ruby earrings while the next year rubies may be out. The latest red car$et fashion trend is $ear sha$ed, gemstones dro$ earrings. Tacori is at the front line of style. These earrings are ersatile and can go from a day to night, from jeans and ballet flats, to a sexy little blac# dress. Amethyst is another $o$ular gemstone es$ecially in the fall. -t is a great accessory to any ring or nec#lace. Considered to be a $recious stone, amethyst ranges in shades from la ender to an intense, dee$ $ur$le. Another trendy gemstone is the moonstone, a gorgeous, translucent gemstone in shades of $eace, blue, $in#, and white. Moonstone jewelry continues to be all the rage. Eutilated Guart! is made from needles of the mineral #nown as rutile which is embedded in crystal ;uart!. Eutilated Guart! is #nown to ease de$ression. 9emstones of this ty$e are often found in arious ty$es of jewelry from nec#laces to bracelets. Chandelier earrings are becoming increasingly $o$ular. These earrings are an exotic, -ndian ins$ired design and a$$eals to women all o er the world. Anyone would feel absolutely radiant when wearing this ty$e of jewelry. 6ig, bold, and colorful jewelry is among the gemstone jewelry trends. 6lac# jewelry with large gemstones is ery $o$ular amongst arious indi iduals today. 8.+.* Mar#et 9rowth 9emstone jewelry has been one of the fastest growth areas. -n today%s society, the majority of gemstone jewelry is still sold to women, and it doesn%t loo# li#e that fact will be changing any time soon. 2owe er, as the interest in this jewelry grows with women, it seems that men are not far behind in finding interest in such items as well.

#.3

ositioning

We will $osition our jewelry to be of high ;uality with designs that ins$ire con ersation. We will be #nown for not only ;uality and trendy designs, but $rimarily for our ser ice. We will be #nowledgeable of design trends and will offer ad ice on how to accent s$ecific outfits with s$ecific jewelry $ieces. "ur customers will feel confident that they can a$$roach us with their jewelry related ;uestions and confident that we will offer good ad ice. ,.0 Strategy and +m!"ementation The Jewelry Store Cartier will $ro ide high ;uality gemstone jewelry to women. "ther jewelry retailers ha e lagged in this $articular mar#et by not concentrating on $ro iding a large ariety of colors, si!es and designs. We intend to le erage our ex$ertise, $roduct offering and mar#eting strategy to increase our customer base while dri ing sales and $rofit. The following sections re iew the arious strategies that will su$$ort this effort. ,.1 S-O5 2na"ysis

The SW"T analysis $ro ides us with an o$$ortunity to examine the internal strengths and wea#nesses the Jewelry Store Cartier must address. -t also allows us to examine the o$$ortunities $resented to The Jewelry Store Cartier as well as $otential threats. ,.1.1 Strengt(s > Strong relationshi$s with su$$liers that offer credit arrangements, flexibility, and res$onse to s$ecial re;uirements. > &xcellent and #nowledgeable staff, offering $ersonali!ed customer ser ice. The jewelry Cartier sets itself a$art from the com$etition by $ro iding customi!ed jewelry designs while the customer waits. > > 9reat retail s$ace with an attracti e, in iting atmos$here. Access to additional o$erating ca$ital. ,.1.2 -ea1nesses > Ee enues in the industry are cyclical< the majority of re enues are earned during the fourth ;uarter and +75 are earned in the month of December. > "wners are climbing the retail ex$erience cur e.

,.1.3 O!!ortunities > > -ncrease in higher income of target mar#et. Addition of other jewelry related $roducts and ser ices.

,.1.# 5(reats > > > ,.2 Cocal and emerging com$etitors. Sho$lifting. Sales tied to economic growth. Strategy yramid 6e the jewelry fashion consultant ex$ert 6uild awareness of our fashion consultation ser ice Dis$lay signage in our #ios# ad ertising this free ser ice

Strategy= Tactics= ?rograms=

"ffer the highest le el of fashion consultation ser ice De elo$ a tagline, which $romotes this ser ice De elo$ $rinted articles and wor#sheets for our customers &ducate all staff on fashion design $rinci$les Strategy= Tactics= Acti ely engage $ros$ecti e customers Draw sho$$ers wal#ing near our location to our #ios#

De elo$ a two0way con ersation with $otential customers ?rograms= De elo$ engaging lines to draw $otential customers to our #ios# )i.e. com$lements on items theyBre wearing, suggestions on how to com$lement the clothes theyBre wearing, etc., Train staff on how to as# o$en0ended ;uestions and ta#e an interest in our $ros$ects to de elo$ a con ersation, rather than $itching a sale at them.

,.3

6ni7ue Se""ing ro!osition 86S 9

The Jewelry Store Cartier will offer $ersonali!ed fashion consulting to our customers with onsite custom jewelry ma#ing ser ice. We will demonstrate our extensi e #nowledge in gemstones, clothingHjewelry color combinations and current fashion design trends. We will offer ad ice on how to dress for s$ecific occasions and which jewelry goes best with which clothing. -f we donBt ha e the right $iece of jewelry to meet their needs we will be able to design and create that $iece while they wait. We will be the one source $eo$le turn to when they need ad ice on how to dress and how to accent with jewelry.

,.#

%om!etitive 2dvantage

"ur com$etiti e edge is that we are $rimarily concentrating on the selling of gemstone jewelry, while other com$etitors only minimally focus on this ty$e of jewelry. "ur ser ices will also include creating custom $ieces for our customers according to their design needs. ,., Mar1eting Strategy and ositioning The Jewelry Store Cartier will be centrally located in a high traffic area and easily accessible for customers. ,.,.1 ositioning Statement 6ased on our #nowledge and ex$erience with fashion design combined with our s#ills at designing and ma#ing jewelry $roducts we are a full ser ice jewelry store Cartier which sells jewelry tailored and customi!ed to each customer. ,.,.2 ricing Strategy

The Jewelry Store Cartier will use a dynamic $ricing model. All jewelry will be clearly mar#ed with $rices 0 howe er, our $ricing $olicy will allow for some flexibility. -n order to increase sales re enues, our sales re$resentati es will be authori!ed to offer a maximum $redetermined discount to extend to their customers. This incenti e will $ro ide the customer the $erce$tion of extra alue and a bargain $urchase. ,.,.3 romotion and 2dvertising Strategy "ur $rimary $romotion and ad ertising strategy will be word0of0mouth. ,.,.# -ebsite Due to the nature of this business being a mall there are no $lans to de elo$ a website during the initial startu$ of the business. We will de elo$ a website after the first six to twel e months which will be an informational site and will not list our $roducts. The website will ha e our location, fashion related articles and announcements of new $roducts. ,./ Sa"es Strategy 6ecause The Jewelry Store Cartier is a new business, we understand that we will ha e to $ro e our Com$any%s worth to customers to earn their business. As e;ually im$ortant, we need to sell both the Com$any and $roducts. We will a$$roach sales from a sales$erson0customer relationshi$ basis. All sales re$resentati es will be trained and encouraged to assist customers in a $ersonal and engaging manner. 6y gathering #ey customer information and see#ing design feedbac# on our $roducts will assist us in the following ways= > > Targeting our mar#eting efforts more effecti ely. De elo$ing $roduct offers that will increase sales.

> Training and de elo$ing sales re$resentati es in order to effecti ely ser ice the customer.

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> -ncreasing awareness of our Jewelry Store Cartier within the jewelry retail consumer mar#et$lace. > De elo$ing future sales o$$ortunities that allow for continued growth of the business. With regard to all $roducts, we will continue to stay abreast with the latest fashion trends in order to offer our customers new, trendy jewelry. Sales :orecast The following table and related charts show our $resent sales forecast. 5ab"e ,./.1 2nnua" Sa"es *orecast Annual Sales :orecast Sales Cartier Ee enues Ser ice and Ee$air Total Sales Direct Cost of Sales Jewelry and Su$$lies Total Direct Cost of Sales F'.,+(( F'.,+(( F+7,+(( F+7,+(( F*/,((( F*/,((( F./,((( F.,/(( F'(7,/(( F'+/,((( F'+,/(( F'*3,/(( F'3(,((( F'3,((( F'.3,((( Iear ' Iear + Iear *

,./.2 Sa"es rograms "ur sales staff will be trained not only on our $roducts but also on fashion design $rinci$les and the acti e engagement of customers. They will be $aid based on commissions with a small base salary. The sales staff will be em$owered to offer discounts on our jewelry< howe er, they will ha e $re0defined discounts they can offer and their commission rate will change based on the discount le el )the greater the discount the lower their commission rate,.

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Mi"estones Mi"estones Date '+H('H+(x x ('H('H+(x x ('H('H+(x x ('H+(H+(x x (+H('H+(x x

The milestones for our first year of business are listed below= 5ab"e ,.: Milestone Sign Cease for Cartier Design and Ma#e Jewelry Store Dis$lay "rder Jewelry Su$$lies Design and Ma#e Jewelry for Cartier Dis$layHSales "$en Store to ?ublic

,.;

Exit Strategy

While most businesses ta#e time to de elo$ a customer base, the Jewelry Store Cartier has an ad antage by being located in a high traffic area, which lends itself to an immediate base of $otential customers. 6usiness will grow as we further de elo$ a loyal customer base, as such we can ex$ect im$ro ements in sales ;uarter o er ;uarter. We ha e the financial resources to self fund the business u$ to one year, which is the amount of time we gi e it to be $rofitable and self sustaining. -f after the first holiday season the business is not $rofitable we will not renew our lease with the mall and will li;uidate as many $roducts as we can. /.0 Organi3ation and Management

/.1

Organi3ationa" Structure

As a small business with one owner and minimal em$loyees the Jewelry Store Cartier doesnBt re;uire an organi!ational structure. The owner will manage all #ey roles and res$onsibilities. /.2 Management 5eam

:ormed as a sole $ro$rietorshi$, The Jewelry Cartier Store is owned and o$erated by -brahim Ashour. With an early interest in art at an early age, the owner wor#ed at a
'+

local design firm where he mastered the s#ill of $roduct design. 1$on graduation, he #new that he wanted to start his own business as a jewelry designer. /.3 Management 5eam Ga!s

The owner has ery good mar#eting, sales and $roduct design ex$erience< howe er, he does not ha e ex$erience in financial management. 2e will fill this ga$ by hiring a $art time boo##ee$er to assist in setting u$ her boo#s and managing them on a monthly basis. /.# ersonne" "an

:or the first eight months the owner will ha e a aried number of res$onsibilities. 2e will be the designer, sales re$resentati e, and handle all ordering of the raw materials. After about eight months, the owner will bring on board an inde$endent sales re$resentati e to assist with sales and mar#eting. The owner will not ta#e a salary the first two years of o$eration. -n Iear Three, the owner will draw a F'(,((( salary increasing o er time to F/(,(((. 5ab"e /.# ?osition "wnerH?ro$rietor Sales Ee$resentati e Total ?ersonnel Costs :.0 *inancia" "an ersonne" "an Iear ' F( F3,**( F3,**( Iear + F( F+(,((( F+(,((( Iear * F'(,((( F+(,((( F*(,(((

?rofit and Coss shows the $rofitability of the business, whereas, the 6alance Sheet shows the financial $osition of the Jewelry Store Cartier. The Cash :low shows the status of cash recei ed and cash $aid o er a s$ecified $eriod of time. These documents are re;uired to get financing for your enture. Since we are entering a retail en ironment we will acce$t cash, chec#s, and all major credit cards. We will select a chec# guaranty system to hel$ reduce the $ercentage of loss on bad chec#s. The following sections outline our financial $lan= :.1+m!ortant 2ssum!tions ro.it and )oss 2ssum!tions= &stimated A erage Sales ?rice $er unit is F'(( A erage daily sale= +./4 units Iear'

'*

A erage units sold monthly= 3( Iear ', '(7 in Iear + J '7( in Iear * 8(5 of re enues occur during 8th Guarter +75 of re enues occur during December Ee enue increase in Iear + assumes a erage daily sales of *.7 units or +4.435 annual increase Ee enue increase in Iear * assumes a erage daily sales of 7 units or 8+.3/5 annual increase )Ee enues will le el off near year * and total assets will remain static, Ser ice and Ee$air estimated Ee enue= '(5 gross sales )industry a erage, Cost of 9ood Sold= +(5 of gross re enues )com$ares higher than industry $eers K 8..'(5< mainly this is attributed to two factors= ', low cost associated with obtaining raw materials and finding from China L +, owner also constructs the final $roduct, further reducing o erhead ex$enses. Ad ertising &x$ense= MHA< #ios# will be isible in the mall L word of mouth Accounting= F8(( monthly boo##ee$ing L F/(( for income tax $re$arations 6ad Debts= &stimate 75 Shrin#age= &stimate *5 Credit Card :ees= F(.+7 $er transaction $lus '.75 -nsurance= &stimate F8(( annually Miscellaneous= &stimate= F+7( annually ?ayroll Tax Assum$tions= based on State of Maryland -ncome Tax Eates ?ermits and Cicense= &stimate F'+( annually Eent= F+,4(( monthly January @ "ctober then F.,'(( for Mo ember and December )Analysis assumes three )*, one year leases renewing annually with *5 escalations for inflation rounded to the nearest F'((, Salaries= "wner will not ta#e salary for initial Iear ' and Iear +. At Iear *, owner will ta#e salary of F'(,((( and increasing o er time to F/(,(((. Annual increases allow for a *5 increase for inflation

Ba"ance S(eet 2ssum!tions: Start01$ Ca$ital -tems= > Cartier store L Dis$lay=F+,7(( > 6eginning -n entory=F8.,3(( )which reflects industry a erages and com$ares in line with industry $eers, > > ?C 6ased cash register F8,((( )no annual maintenance fees, Assumes annual growth rate for total e;uity= 75 Iear +, and 4.75 I*

'8

:.2

Start<6! %osts

The cost to setu$ a Cartier and $re$are it for o$eration total F7/,*((. Start u$ in entory will cost a$$roximately F8.,3((. The bul# of the annual ex$enses annual rental and are estimated to be F87,+(( or /85 of total ex$enses. Start0u$ costs will be financed through owner in estment.

5ab"e :.2

Start<6! %osts

Start01$ Assets Starting in entory :ixtures and &;ui$ment )Cartier StoreL dis$lay, ?C based cash register F8.,3(( F+,7(( F8,(((

Total Start01$ Assets

F7/,*((

Total Ee;uired Start01$ Costs :.3 Source and 6se o. *unds

F7/,*((

This startu$ will be com$letely financed by the owner of the business. The startu$ funds will be used to $urchase initial in entory, $urchase the Store and dis$lay case, and a ?C based cash register. Additionally the owner will $ro ide the necessary wor#ing ca$ital re;uirements to fund day to day o$erations for the initial year of o$erations. The owner has enough funding to com$letely fund the business for the first +8 months without relying on sales or other sources of funds. The funds are li;uid and $rimarily in the form of mar#etable securities.

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5ab"e :.3

Source and 6se o. *unds Source and 1se of :unds Sources of :unds "wners% and other in estments 6an# loans "ther loans Total Source of :unds F .4,4+8 F F 0 0

F .4,4+8

1se of :unds 6uildingsHreal estate Ceasehold im$ro ements Ca$ital e;ui$ment CocationHadministration ex$enses "$ening in entory Ad ertisingH$romotional ex$enses "ther ex$enses Contingency fund Wor#ing ca$ital Total 1se of :unds F F 0 0

F /,7(( F 0

F 8.,3(( F F F 0 0 0

F 8',8+8 F .4,4+8

:.#

Brea1<Even 2na"ysis

'/

Total fixed costs associated with the jewelry Cartier are F4(,/+8 and re$resent the annual ex$enses associated with salary, credit card fees, accounting and legal ex$enses, rent, insurance, $ermits and licenses, bad debt and shrin#age, and miscellaneous ex$enses. The ariable cost )o erhead, is estimated to be F+( $er unit. 6ased on the assum$tion of F'(( as the a erage sales $rice $er unit, the brea#e en re enue then is F33,+3' or '84.'8 units. This is further de$icted in the Table 6elow and the 9ra$h that follow=

Table 4.8

6rea#0& en Analysis F 4(,/+8./+ F F F +(.(( '84.'8 '((.((

:-N&D C"ST OAE-A6C& C"ST M1M6&E ": 1M-TS 1M-T ?E-C&

M&T 1M-T S ( '84 +.8 88' 73. 4*/ 33* '(*( ''44 '*+8 '84' '/'3 '4//

M&T E&O&M1 & F( F'8,4'8 F+.,8+4 F88,'8' F73,378 F4*,7/3 F33,+3' F'(+,..7 F''4,4(3 F'*+,8++ F'84,'*7 F'/',38. F'4/,7/+

:-N&D C"ST F4(,/+7 F4(,/+7 F4(,/+7 F4(,/+7 F4(,/+7 F4(,/+7 F4(,/+7 F4(,/+7 F4(,/+7 F4(,/+7 F4(,/+7 F4(,/+7 F4(,/+7

OAE-A6C& C"ST

T"TAC C"ST F4(,/+7 F4*,7/4 F4/,7'( F4.,87* F3+,*.7 F37,**3 F33,+3' F.',++8 F.8,'// F.4,'(. F'((,(7+ F'(+,..8 F'(7,.*4

T"TAC ?E":-T 0F4(,/+7 0F73,378 0F84,(3* 0F*7,*'+ 0F+*,78' 0F'',44' F( F'',44' F+*,78+ F*7,*'* F84,(3* F73,378 F4(,/+7

F( F+,.8* F7,337 F3,3+3 F'',44' F'8,4'8 F'4,/7/ F+(,7.. F+*,78+ F+/,838 F+.,8+4 F*+,*4( F*7,*'+

'4

'.'* +(/( ++(4 +*78

F'.',+4/ F+(7,.3. F++(,4(* F+*7,8'/

F4(,/+7 F4(,/+7 F4(,/+7 F4(,/+7

F*3,+77 F8','.3 F88,'8' F84,(3*

F'(3,33( F''',3++ F''8,4/7 F''4,4(3

F3+,*./ F.8,'/4 F'(7,.*4 F''4,4(3

:.,

rojections

There are three #ey $rojections needed for this section< ?rofit and Coss, Cash :low and 6alance Sheet. :or a start0u$ business we ha e to $roject figures for all of the abo e financial statements, such statements are called $ro forma statements. The word $ro forma means $ro ided in ad ance. Iou should consult your accountant or financial ad isor when ma#ing $rojections. The sam$les tables here are not all inclusi e and are $resented as exam$les only which are to be used as a starting $oint. :.,.1 rojected ro.it and )oss

The ?rofit and Coss statement details the income and sales of your com$any o er a s$ecified $eriod.

'3

5ab"e :.,.1

ro *orma ro.it and )oss

?ro :orma ?rofit and Coss -ncome Sales Cost of 9oods Sold 9ross ?rofit &x$enses Accounting H Cegal 6ad Debts Shrin#age Credit Card :ees -nsurance Miscellaneous ?ayroll Taxes ?ermits and Cicenses Eent Salaries Wages Total &x$enses Met ?rofit

Iear '

Iear +

Iear *

F'(7,/(( )F'.,+(( , F3/,8((

F'*3,/(( )F+7,+(( , F''*,8((

F'.3,((( )F*/,((( , F'/+,(((

F7,8(( F8,3(( F+,33( F',/3( F8(( F+7( F',7/7 F'+( F87,+(( F( F3,**( F4(,/+7 F'7,447

F7,7/+ F/,*(( F*,43( F+,+(7 F8(3 F+84 F*,474 F'+8 F83,3(( F( F+(,((( F.','3+ F++,+'3

F7,4+. F.,((( F7,8(( F*,'7( F8+( F+77 F7,/*7 F'+4 F7',((( F'(,((( F+(,((( F''(,4'/ F7',+38

:.,.2

rojected %as( *"o'

'.

The statement of cash flow shows the incoming and outgoing cash of the business.

5ab"e :.,.2

ro *orma %as( *"o' ?ro :orma Cash :low Cash Eecei ed Cash from "$erations Cash Sales Cash from Eecei ables Subtotal Cash from "$erations Additional Cash Eecei ed Sales Tax "wners -n estment Subtotal Cash Eecei ed &x$enditures &x$enditures from "$erations Cash S$ent 6ills ?aid Subtotal S$ent on "$erations Additional Cash S$ent Sales Tax Coan ?ayment Subtotal Additional Cash S$ent Subtotal &x$enditures Met Cash :low Cash 6alance F( F'8/,'+7 )F4*,(+8 , )F4*,(+8 F( F''/,*3+ F'',.*/ )F/',(33 F( F'8/,4'/ F.+,+3/ F*','.3 F'8/,'+7 F''/,*3+ F'8/,4'/ F47,7(( F4(,/+7 F+7,+(( F.','3+ F*/,((( F''(,4'/ F4*,'(( F'+3,*'3 F+*.,((+ )F*+,7(( , F'(7,/(( F( F4*,'(( )F'(,+3+ , F'*3,/(( F( F'+3,*'3 F+*.,((+ F8',((+ F'.3,((( Iear ' Iear + Iear *

+(

The owner has the financial wherewithal to co er all cash flow shortages for the initial +8 months of o$erations. The sources of funds are in the form of mar#etable securities.

:.,.3

rojected Ba"ance S(eet

The balance sheet $ro ides instant $icture of the business. -t has two sections< one is for assets and the other for liabilities and ca$ital.

5ab"e :.,.3

ro *orma Ba"ance S(eet Iear ' Iear + Iear *

?ro :orma 6alance Sheet Assets Current Assets Cash Accounts Eecei able -n entory "ther Current Assets Total Current Assets Cong Term Assets Cong Term Assets Accumulated De$reciation Total Cong Term Assets Total Assets Ciabilities and Ca$ital Current Ciabilities Accounts ?ayable Current 6orrowing

F3,(+7 F',4+7 F8.,3( ( F.47 F/(,7+ 7

F3,8+/ F',3'' F7+,+. ( F',(+8 F/*,77 '

F.,(73 F',.84 F7/,+' + F','(' F/3,*' 3

F/,7(( F*,.47 F'8,.4 7 F47,7( (

F/,3+7 F8,'48 F'7,4+ 8 F4.,+4 7

F4,**4 F8,834 F'/,.( * F37,++ '

F'',77 + F(

F'+,'+ . F(

F'*,(* . F(

+'

"ther Current Ciabilities Subtotal Current Ciabilities Cong Term Ciabilities Total Ciabilities ?aid -n H -n ested Ca$ital Eetained &arnings &arnings Total Ca$ital Total Ciabilities and Ca$ital Met Worth

F4,77( F'.,'( + F( F'.,'( + F7/,*. 3

F4,.+3 F+',7/ ' F( F+(,(7 4 F7.,+' 3

F3,7++ F( F( F+',7/ ' F/*,/7 .

F7/,*. 3 F47,7( ( F7/,*. 3

F7.,+' 3 F4.,+4 8 F7.,+' 3

F/*,/7 . F37,++ ( F/*,/7 .

:./

Business =atios

This analysis is based on the Standard -ndustrial Classification )S-C, code 7.88 @ Eetail Jewelry. These ratios are often used by lenders a measure of $erformance when com$ared to your $eers. " erall, the Jewelry Store Cartier demonstrates sufficient li;uidity, has no debt obligations, and demonstrates fa orably $rofit margins. Ci;uidity and Ce erage= The Jewelry Store Cartier has ade;uate li;uidity and com$ares fa orably with its $eers based on its current ratios. -n Iear "ne, the Jewelry Store cartier re$orts a current ratio of *.'4 com$ared to the industry a erage of *./4. The Jewelry Store CartierBs le erage and e;uity ratios will not com$are with its $eers. This is $rimarily attributed to the fact that the owner will self0fund with no outside debt or financial obligations. ?rofitability= ?rofitability com$ares below its $eers as e idenced by it Eeturn on Assets Eatio of +(..5 in Iear "ne com$ared to the -ndustry A erage of .(5. Mitigating this a erage is the Jewelry StoreBs abo e a erage gross $rofit margin of 3'.35 in Iear "ne com$ared to the -ndustry A erage of 8..45. The owner is able to achie e such margins with reductions in ex$enses associated with o erhead and by constructing the jewelry designs herself.

++

Acti ity= The a erage -n entory turno er is .4(N times annually. The Jewelry Store Cartier is antici$ated to turno er in entory .*3N in Iear "ne, .83N times in Iear Two and ./8N in Iear Three and com$ares to be in line with its $eers. Although slow to turn, this is a commonality of the Jewelry Store -ndustry with merchandise in entories re$resenting more than 7(5 of annual sales.

5ab"e :./

=atio 2na"ysis Iear ' Iear + Iear * -ndustry ?rofile

Eatio Analysis :inancial Eatios Guic# Eatio Current Eatio Current Ciabilities to Met Worth Current Ciabilities to -n entory Total Ciabilities to Met Worth :ixed Assets to Met Worth Collection ?eriod -n entory Turno er Assets to Sales Sales to Wor#ing Ca$ital Accounts ?ayable to Sales Eeturn on Sales Eeturn on Assets Eeturn on &;uity -nterest Co erage -ncome Statement Met Sales 9ross ?rofit "$erating -ncome

(.7' *.'4 **..5 *3.85 **..5 +/./5

(.7' *.'4 **..5 *3.85 **..5 +/./5

(.7' *.'4 **..5 *3.85 **..5 +/./5

(.88 *./4 (.+ (.8 *+.(5 (.' '.8

(.8 4'.75 +.77 '(..5 '8..5 +(..5 +3.(5

(.7 74.+5 *.'. 3.35 '/.(5 +3.(5 *4.75

(./ 8*.(5 8.+* /./5 +7..5 /(.+5 3(./5

.4 38.(5 '.. 4.(5 (.( .(5 '(.75 +.7

'8..5 3'.35 '8..5

'/.(5 3'.35 '/.(5

+7..5 3'.35 +7..5 8..45 *.75

+*

Met ?rofit After Tax 6alance Sheet Cash Accounts Eecei able -n entory Total Current Assets Total :ixed Assets "ther Mon0Current Assets Total Assets Accounts ?ayable Total Current Ciabilities Total Cong Term Ciabilities Met Worth '(./5 +.*5 //.(5 3(.+5 3./5 /.(5 '((.(5 '7.*5 '(.(5 (.(5 48.45 '(./5 +.*5 //.(5 3(.+5 3./5 /.(5 '((.(5 '7.*5 '(.(5 (.(5 48.45 '(.45 +.*5 //.85 3(.45 3.(5 /.(5 '((.(5 '7.*5 '(.(5 '3.45 +3.(5

'./5

4.+5 (.*5 /4.45 47.75 7.+5 '..*5 '((.(5 3.'5 +*.85 (.(5 4/./5

+8