suoicileDDenim Business plan
Table of Contents Executive summary Core identity Target group description Collection overview Strategic Objectives Management & organization Legal Form Marketing
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7Ps Production and Sourcing Risk Analysis Appendix: Financial Statements Introduction Investment & financial statement Opening & closing balance sheet Profit & loss Cash flow budget Breakeven Sales forecast Costprice Calculation PMF calculation Depreciation Explanation
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Competitor Analysis
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Executive Summary Following the last years market developments in the apparel industry, in particular the Dutch denim sector, as well as changing consumer’s behavior, and growing environmental awareness, we have decided that these current market developments are a promising opportunity for Delicious Denim to enter the industry. Delicious Denim is a sustainable fashion brand, whose aim is to penetrate the Dutch apparel industry with an entirely environmental friendly product that strictly follows the C2C philosophy. Our concept is unique and new, responding to the rising demand in our target market for sustainable clothing, which is not only fashionable but also affordable. Amongst the few sustainable fashion brands that exist on the Dutch clothing market, the concept of Delicious Denim definitely stands out. We take sustainability to another level by fully adopting the C2C philosophy in our concept. Besides using fibres like organic cotton and lyocell, we have discovered a new and innovative solution to blend these fibres, the triggering idea our concept is also based on: fruits. Advantages, like a positive impact on the wearer’s health, long durability of the garment and most importantly, complete eco-‐friendliness, are just a few of its benefits. In short, we enter the market with a new product and we therefore will only face little direct competition. Our first collection will be launched in Rotterdam, Netherlands. In depth market research has proved that the Dutch apparel market shows a growth of 1% in 2011 and that this is also the industry sector, Dutch people spend the most money on. The targeted market segment covers women of the age 55 +, approximately 15 % of the Dutch population (Source: cbs.nl). Research and own surveys affirm that consumers’ behavior is changing regarding their demand for better and more sustainable quality in clothing and a better customer-‐brand relationship. With its concept, Delicious Denim reacts directly to these developments and is therefore confident about a successful start. On the basis of profound market research, we developed a financial plan, which states all the important aspects, our creditors need to know in order to see that this is indeed an auspicious investment. Brands like innocent smoothie already believe in Delicious Denim and therefore decided to become one of the shareholders. With regard to the forecasted economic development, the expected increase of the denim demand and our consumer group‘s future growth potential, we anticipate to hold 0,3% of the denim market‘s shares after our initial business year. Besides that, we want to increase our brand awareness and achieve a distinct competitive advantage by also increasing brand awareness. Delicious Denim’s concept is innovative and different and it directly responds to the current denim market developments and the customer’s demand.
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Core Identity Delicious Denim’s goal is to provide every woman with the perfect jeans. We offer special denim products in various shapes and cuts, so that every woman can feel comfortable and beautiful in her body. Our whole concept is based on the central idea of a fruit. On the one side we use the fruit in a metaphoric way, because it symbolizes the mature, self-‐confident and body-‐conscious woman we are targeting. On the other hand, we literally use the fruit in our garment production to achieve our C2C standard. We blend natural fibers -‐ such as organic cotton and lyocell -‐ with fruit fibres so we can lower the harmful impact of the jeans production on the environment. Furthermore we only use natural dyestuff, which we also take from fruits. By disassembling, recycling and biodegrading the worn out clothes, we guarantee a fully closed garment life cycle.
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Vision DeliciousDenim observes women 55+ who seek a fashion brand that takes environmental action and fully recognizes their bodies. Mission As one of the few fashion brands, DeliciousDenim sees and takes this unique opportunity to create a highly C2C friendly and body conscious product that responds to these demands. Values Natural pride: Taking nature as an inspiring ideal to take the limit of sustainability in fashion to another level by fully adapting the C2C philosophy in our brand concept Seductive comfort: DeliciousDenim considers the woman as she is, being true to oneself and loving ones body. Well thought-‐through cuts that are adjusted to the individual woman’s body shape guarantee a perfect fit. Perfect flaws: The idea of accepted and loving ones flaws inspires DeliciousDenim’s designs and fabric choice.
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Target Group description
Sarah is 55 years old and worked as a HR manager in two differnt companies. After 15 years of working experience, she decided to start her own business, a dream she always had. Thus, at the age of 40 she started her own private consulting company, which main tasks include contributing to favorable framework conditions for companies and to help retain and create jobs in the area. Furthermore, she strives to pass on job seekers and employees. Her net income varies from 3500 to 4000€. The fact that she succeeded to successfully enter the market, and the fact that she managed to start her very own business makes her incredibly proud. Even though it is hard work, she loves her job and the people she works with very much. In fact, thanks to her experienced and forward-‐thinking attitude she can easily work with a lot of different people and cope with every kind of problem. In her point of view, a good knowledge of human nature is essential for everyone, not depending on what job one may have. Even though she loves her work, she believes that one should never forget about her own wellbeing. Caring after her is very important, because it gives her the energy she needs. Thus, a varied and diverse free time is essential to her. She really cares about good and authentic food, so she regularly tries out new recipes and takes a lot of time for grocery shopping during the weekend. In order to stay healthy and equable she practices Yoga and spends a lot of time outside, surrounded by a natural environment. As she is a cultivated person, she is very interested in photography. To her, photography captures a moment and creates an atmosphere that is real and authentic. In fact, photographers show reality as it is, with all its mistakes, individualities and flaws. She likes that a lot. Besides that, she likes spending her time with the magazines FAB and LINDA, which she finds interesting and refreshing. Concerning her way of dressing, she is very proud of my own personal style, which is natural and doesn’t depend on fashion trends. She doesn’t appreciate fast fashion, where one trend catches the other, because it makes own taste almost impossible to keep and clothing meaningless and disposable. Even though she believes in the importance of fashion and the way one dresses, she doesn’t spend her money rashly. She buys less, but unique and timeless pieces that last more than only one season. For a pair of jeans she is willing to pay between 130 € to 190€. She is brand loyal and usually shops at Rosner, Gap and Escada. Good service and a trustful and calming shop atmosphere is essential to her, because she likes to take her time when she tries on different items and looks for the comfortable jeans that really looks good on her. She doesn’t agree with the ongoing size 0 trend, which is in her opinion completely sick. “My body is too valuable to just let it starve. I am proud of being a woman, who actually looks like a woman. Forcing me into something I am not, is simply a waste of time and energy.”
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Collection Overview In common English language, “plum” can be used as an idiom to describe something a lot of people would love to have or be. Taking this expression as an inspiration, Delicious Denim decided to launch its first collection under the name “Plum shapes fall/winter 2013” More and more people turn away from the glossy and polished side of fashion and turn to naturalness, flaws and individuality instead. A plum is far from being perfect and so are “Plum shapes”. The choice of fabric, colors and cut contribute to this mood. The collection is a tribute of the body-‐conscious, self-‐confident and authentic woman, giving her the chance to express herself in the right clothing -‐ clothing that doesn’t hide her, but underlines her personality.
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Strategic Objectives
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Management and Organization Management Team Delicious Denim is a well-‐organized and structured starting company whose success depends excessively on the quality of the management team. Having a capable management team and a well thought through organizational structure is the key to make our business successful. With the organizational plan, we want to organize the lines of authority and communications, as well as assigning the right tasks and duties. Our management team consists of people who are capable and will contribute their knowledge and skills to our company. Due to our organizational objectives, we choose a decentralized business structure, where the decision-‐making is relying on a team environment. Decentralization gives benefits to employees as well. The freedom and autonomy of working in this framework, as the employees will maintain a bigger level of control over the business, thus it provides a more enjoyable and positive work environment. It gives them a sense of importance and making them feel as if they have more input in the direction of the organization. We are able to make decision quickly. It is because a manager can often make a decision without having to wait from the upper hierarchy. This allows us to react quickly to situations where fast actions are needed. As we are a small and new brand in the fashion industry, our funds are still limited; hence the costs should be kept to a minimum. There are two reasons that support the structure of Delicious Denim as shown above: Reducing the expenses on the employees as far as possible in order to invest more in the company’s supply. Therefore we decided that each shareholder is going to work part time in the shop. This means that every shareholder will work one day during the week. Furthermore, we hire one sales assistant who works full time. It will reduce our costs for staff in the first year. But we are going to hire personnel for the store in the future as our company grows. Thus increasing the efficiency of the production phase.
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Organizational Chart Delicious Denim Business Owners – Shareholders “Innocent Smoothies” Company, Edith Kofler, Lisa Schröder, Elena Thyssen, Maike Weiser, Juanita Inez Prawitasari Each person owns shares in the company. Design Department
-‐ Maike Weisser -‐ Collectioning | Design -‐ 1. F.t.e -‐ € 1.700/month
Product Manager
Administration & Finance
Marketing & Retail Manager
-‐ Lisa Schroder -‐ Production | Supply Chain Management | Outsourcing -‐ 1 f.t.e -‐ €1.700/month
-‐ Elena Thyssen -‐ Accounting | Finance | Administration -‐ 1 f.t.e -‐ €1.700/month
-‐ Juanita Inez Prawitasari Marketing of delicious denim | Visual Merchandise -‐ 1 f.t.e -‐ €1.700/month
External Supervisor Delicious Denim -‐ Edith Kofler -‐ Overall responsibility of running Delicious Denim -‐ 1 f.t.e -‐ €1.700/month
Staff
-‐ Katrin Snijder -‐ full time sales assistant -‐ 1 f.t.e -‐ €1.100/month
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Our management team will consist of the shareholder, the department managers who are divided into design manager, product manager, administration and finance manager, marketing & retail manager. All departments work full-‐time based on their f.t.e rate and receive yearly additional support and benefits an additional support. Ownership A.) “Innocent Smoothie” Company Shareholder with 10% of the Delicious Denim Company share. As a working partner, we are going to provide a space for a smoothie stand in our clothing store. This then will benefit both companies. B.) Edith Kofler, Lisa Schröder, Elena Thyssen, Maike Weiser and Juanita Inez Prawitasari Shareholder with 18% of the Delicious Denim Company share. Each of the shareholders contributes 10.000€ at the beginning to the company’s own capital. It can be seen as an investment and will be rewarded with a dividend pay-‐out once a year, as soon as the company has managed to establish itself on the market and make profit. Responsibilities, tasks, benefits and salaries. Responsibilities and tasks of the different job positions within the Delicious Denim management team are: 1. External Supervisor Delicious Denim -‐ Edith Kofler -‐ Responsible for supervising the decision-‐making within the company -‐ Overall responsibility of operations, marketing, strategy, financing, human resources, sales, strategies and visions. -‐ Choosing formulating the strategic plan that guides Delicious Denim up to the market. -‐ 1 f.t.e -‐ €1.700/month 2. Design Department -‐ Maike Weisser -‐ Responsible for designing the collection of Delicious Denim. -‐ A good coordination of the products, sales and marketing teams to create the right product designs. -‐ 1 f.t.e -‐ €1.700/month 3. Product Manager -‐ Lisa Schröder -‐ Responsible for the planning, coordination and control of the production process. -‐ Responsible for the outsourcing management of the company -‐ 1 f.t.e -‐ €1.700/month
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4. Administration & Finance Manager -‐ Elena Thyssen -‐ Responsible for the daily, monthly, yearly financial matters of Delicious Denim -‐ 1 f.t.e -‐ €1.700/month 5. Marketing & Retail Manager -‐ Responsible for the marketing of delicious denim -‐ Responsible for running the store in Rotterdam -‐ Managing the stock levels of the garments in the shop -‐ 1 f.t.e -‐ €1.700/month 6. Sales assistant -‐ works full time in the shop -‐ responsible for customer service -‐ € 1.100/month
Proposed Legal Form Delicious Denim Ltd. (Dutch: Delicious Denim B.V.) Delicious Denim will start trade under Delicious Denim B.V (Besloten Vennootschap) (English: Delicious Denim Ltd). Therefore, we are registered as a private limited liability company (BV). The reason why we choose this is the limited liability of the company’s officers and shareholders. Being a limited company develops the feeling of security and comfort for the employees and to other members in the company, for our shareholders, and also our suppliers. If a bankruptcy and receivership occurs, the only way that we are going to repay back is from the assets of the company. Advantages for being a limited liability company: -‐ Our company name and logo’s are protected -‐ Limited liability -‐ Tax advantage (corporate tax) to unincorporated businesses (income tax) -‐ Reliable business activities -‐ Company continues despite the acknowledgment of the management and/ or members -‐ Easy to produce new shareholders and investors -‐ Ltd can be converted to a PLC (future considerations)
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Marketing
Competitor Analysis
From the chart above, we consider two competitors as the main competitors of DeliciousDenim: GAP and Rosner. Direct Competitors 1. Brand: GAP Origin: founded in 1969 in San Francisco Vision: founder “couldn’t find a pair of jeans that fitted” (quote http://www.gapinc.com/content/gapinc/html/aboutus/ourstory.html) Values: „creativity, delivering results, doing what’s right and always thinking of our customers first.“ (quoted from http://www.gapinc.com/content/gapinc/html/aboutus/ourstory.html)
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Similarities to DeliciousDenim Style: • Simple designs, very clean, sometimes quirky • Not many details, but “special effects” are created by knitting techniques • Offer rather basic and season-‐less clothing • Special finishings like seams on the outside, using the left side of the fabric Dissimilarities to DeliciousDenim Sustainability: • GAP uses a lot of synthetic materials and blends. Production is also low cost and low quality Pricing: • According to its price range, GAP is a little cheaper than DeliciousDenim • Prices for jeans vary between 70$-‐ 90$, prices for knitwear between 50$-‐ 130$ Product: • offer more products (also shoes and accessories, baby line etc.) • target group is very broad 25-‐65+ Strength: - high aided brand awareness (brand is well-known) - brand loyalty amongst elderly generation because they grew up with the brand - large networks - competitive prices - have a name on the international market - brand extension: kids, baby, men, women, old navy, banana republic etc - advertisement, e.g. TV 60% and Magazines 25%, Outdoor 12%
Weaknesses: - weak performance within last years - low attractiveness for younger generations respectively, they waste efforts in trying to market them instead of focusing on their loyal customer base - (low quality) - criticism for labor policies - getting intense competition
2. Brand: Rosner Origin: founded in 1967 in Germany Mission: create the perfect fitting jeans Values: “Not just any trousers – we make exclusive ladies trousers for sophisticated customers and upscale boutiques. Trousers that always fit perfectly, and look perfect, too. They unite elegance and style, and combine selected materials and high-‐quality production techniques with an authentic look.” Similarities to DeliciousDenim: Style: • sophisticated and simple design
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• focus lies on fit • style for different body types Quality: • modern fabrics • high quality Dissimilarities to DeliciousDenim: Style: • even though the cut is simple, they use a lot of prints and washings, whereas DeliciousDenim keeps its design rather plain Pricing: • Rosner sees itself as a designer brand and counts as its competitors Burberry and Prada • Price range for a pair of jeans varies between 130€-‐200€ Sustainability: • Using synthetic materials as well as blends Strength: - has settled on the international market; over 100 stores around Europe, Canada and Russia - the garments comfortable fit - celebrities as Models (e.g. Heidi Klum) - strong motivated workforce - annual revenues of more than 50 million euro
Weakness: - has not established itself in the ecommerce yet, actually it is nearly impossible to find an online store. - not a very high brand awareness / brand recognition. Only amongst its customer base known
Other competitors
1. Esprit -‐ Founded in: 1968 -‐ Target audience: 25-‐35 years old -‐ Denim price range: €60 -‐ €90 -‐ Focusing on qualitative-‐high and modern designs and a common target group. -‐ Puts a lot emphasis on the right fit -‐ Casual sportswear and business clothing for both men and women
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2. Mexx -‐ Founded in: 1986 -‐ Target audience: 20-‐50 years old -‐ Denim price range: €50 -‐ €80 -‐ The style of the clothing is casual smart, and metropolitan casual -‐ Focusing on precise cuts on the denim, especially on the hips area -‐ One of the leading clothing brand in the Netherlands, Mexx has grown to become an international brand with over 800 stores in 55 countries 3. Escada -‐ Founded in: 1976 -‐ Target audience: 30 – 40 years old -‐ Denim price range: €50 -‐ €80 -‐ The style of the clothing is modern elegance, cool glamour, and sensual feminity -‐ They have ESCADA and ESCADA SPORT as a sub brand, targeting 2 different audience
7 Ps
Marketing Strategies Promotion: -‐ Shop opening: On the 1st of June 2013 the brand DeliciousDenim will be launched and we therefore organize an opening event which will take place on that very day. We start promoting in May, with a billboard, our shop window and an interview featured in the magazine LINDA. Press will be invited as well as representatives from the fashion industry and a few customers who won an invite on our homepage. We will provide our guest with music, a buffet and drinks. Furthermore, are we going to present our concept and the guests will also have the unique opportunity to be the first ones to not only have a look at but also to purchase our collection “Plum Shapes f/w 2013/14”
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Heineken and innocent smoothie will partly sponsor drinks and buffet. As far as it concerns the music, a DJ will be playing the whole evening. He is a close friend of DeliciousDenim and therefore doesn’t charge us anything. Furthermore, we hire two waiters and one doorman. For the concept presentation we bought a beamer and a screen, which we might need for other similar events in the future as well. Besides that, we need to calculate money for various other things, like decoration, carpets and service and also the invites. We are very positive about the success of this opening event. It will spotlight a new and different brand with an original and innovative concept for a promising start in the fashion industry. As we keep it rather exclusive, people will get more interested in it and our concept. By exclusively inviting a certain amount of potential customers, we create a good relationship with our target woman and make her feel already closer connected to the brand. The costs for the event are well calculated and thought through (see costs cashflow in appendix). As we are a start up company with a different and new concept, such an opening event is of crucial importance to properly introduce our brand to the fashion industry and to our target customer. The event will take place on the 1st of June 2013. Costs need to be paid within the month of June. Even though we open our shop in June, our financial year already starts in January. We therefore expect the bank loan already in January, which means that the promotion costs can be paid in time. Promotion methods Newspaper ads Our target customer is educated and interested in international and environmental affairs, as well as design, architecture and fashion. To stay updated she reads magazines like Gentlewoman, Fab Magazine and LINDA. The latter describes itself as the first personality magazine in the Netherlands and it is also the largest women’s glossy magazine of the Netherlands. This fits perfectly the interests of our target customer, therefore Delicious Denim decided to feature an interview in LINDA presenting the brand’s story, goals and its first collection Plum Shapes autumn/fall 2013/14. Further advertisements will be placed in magazines like Fab and Gentlewoman, 2 times throughout our first year. Online advertising To create an interactive and vivid community, Delicious Denim features a blog, which is directly connected to our homepage and that will serve to keep our customer updated and connected. This webpage will provide our customer with information concerning the brand and its latest developments. Furthermore, we are also acquainting our customer with
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the latest news regarding environmental and social affairs, which reflect Delicious Denim’s inspiration and our consumer’s interest. The Delicious Denim blog provides our customer with the possibility to ask questions, give the brand feedback and make suggestions. Moreover, we can keep her directly updated on special events, collections and sales. Statistics about Internet usage in Europe show that out of 16.730.632 mio. people (Dutch population in 2012) 92,9% use the Internet on a regular basis. We therefore figured that online advertising like our homepage and our blog would be an effective but also cost-‐saving promotion method for a start-‐up company. We will launch our homepage in May combined with the interview featured in LINDA magazine.
Nature matters Our brand’s mission evolved around the Cradle2Cradle philosophy, which means that our garments have a fully closed life cycle, in order to be completely environmental friendly. We use only natural materials and natural dyestuffs, but to complete the garments life cycle, it needs to be disassembled. Therefore it is of crucial importance that our customers, instead of throwing away their jeans, bring them back to the Delicious Denim store. With this simple gesture, they can take social and environmental responsibility. We rely on our customer’s conscience and expect 30% of returned jeans in the first year, which can be disassembled. Packaging Our shopping bags are made out of 100% organic and recycled cotton and our logo will be printed on with natural dyestuff. These characteristics make our bags 100% biodegradable. Thanks to their robust construction, our customer can use them for other purposes as well, like grocery shopping. The packaging costs have been included in the garment’s costs price calculation (see appendix).
Product DeliciousDenim is a new company with an innovative product that varies from its competitors thanks to its two main characteristics: fit and environmental friendliness. In order to fully respond to our customer’s needs our product is designed according to the four most common body shapes: pear, apple, strawberry and rhubarb. This ensures a perfect fit and a comfortable clothing experience. Besides that, DeliciousDenim follows a strict C2C philosophy.
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Our product consists of 100% natural material using organic cotton, lyocell and mostly important fruit fibres (coir, banana leaf and pina). To fully ensure a 100% natural product, DeliciousDenim only uses natural dyestuff.
Personnel
DeliciousDenim selectes its stuff with care to create a fully functional business and a good working atmosphere. We want our team to be knowledgeable, skillful, and cooperative. By learning the business vision and mission the team will be in one objective and feel very closely connected to the brand, which will lead them to loyalty to the company. As for the sales force, our company guaranteed to give the best customer service. We trained our team to make customers feel as very valued customers. The staff in our shop are going to be wisely chosen. We put a lot of emphasis on friendly and attentive staff. We intended to give the customer the feeling of emotional security and build up a trustful relationship. Physical distribution: Our shop is inspired by nature, the idea is to create a natural shopping environment in which the customer feels at ease and her sense are simulated. We want to create a comfortable, warm, and cozy atmosphere to the customers. The store is going to have 2 changing rooms, and it is going to be filled with warm colors, most of the furniture are made out of woods. Most of our garments are going to be hanged, but we are going to use mannequins to give a clear view to the customer. In the corner of the store, there is going to be a Delicious Smoothie Café sponsored by our shareholder, Delicious Smoothie. Here, our customers can relax enjoy a freshly made smoothie afterwards.
Place: The Delicious Denim shop will be located in Rotterdam. Our shop will be open: Monday closed Tuesday/Wednesday/Friday 10.00-‐18-‐00 Thursday 10.00-‐21-‐00 Saturday 12.00-‐18-‐00 Sunday closed
Price range: DeliciousDenim’s target customer is willing to pay The prices of DeliciousDenim are as follows: Denim Prices vary from: 130,00 € to 170,00 €
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Knits Basics: Price vary from: 40,00 € to 60,00 € Fashion basics: Prices vary from: 80,00 € to 92,00 € Items: Prices vary from: 160,00 € to 178,00 € In sales months we calculated a discount of 15% These are retail prices. Cost prices can be found in the cost price calculation in the appendix.
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Production & Sourcing Production country Delicious Denim chose Istanbul, Turkey as its production place because of Istanbul’s great advantages. Amongst the most common production countries, Turkey is well know for its specialisation in denim production, concerning technologies, deliveries, prices and good production efficiency. Moreover, it is important to say that Turkey respects the GDP and fair trade agreements. Environmental matters Turkey is specialised in producing organic cotton fabrics, has a strong wool industry and is the 3rd largest mohair producer in the world. In collaboration with our fruit fibre suppliers in China, Delicious Denim starts to develop fabrics that result in a selection of high quality organic weaves and knits blended with fruit fibres like Pina fibre, banana leaf and coir. Transportation Delicious Denim planned to deliver stock 4 times per year. We decided to rely on Just-‐in-‐time-‐delivery, so we won’t have to keep a big warehouse all the time. It is the most convenient and economic solution. Transport methods include ship and truck, which is the cheapest but also most environmental-‐friendly method. Inventory Thinking about our replenishments, we decided to have just-‐in-‐time delivery. That means that we lower the costs by having small stocks and no need of warehouses. Most of the garments that we get delivered will be displayed in the store. We use an EDI system in our store. By using this optimised control and information system, Delicious Denim manages to receive the just-‐in-‐time deliveries (JIT) for a well organised and coordinated replenishment (fig1). This gives us the opportunity to work faster, to communicate better and again to lower the costs.
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Collection volume As already mentioned, Delicious Denim decided to deliver the goods four times a year, so every three months. These deliver dates however are slightly different in the first year because we launch the a/w collection already in June when we open our shop in shop. The sales volume for the first in between delivery period from June 2013 until August 2013 is 852 units, which is the average in 2013 but not in 2014, because we are planning on producing more in that year.
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Supply chain Turkey
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Supply chain China
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Risk Analysis As a starting business, our company has to keep following possible external and internal risks in mind. Furthermore, it is important to also have solutions to those problems, to that a fast reaction is ensured and therefore damage can be kept small. External Risks: - Costumers o they do not like our concept or can not understand it o they find the prices too high o scepticism towards our product, because the unconventional materials (fruit fibers, fruit dyes) might not react, look or feel as expected and prejudices exist about these products. - Natural Influences: o due to extreme climate in the sourcing countries or similar happenings our suppliers might have to raise the prices for the materials or won’t be able to deliver o a mild winter in Rotterdam could lead to less sales of articles from the A/W collection 2013 - Economical Risks: o banks do not invest as much money anymore, because they fear that businesses will not succeed in the current economy o costumers have changed their buying behaviour, because they want to save money o launching a winter collection in summer might not be very profitable for our company Solutions for External Risks: - Costumers: o have a clear communication of our concept to avoid misunderstandings o we will be transparent in the way we make business o make surveys about the costumer’s satisfaction with the brand and the products to find the core of possible problems and to find out how to improve our business o introduce sales and actions if the products are not selling o be honest from the start and explain that natural products may differ from conventional clothing; create excitement about the uniqueness this unpredictability brings with a good implementation of our brand values. - Natural Influences: o have a good network of suppliers in different countries that we could easily switch to o stay updated about the ongoings in the production and selling countries and compare prices regularly o have midseason sales to drive the sales up o turn the attention to internet sales, if the collection doesn’t sell in the Netherlands, because on the internet there is a larger audience
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from different regions of the world who might be interested in our garments. Economical Risks: o have an efficient and transparent business plan o find alternative sources of finance (e.g. crowd funding or private investors) o launching a winter collection in summer is not very profitable, so we will first have the pre-‐winter garments delivered and only in the winter months introduce the winter articles to our collection. o midseason sales will help us reduce stock and sell the clothing in case that we were too optimistic on the sales forecast. o Sell collection to another wholesaler in case of not enough profit
Internal Risks: - Lack of Experience and History o as a start up company we lack a history, which nowadays is very popular with the customers and therefore very valuable for the marketing. o we lack experience in running a business and figures to compare and measure our performance to - Mistakes o mistakes made by our employees o Failures and mistakes during the production or accounting process - Brand Failure o the brand fails to reach out to the target group and/or its marketing strategies do not show the expected success. o the products have a disappointing quality Solutions for the Internal Risks: - Lack of Experience and History: o have a catchy and fresh concept o invest a big part of our profit into marketing and advertisement to make our target group as fast as possible aware of our brand o compare to competitors and orientate to their numbers, figures and strategies o especially in the first year, have frequent check ups of the books and accounts to control our performance o get help from experts from outside our company - Mistakes: o provide trainings and seminars for our employees o change organizational structureàhave a centralized organisation to maintain a good overview over the happenings in the company o be well insured to compensate for the financial losses caused by mistakes or incidents. - Brand Failure o engage a professional PR company o host events and advertise in magazines and news papers that our target customer is interested in
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o create actions and make offers that get the customer interested and builds up customer loyalty o have product and quality checks on a regular basis and switch to another supplier or manufacturer when the results do not meet the requirements.
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Financial statements Introduction DeliciousDenim rents a 50m2 shop in the Kohnstammhuis in Rotterdam. The rent for this building is 125€/m2/year. Besides that, we are also renting empty space, which we use as a stock. The space’s rent is 66€/m2/year. We decided to rent 25m2 for our stock, which means that we are paying 137,50€ rent per month. The service costs are already included in the price of the rent. Concerning our office, we decided to rent space in Rotterdam for the rental price of 500€ per month, including 150€ monthly service costs. Even though we are opening our store in June 2013, our financial year already starts in January 2013. Therefore we are renting our office starting from January, which means we need to pay the deposit needs to be paid in January already. We rent the shop starting from May, so we have one month time for several preparations like wall and flooring and organizing our shop windows. The term “Owner’s equity” stands for the six shareholders that invest in DeliciousDenim. The owners Elena Thyssen, Maike Weiser, Lisa Schröder, Juanita Inez Prawitasari and Edith Kofler all invest 10.000€ from their private savings. Innocent smoothie decided to become a shareholder as well, by investing 10.000€. The bank is willing to offer as a loan of 48.082,64 € by means of a mortgage of 1,7 %. This loan will be repaid starting from the second fiscal year. The interest however has to be paid at the end of each year. Repayment will start in January 2014. The COGS that arise from the production and sourcing from the material, as well as transport and other several costs (see cost price calculation in appendix) are paid on account in instalments, spread evenly over the year. This will avoid red numbers in the Cash Flow statement. Fixed assets like inventory for instance will depreciate over the years by an average depreciation rate of 22% in 2013 and 19% in 2014.
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Investment and financing plan Investment budget Fixed assets Furniture and fittings Tables (4) Chairs (5) Mirrors (8) Lamps (30) Mannequins (6) Cash machine (1) Counter (1) Changing rooms (2) Card reader Computer Shelfs (8) Telephone Miscellanious Subtotal
Office equipments Desk (5) Cabinet (6) Chairs (7) Beamer (1) Screen (1) Computer (5) Telephone Subtotal Salaries (one year) TOTAL Current assets Stock Cash Bank account TOTAL
800,00 €
200,00 € 800,00 € 900,00 € 1.200,00 € 400,00 € 600,00 € 1.400,00 € 394,00 € 1.349,00 € 2.400,00 € 40,00 € 2.000,00 € 12.483,00 € 1.350,00 € 900,00 € 350,00 € 300,00 € 100,00 € 6.745,00 € 120,00 € 9.865,00 € 109.700,00 € 132.048,00 € 22.460,44 € 10.000,00 € 30.000,00 € 62.460,44 €
Financing Plan Owner equity 60.000,00 € Loan 147.117,55 €
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Start up expense Deposit for shop Deposit for office Wall and flooring Subtotal TOTAL Opening expense Chamber of Commerce Legal form Unforeseen TOTAL
TOTAL
2.600,00 € 4.050,00 € 3.500,00 € 10.150,00 € 10.150,00 € 459,11 € 84,11 € 375,00 € 2.000,00 € 2.459,11 € 207.117,55 €
207.117,55 €
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Opening Balance Sheet
Opening Balance Sheet 1st of June 2013 ACTIVA Fixed assets Furniture and fittings Office equipments Current assets Stock Cash or cash equivalent Unforeseen TOTAL
PASSIVA
22.348,00 € 12.483,00 € 9.865,00 € 172.160,44 €
Owner equity Loan
22.460,44 € 149.700,00 €
2.000,00 € 196.508,44 €
196.508,44 €
49.390,89 € 147.117,55 €
The figure above shows our snapshot of our financial condition on the 1st of June 2013. It addresses what our company owns, what our company owes and what it is worth at a given moment.
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Profit and Loss statement
Our profit and loss statement for the year 2013, 2014, 2015 and 2016 starts at the 1st of January. The chart shows us where do we get our money from and where are we going to spend our money. The revenue, costs, and profits have changed over time. Fixed assets loose their value over a certain period. For that reason, the depreciation of 33,3% per year must be considered in the profit and loss statement.
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Cash Flow Budget
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Explanation Cash Flow Sales start in June, even though the company already exists at the start of January 2013 for the simple reason that we need the time beforehand to round of and source our collection and to prepare for our shop opening. The COGS are evenly spread over the months, starting in June 2013 simultaneously with the sales. Only five of our six salaries are paid from the very beginning. The salary for our shop assistant will be added to our salary payments when the shop opens. Similarly it is for the rent of the shop and the warehouse, which are listed together in the cashflow forecast. The payments will start May because we need the extra month before the opening for preparation. Promotion costs only appear in the month where there is a marketing action taken. The start up expenses will only be made in the first year 2013. In January they consists of the three month deposit for our office and the registration fee for our legal form. In April another rate asks to be paid which is made up of the shop’s deposit. In May, the costs for wall and flooring for the shop will be paid. It is noticeable
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Breakeven Point
Delicious Denim Break Even Sales
Fixed
Total Costs
BEU approx. = 1893
€ 400.000 € 350.000 € 300.000 € 250.000 € 200.000 € 150.000 € 100.000 € 50.000 € 0 0
500
1.000
1.500
2.000
2.500
3.000
3.500
Units
Fixed costs Salaries Rent shop & warehouse Rent office Gas, water, electricity Internet, telephone Insurance Interest costs, bank charges Total
€ 119.300 € 5.260 € 4.200 € 1.800 € 1.200 € 1.800 € 817.44 € 134.377
Average selling price: € 115 Average cost price: € 44 Gross profit per pc: € 71 Fix cost : € 134.377 Breakeven point = Fix Cost Gross profit per pc = € 134.377 € 71 Break even point: 1893 pieces have to be sold. According to our sales forecast, we therefore will break even in July 2014.
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Closing Balance Sheet
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Sales Forecast
140,00
Sales forecast
Achsentitel
120,00 100,00 80,00 60,00 40,00 20,00
Knits Denim
0,00
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October November December
June July August September
February March April May
Knits January
140,00 120,00 100,00 80,00 60,00 40,00 20,00 0,00
Denim
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160,00 140,00 120,00 100,00 80,00 60,00 40,00 20,00 0,00
Knits Denim
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Cost Price Calculation The following tables show the Cost Price calculation of four different styles of the DeliciousDenim collection “Plum Shapes f/w 2013/14”. This calculation includes costs for materials that are needed for the production, as well as design costs, C.M.T. and logistic costs. Furthermore, they already include the Dutch value added tax (VAT) of 21%. We calculated a margin of 250% for the jeans which results in an average suggested retail price of 150,00€. As you can see in our sales forecast, concerning denim, if you look at the month of June 2013 for instance we have a average selling price of 150,00€ and a average costs price of 49,98€ resulting in an average gross profit margin of 68,12% (changes during sales months (15% of discount) to 62,42%.) In the cost price calculation, a margin of 250% As far as it concerns the margin of basics in, we have an average selling price of 53,99€ and an average cost price of 21,59€, which results in an average gross profit margin of 60,0 % and 52,8 % during sales months. As shown in the costprice calculation, we have a margin of 250%. By rounding up or down the suggested retail price, we obtain an individual margin, which can be seen in the costprice calculation of the item and fashion basic. Calculating our total sales value and subtracting our total COGS, we obtain our net income, listed in the income statement. The average gross profit margin for 2013 is 61%.
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Potential Market Forecast The market potential forecast is the number of potential buyers, an average selling price and an estimate of usage for a specific period of time. The general formula for this estimation is: MP = N x MS x P x Q MP= market potential N = total number of potential consumers MS = market share – percent of consumers buying from you P = average selling price Q = average annual consumption N = 44.448 Our target group is women between the age of 55-‐65 years old in Rotterdam MS = 0.2% for 2013 We divided the sales of Delicious Denim by total industry sales. P = € 80 Average selling price of Delicious Denim Q = 6 Based on the survey we conducted on the target group. 45% of the interviewed women claimed to buy 6 pair of jeans on the average during 1 year. MP = N x MS x P x Q MP = 44.448 x 0.2% x 80 x 6 MP = € 4.267.008
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Depreciation calculation:
Depreciation Calculation The depreciation is a figure that describes the decrease in value of some of our company’s assets. The depreciation rate is usually only measured for machines and other valuable and important gadgets that are more worth than 1000 €. It can be measured in two different ways, the declining balance method, and the linear method, which we used, because it is not only far less complicated, but it is also the most common method. Delicious Denim will only list the depreciation of its 6 computers, because they are the only objects that cost over 1000 € per piece. The other objects in the fixed assets, such as chairs, tables or the cash machine, are just considered as an investment to get the business running and therefore won’t be counted as a tax receivable like the depreciation value of the computers. The calculation for the value loss is done as follows: First of all, we listed all the assets that were considered for the depreciation, which in our case were only the computers, and their initial price, i.e. the price that we bought them for when they were new. Furthermore, we determined for how long we would keep and work with the item (so, its useful life) and finally what would be their salvage value, so the estimated amount that the items would be worth at the end of their useful life. For our computers we only have a useful lifecycle of three years, because of the fast developments in the technology industry and the higher use that we would make of it compared to other businesses. The salvage value we put at 0 €. This means that we have higher tax deductions and therefore is an advantage for us, since the depreciation costs are not really costs that are deducted from our from our bank account, but are a decrease in value of an object we already paid for. To determine the percentage of the annual depreciation, we used the following formula: initial cost – salvage cost Annual Depreciation Cost = -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ useful life 1.349,00 € -‐ 0 € Annual Depreciation Cost = -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ = 449,67 € 3 This shows that each computer will depreciate each year for an amount of 449,67 €. Consequently, the depreciation amount for all six of our computers will be 449,67€ * 6 = 2698,02 €.
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Reference List: •
http://www.cbs.nl/en-‐GB/menu/themas/gezondheid-‐ welzijn/publicaties/artikelen/archief/2012/2012-‐3746-‐wm.htm
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Mintel Report: https://intra.amfi.hva.nl/voorzieningen/mediatheek/or/cre2012/Mintel _Clothing_Retailing_Europe_october_2012.pdf
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https://intra.amfi.hva.nl/voorzieningen/mediatheek/or/aroq_globaldeni m2008.pdf
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http://cbi.eu/marketintel_platform/Apparel/135943/trendmapping
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http://lciweb.com/top5.htm
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http://www.marketing-‐made-‐simple.com/articles/marketing-‐ plan.htm#.UMjDoLRctO0
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http://www.marketingdonut.co.uk/marketing/advertising/online-‐ advertising
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http://myadbase.com/guide_final.php?page=ad_costs
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http://www.qwaya.com/pricing
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http://www.pressreference.com/Ma-‐No/Netherlands.html#b
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http://www.quirks.com/advertise/print/adrates.aspx
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http://www.smartbiz.com/article/view/409/1/4
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http://www.articlesbase.com/marketing-‐articles/customer-‐buying-‐ behaviour-‐999729.html http://www.euromonitor.com/apparel-‐in-‐the-‐netherlands/report
• •
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