Financial Projections for the Business - Coursework Example

Funding Request Presentation Funding Request Presentation Funding request is a presentation that details the benefits of the research or business to the individual, society, or the investors giving the funders a reason to fund the project. A funding request allows a business person or a researcher to access funds for the business or carrying out the researcher. Funding request, therefore, gives people with excellent business ideas an opportunity to develop their businesses through accessing funds from investors. The paper aims at providing a presentation to prospective investors seeking funds Best Clothing Line start up business venture. The study will state what the business is about, the need for the business, marketing opportunity, stakeholders, and advisors, and investment related issues to guide the use of funds and provide financial projections for the business. Background of the business Best Women Boutique identifies with the needs of the stylish woman and will open its doors in January 2015. Acceptance for funding will allow the business to be organized as a partnership owing to fewer formalities and presence of formation and development guidelines (Abrams, 2003). The business will be located in London, Marylebone Road chosen for the close proximity to the target market and high social activity by the target market. The choice of the location is an important factor and plays a huge role in determining the ability of the business to succeed and due diligence and research was taken to make the choice of the aforementioned location (Finch, 2010). Best Clothing Line aims at achieving a number of objectives including: 1. To provide the London residents a shopping environment for their apparel and accessories 2. To gain 50% market share and develop the brand through innovation, quality service, and fast moving inventory anchored of fashion and customer feedback (Panda, 2009) 3. To earn 75.77% profit/sales within the first year of operation 4. To participate actively in corporate social responsibility including cleaning the environment, working with the local community on conservation, and employing from the local community. Market Opportunity- Define market size & your customer base; Different factors affect the apparel business with the main being customer confidence in the business and unemployment resulting in branching into designer business by large retailers like Wal-Mart. However, lack retailers cannot compete with small retailers on quality and personalized service because of their dedication to other facets of the business other than design (St. Clair, 1993). The success of Saks, Tiffany, and Coach in the luxury market depict a strong market for Best Women Boutique. The market for Best Women Boutique is high because of the belief by luxury consumers that apparel and accessories as necessities. In the London area, clothing boutiques generate $ 300,000 and has high-profit margins depicting the high profitability of the market segment because of the affluent majority residents in the London area. Owing to the large number of affluent residents in the London area, the market size is large and has the potential of growing even larger due to increasing incomes. The customer base consists of women who are stressed with their clothing needs owing to the choice of style and not a lack of income. They need guidance on the latest styles and the availability of these styles within their area of operation and in the shortest time possible. This customer base requires help to determine the clothes that best describes them and offers the most elegance, and help they will receive at Best Women Boutique. Each year, women between 24 and 54 spend over $ 34 million on apparel showing the high amount of money in the fashion industry but the main tool for Best Women Boutique is to provide the best guidance to women to make the best clothing choices. The choice of women as the main target market for Best Women Boutique is anchored on research showing increased college and masters degrees earned by women resulting in higher positions and pay compared to men. The other reason is that household purchases are controlled to an extent of 80 percent by women. The understanding of women for the need to develop relations with the brand, the business will aim at providing the best service ever resulting in word of mouth advertising and development of customer loyalty (Abrams & Vallone, 2008). The demographics of the target population are high-income professional women living in London and are well educated. This market segment is willing to pay for quality rather than quantity, spend time in understanding the clothing, and aims at looking for the best and elegant fashion. Problem & Current Solutions The problem is the lack of clothing for stylish women in the London locality, and this will be accessed and filled through a number of ways. Best Women Boutique will offer a wide variety of selection, style assessment, and personalized services to augment the chances of success in the highly competitive clothing industry. Best Women Boutique will have both read to wear designer and contemporary accessories and apparel for women with the main designs being Herr Frau, Weekend MaxMini, Tosca, Hocken, and Catherine the Great. Best Women Boutique aims at meeting the needs of a busy professional woman with an income of above $80K. The main characteristic of this target market is getting a clothing line that meets the busy lifestyle and oozes of elegance, and that is what Best Women Boutique aims to provide. Other problems in the area are the lack of specialized personal assistants to assist women makes the best clothing choice, and this will be provided at Best Women Boutique. Business Model: Key Revenue Stream The key revenue streams for the business will be ready to wear designer and contemporary apparel designs and accessories. Different apparel designs will be offered consisting of mainly Herr Frau, Weekend MaxMini, & Hocken with accessories consisting of Lint Brushes and Tosca Laundry shops among other designs. Local designer jewelry, belts, hats, scarves, and handbags will also form part of the inventory in the business. The design quantity, amount, and value will be determined by the demand by the clients and fashion trends. Market Approach & Strategy: How you grow your business The average income of the London area residents is $ 100,000, over 50% have degrees, and postgraduate showing the population is among the United Kingdom’s most affluent and educated areas. The avenues to be used in marketing the store include the excellent location of the business, word of mouth advertising, direct mail, use of personal shoppers and stylists, advertisement in local press, travel websites, and books, and in women’s fashion magazines (Ferrell & Hartline, 2004). The strategies for the success of the business include: 1. Developing close relations and provision of style assessment by experts for the right clothing choice for each client 2. Use of recent publications on fashion and style to make women get better understanding of trends 3. Build brand awareness and reputation 4. Augment referrals through excellent quality and service The sales strategy will involve inventory consisting of fashion and wardrobe accessories catering for seasonal changes coupled with the provision of personal services for the consumers to guide them on best style choice and fashion. Special ordering and alterations for clients are the other strategies for sales at the boutique. Pricing: having a retail markup of 60% for all merchandise will allow Best Women Boutique to maintain a 15% profit margin despite the willingness of the target market to pay high prices for the best quality. The average price at Best Women Boutique will be $150 with the variance dependent on quality. Location: the location in an upscale region of London allows for access to large customer base and allow for use of local merchants and publishers for PR generation in the area. Website: the use of the Best Women Boutique website will allow for increased presence in the country through spanning a large geographical area by online presence allowing clients from afar to know about the boutique, products offered, personal style aids, and make appointments. The use of style aids/ assessors at the boutique will allow the business to aid clients understand their clothing needs and form a close relations with the business. Team & Key Stakeholders The team will consist of three style aids/associates consisting of me (manager), an employee specializing in apparel and fashion design, and an assistant manager providing styles information and guidance to the clients and aid in developing close client relation for the business. The key stakeholders will be the clients, the investor, and me as a manager. There will be no other investors to the business unless when expansion needs beckon, and the need is ascertained in the future. Financial Plan The preparation of Best Clothing Line Financials is anchored on the following assumptions: Assumptions (Peterson & Fabozzi, 2006) FY 2015 FY 2016 FY 2017 Plan 1 2 3 Current Interest Rate 11% 11% 11% Long Term Interest Rate 8% 8% 8% Tax Rate 24% 24% 24% Credit Sales 50% 50% 50% Projected Cash flows Best Clothing Line begins with a small amount of cash but this will improve as projected cash flows shows: FY 2014 ($) FY 2015 ($) FY 2016 ($) Operations Cash Received Cash sales 171,565 225,000 300,000 Receivables cash 85,782.5 112,500 150,000 Total operations cash 257,347.5 337,500 450,000 Total Cash Received 257,347.5 337,500 450,000 Cash Outflow Expenses payment 124,000 116,340 126, 400 Accounts Payable 13,440 14,000 12,000 Total cash outflow 137,440 130,340 138,400 Cash Balance 119,907.5 207,160 311,600 The cash flow projection shows increased cash flows from the business to meet cash requirement for the business and allow the business to generate cash for funding of the loan and run the business to future success. Projected profit and loss account (Fridson, & Alvarez, 2002) FY 2014 ($) FY 2015 ($) FY 2016 ($) Sales 257,347.5 337,500 450,000 Direct costs of goods 14,000 17400 17300 Other costs 1000 2000 4000 Gross Margin 242,347.5 322,100 428,700 Gross Margin % 94.17% 95.44% 95.27% Expenses Salary 77,000 89,000 110,000 Sales and marketing 70,000 30,000 20,000 Lorry Depreciation 2000 2000 2000 Rent 2000 2000 7,000 Utilities 2700 3700 4400 Insurance 300 300 300 Leases 300 700 1000 Total expenses 154,300 127,700 144,700 Profits before interest and Taxes 88047.5 194,400 284,000 Interest Expense 200 300 400 Taxes 21,131.40 46,656 68,160 Net Profit 66716.10 80,744 215,440 Net Profit/Sales 75.77% 41.53% 75.86% The projected net profit for the business in the following three years are as stated below showing the ability of the business to be profitable and generate cash flows that will allow the repayment of the loan through better performance of the business and servicing of the funding. Net Profit 66716.10 80,744 215,440 Net Profit/Sales 75.77% 41.53% 75.86% Projected Balance Sheet FY 2014 ($) FY 2015 ($) FY 2016 ($) Assets Current Assets Cash 119,907.5 207,160 311,600 Receivables 85,782.5 112,500 150,000 Inventory 200,000 40,000 74,000 Total current Assets 405,690 359,660 535,600 Fixed Assets Lorry 20,000 20,000 20,000 Other assets 10,000 10,000 10,000 Depreciation (2000) (2000) (2000) Total Assets 433,690 387,660 563,600 Liabilities Current Accounts Payable 4000 17000 18000 Total Current Liabilities 16,000 20,500 23,000 Long-term Liabilities 210,000 175,300 210,000 Total Liabilities 230,000 174,860 312,600 Retained Earnings 0 119,051.20 196,175.6 Earnings 119,051.20 196,175.6 222493.80 Paid in Capital 14,948.80 20,000 30,000 Total Capital & Liabilities 310,000 335,851.20 467,470.8 Competition There is high competition in the apparel and fashion marketing from other boutiques in the area. The other form of competition is from large retailers includes Sak and Wal-Mart that have ventured into the designer apparel business in recent years. Local designers in the region and small shops also offer competition through providing the clients a cheaper alternative. Overcoming the competition will be through offering the best quality and offering personalized style guides differentiating Best Women Boutique from the competition. Offering of information of fashion trends and developing close relations with the customers will also allow Best Women Boutique to stand out from the competition. Investment: Basic use of fund The funds will be used for purchase of inventory and running of daily operations of the business including payment of expenses, promotional activities, and as a buffer for making more shipment in terms of high demand for products and services. The start up and assets expenses will be taken up by me. Discretionary information could include Exit Strategy, Partnership Agreements The exit strategy anchors on the inability of the business to meet your needs as an investor and will translate to the funding being considered as a loan to the business that shall be paid according to the market interest rate and within a period dully determined by both parties. The partnership agreements will be signed relating to the running for the business and allow for your input in operations and revenue generations of the business. Having a role in running the business will allosw you to have a say in decision making and have control in the use if funds and taking on investment opportunities. Existing Sales/Clients There are no existing clients since the business is aimed at starting in next year. References Abrams, R. M. (2003). The successful business plan: Secrets & strategies. Palto Alto, Calif: Planning Shop. Abrams, R. M., & Vallone, J. (2008). Successful marketing: Secrets & strategies. Palo Alto, Calif: The Planning Shop. Clow, K. E., & Baack, D. (2004). Integrated advertising, promotion & marketing communications. Upper Saddle River, N.J: Pearson Prentice Hall. Ferrell, O. C., & Hartline, M. D. (2004). Marketing strategy. Mason, Ohio: Thomson/South-Western. Finch, B. (2010). How to write a business plan. London: Kogan Page. Fridson, M. S., & Alvarez, F. (2002). Financial statement analysis: A practitioners guide. New York: John Wiley & Sons. Panda, T. (2009). Marketing Management. New York: McGraw-Hill. Peterson, D. & Fabozzi, F. J. (2006). Analysis of financial statements. Hoboken, N.J: Wiley. St. Clair, G. (1993). Customer service in the information environment. London, Bowker-Saur. Read More