PREMIER“Always on the Ball”

Business Plan

Ryan Mack

Table of Contents

1.0 Executive Summary......................................................................................................... 4

2.0 Business Introduction..................................................................................................... 52.1 Introduction................................................................................................................................. 5

2.2 Mission Statement...................................................................................................................... 52.3 Objectives...................................................................................................................................... 5

3.0 Operations Plan................................................................................................................ 53.1 Location......................................................................................................................................... 53.2 Floor Plan...................................................................................................................................... 63.3 Business Hours............................................................................................................................ 73.4 Suppliers........................................................................................................................................ 83.5 Service Providers....................................................................................................................... 83.6 Capital Budget............................................................................................................................. 83.7 Operating Expenses................................................................................................................... 93.8 Cost of Sales.................................................................................................................................. 93.9 Working Capital Planning........................................................................................................9

4.0 Human Resources.......................................................................................................... 104.1 Organizational Structure.......................................................................................................104.2 Job Descriptions....................................................................................................................... 104.3 Shareholders’ Agreement..................................................................................................... 124.4 Human Resource Strategy.....................................................................................................124.5 Weekly Schedule...................................................................................................................... 124.6 Human Resource Costs...........................................................................................................13

5.0 Marketing Plan............................................................................................................... 135.1 Products/Service..................................................................................................................... 135.2 Price.............................................................................................................................................. 145.3 Place............................................................................................................................................. 145.4 Promotion.................................................................................................................................. 145.5 Competitors............................................................................................................................... 155.6 Purchasing Patterns of Consumers....................................................................................165.7 Policies........................................................................................................................................ 165.8 Marketing Expenses................................................................................................................16

6.0 Financial Plan.................................................................................................................. 176.1 Capital Requirements.............................................................................................................175.2 Summary of Projected Income Statement.......................................................................175.3 Summary of Projected Balance Sheet...............................................................................185.4 Critical Variables...................................................................................................................... 185.5 Contingency Plan......................................................................................................................195.5 Dividend Policy.........................................................................................................................195.6 Economic Forecast................................................................................................................... 195.7 Break-Even Analysis............................................................................................................... 195.8 Net Present Value.....................................................................................................................205.9 Internal Rate of Return..........................................................................................................205.10 Average Owner Compensation.........................................................................................205.11 Risk Analysis........................................................................................................................... 20

6.0 Summary........................................................................................................................... 20

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1.0 Executive Summary

Premier is being created to offer soccer players knowledge and top quality products in Saskatoon and Canada. The store has a retail front and also an e-commerce store.

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It will be located at 1820 McCormond Drive in University Heights Square. The store will be open seven days a week at convenient times. Premier will provide a good experience for those who shop in-store on online.

Saskatoon currently has a large market of soccer players with little competition. There is one brick and mortar store within the city and online stores across the border. Although competitors have history and a good reputation, Premier will strive to do the same by providing an excellent experience and great products to go along with it. As long as a good reputation is built, Premier will become a threat in the marketplace. The ideal location will also play a major strength in the store’s presence.

The store will be owned and ran by Ryan Mack. Ryan is in his fourth year in the Management program at the Edwards School of Business and will be graduating in 2013. He has been heavily involved in sales and marketing at retail stores and has had previous experience in creating strong online presences.

Both bank and equity financing will provide funding. A $20 000 bank loan will be taken, as well as a $60 000 equity financing by the help of two extended family members.

The following document will provide more information on the operations management, marketing, human resources and financials for this business venture.

2.0 Business Introduction

2.1 Introduction

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Premier is a retail and online soccer store that provides customers with the following products:

Footwear Jerseys/Shorts Shin pads/Socks Balls Referee Gear Keeper Gear Accessories

All products will be sold in-store and on an e-commerce website. Products will be picked by staff themselves to ensure that the players back up the products sold. This allows the employees to share personal experiences, which will result in creating strong relationships.

2.2 Mission Statement

We supply essential gear for the competitive and recreational footballer.

2.3 Objectives

The objectives over the next year include:

Receiving financing of $80 000 Generate 25 customers a day, purchasing an average of $40 per sale Generate a positive income in the first year Become well known and respected in the Saskatoon soccer community

3.0 Operations Plan

3.1 Location

Premier is located in Unit 22 of 1820 McCormond Drive in University Heights Square. This is a shopping centre in between Erindale, Evergreen and Willow Grove in the Northeast area of Saskatoon.

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Figure 1 – Map

3.2 Floor Plan

Premier’s building is 1 400 square feet, the length is specifically 70 feet and the width is 20 feet. When entering the building, the left side will have an installed locker spaces and the right side will have the shoe wall and till. The middle space will have a table for a clean merchandising look. The back of the store will have two

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change rooms, a staff washroom and a storage room for the footwear.

Figure 2 - Floor Plan

3.3 Business Hours

In an average week, Premier is open seven days a week. It will only be closed for some holidays such as New Year’s Day and Christmas Day. Below are Premier’s common hours of operation:

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Monday, Tuesday, Wednesday, Friday and Saturday 10 am- 6 pmThursday 12 pm - 8 pmSunday and Holidays 12 pm – 5 pm

3.4 Suppliers

When setting up the building for opening day, a lot of products will be needed considering that the space is brand new. Paint and painting supplies will be purchased from Home Depot, a computer from Computer Trends, office supplies from Supreme Basics, Furniture from Ikea and other electronics from Future Shop. The products that the store will sell will be directly from adidas in Concord, Ontario and Nike in Scarborough, Ontario.

3.5 Service Providers

Since the building is brand new, a lot of work must be done to it at the beginning. A1 Plumbing will install air conditioning, heating, plumbing and electrical. They will install the units and complete the finish. The City of Saskatoon will handle the business’s water and sewage system. SaskPower will supply electricity and Sasktel will be Premier’s phone, Internet and security provider. Moneris will provide services for online and in-store Interac transactions.

3.6 Capital Budget

Majority of the start up costs come from leasehold improvements. There is a lot to be done to make the store look attractive. Also, because the store is meant to have a clean and simple look, the equipment costs can be kept low.

Description Estimated

CostsLeasehold ImprovementsElectrical Installation $14,000.00 A1 PlumbingPlumbing Installation $10,000.00 A1 PlumbingAir Conditioning Installation $3,500.00 A1 PlumbingHeating Installation $15,000.00 A1 PlumbingSignage $1,395.00 SigncraftPaint and Supplies $180.00 Home DepotTotal Leasehold Improvements $44,075.00EquipmentComputer $1,100.00 Computer Trends

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POS Software $495.00 Pc AmericaMoneris $525.00 MonerisWebsite and E-Store Setup $2,500.00 Forte IdeasCordless Phone $30.00 Future ShopFurniture $666.00 IkeaLocker Room $8,000.00Counter Installation $2,970.00Total Cost of Equipment $16,286.00Total Capital Costs $60,361.00

Table 1 - Capital Costs

3.7 Operating Expenses

In Table 2 – Operating Expenses, are Premier’s first year of operating expenses. The benefits were calculated using 2.526% for employment insurance, 4.95% for Canadian pension plan, 5.77% for holiday pay and 2% for workers’ compensation

Operating CostsBuilding Lease ($50,400/12) $4,200.00Moneris $50.00Utilities $312.00Phone/Internet/Security $180.00Office Supplies $145.00Wages $7,144.50Benefits $1,091.67Insurance $2,000.00Total Operating Costs $15,123.17

Table 2 - Operating Expenses

3.8 Cost of Sales

All products have a profit margin of 50%. This can be seen in greater detail in the financials section of the business plan.

3.9 Working Capital Planning

The capital provided in the birth of the business pays for the capital costs and then some. The reason for receiving more financing than needed is to act as a reserve for emergencies. Dividends will only be paid out to the shareholders if the business makes more than $20 000 profit that year. Inventory will be ordered by the owner

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and manager with the help of sales staff in advance by season, colours, styles and sizes will be selected by popularity and likelihood of selling. Accounts receivable will not be an issue because the store will not offer any credit to its customers. Payments will be required to be paid in full. Accounts payable on the other hand is common in the retail industry. The suppliers will give the store the opportunity to pay for the inventory in 30 days.

4.0 Human Resources

4.1 Organizational Structure

The organizational chart explains the hierarchy of Premier. The owner will be in charge of the manager, but it does not mean that the blogger and sales team cannot interact with the owner. The manager is to direct the blogger and sales team of duties. This structure is meant to be flat so that communication is easy and employees can contribute to problems or voice their concerns.

Table 3 - Organizational Chart

4.2 Job Descriptions

The owner of this business is Ryan Mack. Ryan will be graduated with his bachelor of commerce by the midyear of 2013. He is currently in his fourth year of the management program at the University of Saskatchewan. He has been involved in a retail store in University Heights for the past three years. Ryan has played soccer for

Owner

Manager

Sales TeamBlogger

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15 years and plans to remain playing until the sport becomes too physically demanding. He has a good reputation in Saskatoon’s soccer community and many strong relations within it. Lastly, he has worked on a few websites and is heavily involved in social media as an individual and for businesses.

This will entail the duties of the specific employee.

Owner: Oversee all activities Manage employees Buying products Sales Social media activities Hiring and dismissing staff Training Payroll Enter and analyze financials

Manager Creating monthly schedules Buying products Sales Stock and merchandise Interact with customers Training Social media activities Manage employees Warranty issues

Blogger Social media activities Posting information and pictures of new products Keep updated on soccer news Interview members in the soccer community Advertise sales

Sales team Sales Stock and merchandise Interact with customers Product knowledge

4.3 Shareholders’ Agreement

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The owner will hold 100% of the shares for Premier and it will be a private corporation.

4.4 Human Resource Strategy

Premier’s success relies a great deal on the staff hired and their happiness working for the store. The employees will be attracted through the use of the Saskatoon soccer community and social media. With the owner having good ties with soccer clubs, referees, coaches and players in the city, it will allow him to reach potential employees across the city. With social media being popular among University of Saskatchewan Huskies players, it will also help spread the word of employment opportunities at Premier.

It is important that the people hired are well respected in the soccer community and already have prior knowledge to the products in the store. Staff will be offered benefits and a 40% discount to help retention rates. There will be seasonal product knowledge meetings and the staff will be encouraged to test products and to share with the other members. Managers will be in charge of motivating the members to do a good job by challenging the staff and with bonding activities. All staff will be encouraged to communicate with the owner and manager to improve the work environment and the store itself.

4.5 Weekly Schedule

Below is an average weekly schedule at Premier.

Total Hours of Work

OwnerFull Time

Part time 1

Part time 2

Part Time 3 Blogger

Daily Total

Monday 10-6 12-6 10-6 1 22Tuesday 10-6 12-6 1 14Wednesday 10-6 10-6 12-6 1 22Thursday 12-6 12-8 4-8 1 18Friday 10-6 10-6 12-6 1 22Saturday 10-6 10-6 1 16Sunday 12-5 12-5 12-5 1 15TOTAL HOURS 35 40 19 17 18 7 129

Table 4 - Weekly Schedule

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4.6 Human Resource Costs

The chart below will show the amount of staff needed and the wages that they will be paid in the first year. As planned, the owner, a manager, three part time staff and a blogger will need to be employed. The employees will be paid fairly in the first year and the wages and salaries will increase with commitment and strong performance. $85 734 will be the expected salary and wage expense for the first year.

Salary and Wage Expense Number of Employees:

Owner 1 Manager (full time) 1

Full time staff Part time staff 350,000 0.82

Salaries/Wages Owner 40,000

Manager Salary 28,800 Full time staff (wage rate/hr) $12.25

Part time staff (wage rate/hr) $10.50

Salary and Wage Costs Owner 40,000

Manager 28,800 Full time staff -

Part time staff 16,934 Total Salaries and Wages 85,734

Table 5 - Human Resource Costs

5.0 Marketing Plan

5.1 Products/Service

Premier will initially only offer adidas and Nike products. This includes footwear, jerseys, shorts, keeper gear, shin pads, socks, balls, referee gear, accessories, customizable products and gift certificates. Both brands will be featured equally and the majority of their product line will be available in the store. Although there will only be two brands, variety will still be present. Premier will offer products for different surfaces (ex. natural grass, artificial turf and tile) and different weather conditions. Premier plans on carrying a larger amount of the higher-level products compared to lower end. This is because of their larger profit margins and to ensure that the target market is satisfied.

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The service will be excellent because of Premier’s expectations of the staff. The employees will be experienced players who will know the product line by experience, not only specifications and technical aspects. They will be given opportunities to test products and sit through product knowledge sessions with adidas and Nike representatives. The owner, manager and blogger will offer online service. They will respond to all comments on the blog and social network platforms and keep the audience happy with a constant flow of products and events posted online.

5.2 Price

The products will be competitively priced in the Canadian market. Both adidas and Nike offer a Canadian manufacturer suggested retail price that will be followed. This will be surprisingly be less than some competitors when offering the same soccer cleat for example as some businesses mark-up prices even higher. If products make it to the season after, they will be marked down to reduce the amount of units in storage.

5.3 Place

Like stated previously, Premier is located in Unit 22 of 1820 McCormond Drive in University Heights. This store will be in the new University Heights Square. This area is expected to be a highly populated residential area in the future.

Premier has also placed it in a position to offer its services to two main target markets. The first is teenagers who strive to become top division players. Based on the owner’s experience, this is an age where players are given opportunities to become better and when they become capable and conscious consumers. The second target market is active families with parents under the age of 50. This one is important because in Canada, soccer is the most popular sport for youth. Children tend to be more active when their parents are as well.

5.4 Promotion

Premier plans on using these four different styles of promotion as its competitive advantage:

1. Location2. Online Presence3. Service/Environment4. Sponsor

Location is a significant advantage being part of the soccer community. It is near the Sasktel Soccer Centre, Centennial Collegiate Institute and community soccer pitches. The Sasktel Soccer Centre currently has two outdoor fields, three indoor artificial

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turf fields and a tile court as well. The indoor fields were created to help supply the recent demand of indoor soccer in Saskatoon. Tournaments are hosted year around at the Sasktel Soccer Centre as well. Centennial Collegiate Institute is well known for having the only soccer academy in the Saskatoon school division. Around the store are the Forest Park soccer fields too, there are seven fields at the time.

The online presence is another promotion tool for Premier. Premier will be one of the only e-commerce soccer stores in Canada. It will offer free shipping for purchases over $75 and offer holiday deals as well. Premier will also be present on Facebook, Twitter and Instagram to allow customers to keep in contact with the store. These will be used to show users the new products as well as offer exclusive sales.

Service and the store environment may sound generic, but it is important to use this cost-free tool as an advantage. The service provided in-store and online will be excellent with consumer interaction and follow up messages. This will show the store’s appreciation to all customers. The environment is unique because of the store’s locker room merchandising style. Products will be able to be placed nicely on the left wall as if the store was a real team room. In the future televisions playing professional matches will be purchased to be watched inside of the store.

Sponsoring players and teams will be used to help increase sales in the city and across the nation. Premier will search for fantastic players who are well mannered to represent the store. In return they will be offered a 40% discount on all products. In the first year, Premier would also like to sponsor a team. Teams may drop off sponsorship requests or the store will directly ask a team, the team will be provided a discount on team gear and will be provided team kits with Premier’s logo as the sponsor. It is important to pick a top division team that is capable of winning provincials because it will offer Premier a good marketing tool across Canada at the national tournament. In the future, more teams will be sponsored.

5.5 Competitors

Premier has two different sets of competition. One would include the local stores and the other would be e-commerce soccer stores. The local retail stores include XtraTime Sports/Soccer Locker and Sport Chek. The online competition would be Eurosport, Pro-Direct, Soccer Corner and We Got Soccer. XtraTime Sports/Soccer Locker and the e-commerce stores offer high quality and high-tiered products similar to Premier. The substitutes on the other hand are unlimited; Saskatoon provides stores of many different recreational activities. In conclusion, Premier has a strong market to compete with.

The main competitor is XtraTime Sports/Soccer Locker. They offer more brands than Premier, but Premier offers a more selection within the brands sold. Like Premier, XtraTime Sports/Soccer Locker provides equipment for both men and women from high-tier to low-tier. XtraTime Sports/Soccer Locker currently has a

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large following in Saskatoon but no online presence what so ever. They prove to be Premier’s top opponent in the retail soccer industry.

5.6 Purchasing Patterns of Consumers

Both males and females are expected to do business at Premier. It is expected that the average consumer will be a parent purchasing products for their teenage children. As for patterns, the busiest months on average will be May and October because of the new seasons but December for Christmas shopping. The store is also expected to be busy on weekends during local soccer tournaments as well as professional tournaments such as Summer Olympics, Euro’s and World Cup.

5.7 Policies

There are a few policies that Premier would like its customers to follow. The first is that no accounts receivables will be open. Customers will need to purchase products up front whether it be inside of the store or online. For return on regular priced items, the customer has 14 days to return it if it was purchased in-store or 14 days after the product was received if it was purchased from the e-commerce store. These products can only be returned if they have been not been used, purchase is proven and tags are still attached. If the items are returnable a full refund can be given on the card that the purchase was made on or a store credit can be provided. Sale items will be given seven days to return under the same policies as regular priced items but only as an exchange rather than a full refund.

5.8 Marketing Expenses

The chart below shows the planned marketing expenses for the year of 2013. The cost of the website will only be in the first year, this will be provided by Toran Dobni at Forte Ideas. Business cards and stickers will be made by Sam Seto at Think Out of the Box Media yearly. Sponsoring teams will be the last marketing expense for the store, the $720 will cover one team. In the future, costs for sponsoring teams will rise to support more teams. For the most part, Premier will try to keep marketing expenses lower by utilizing social media.

Year 2013

Website $2,500.00Business Cards $120.00Stickers $250.00Sponsoring $720.00Total Expenses $3,590.00

Table 6 - Marketing Expenses

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6.0 Financial Plan

6.1 Capital Requirements

Premier requires $100 000. $20 000 will be from a bank loan from CIBC and $80 000 will be in the form of equity financing from the owner and two members of the owner’s family. The family members are willing to be patient on their return, making equity financing a good choice for Premier.

5.2 Summary of Projected Income Statement

The sales on the chart below are based on 20 customers a day purchasing an average of $40. This means that store is open 360 days that year. Growths in the following years will be based on an inflation factor of 1.025, which increases the average purchase per customer. In the following year, the growth rate number of customers will grow by 20% and will continue to grow after as well. This estimate is accurate due to the fact that the Saskatoon market is limited but the Canadian market is not.

2013 2014 2015 2016 2017

Sales 288,000 354,240 417,560 492,199 554,955 COGS 144,000 177,120 208,780 246,100 277,477

Gross Profit 144,000 177,120 208,780 246,100 277,477Table 8 - Gross Profit

Net Income (30,104) (6,739) 10,671 34,930 54,598End RE (30,104) (36,843) (26,172) 8,758 27,451

Table 9 – Net Income and Retained Earnings

Number of Customers/day 20 24 28 32 35Number of Days/year 360 360 360 360 360Average Purchase/customer $40.00 $41.00 $42.03 $43.08 $44.15Total Sales 288,000 354,240 417,560 492,199 554,955

Growth Rate Number of Customers 20% 15% 15% 10%

Table 10 – Revenues

Table 7 - Capital Requirements

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Bank debt 20,000Equity 80,000 Total 100,000

5.3 Summary of Projected Balance Sheet

For the Year Ended 2013 2014 2015 2016 2017

Total Assets 82,192 77,439 89,962 127,120 147,471Total Liabilities 32,296 34,282 36,134 38,362 40,020

Total Equity 49,896 43,157 53,828 88,758 107,451Table 11 - Balance Sheet

5.4 Critical Variables

There are two main critical variables that affect the success of the business. The first is the number of customers a day and the second is the average purchase made by the customer. This means that Premier is reliant on the growth of the entire sport across the country. This could change the growth rate number of customers for better or for worse. These are sensitive and can alter the average owner compensation easily, which in conclusion can decide the fate of the business. The sensitivity analysis below will show how the number of customers can affect the profits and average owner compensation when the average customer purchases $40 worth of products.

Customers/day Average 5 year Profit

Average Owner Compensation

12 (55,605) 42,50114 (36,837) 42,50116 (19,427) 42,50118 (3,105) 42,05120 12,671 49,23222 28,119 60,57024 43,392 71,73326 58,522 82,75328 73,486 93,608

Table 12 - Sensitivity Analysis

5.5 Contingency Plan

After comparing the base case of customers to the break-even case it looks as if Premier will need to make some big changes if it sees failure in the first two years. If the company is not profitable by the second year, the store can be either moved to a more affordable location or be changed to an exclusive e-commerce store. If Premier

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changes to another location, no other equipment will be needed to run the business. If the store changes to e-commerce only, a lot of the equipment could be sold to keep costs down and the business itself could be run out of a more affordable location.

5.5 Dividend Policy

Dividends are to be paid out when the business profits $20 000 or more. Using the base case in the financial model, it shows that $35 905 will be paid for its first time in the fifth year.

5.6 Economic Forecast

In Premier’s financial model, there was assumption made that the Canadian economic situation will be stable for the next five years. This means that for financial purposes, the inflation rate and debt interest rate remains the same. The inflation rate is 2.5% and the debt interest rate is 7%.

5.7 Break-Even Analysis

The break-even case was measured by determining how many customers purchasing $40 were needed to make the net income equal zero. The red line is the projected break-even analysis and the blue line is the base case. As you can tell from the graph, Premier is not expected to break-even until after the second year of doing business. The first year 25 customers are needed to break even, while the base case states that Premier will have 20 customers. The break-even case stays stable because of the operating costs that remain steady, specifically the leasing expense.

1 2 3 4 50

5

10

15

20

25

30

35

40

Table 14 - Break-Even Analysis Graph

Table 13 - Breakeven Analysis

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Base Case Cust/day 20 24 28 32 35

Breakeven Cust/day 25 25 26 25 25

5.8 Net Present Value

The net present value of the investment of 80% equity financing for Premier is $95 221.

5.9 Internal Rate of Return

Based on the 80% equity financing, the internal rate of return is 36.4%.

5.10 Average Owner Compensation

Average owner compensation was the most important tool for measuring the success of the business because it shows the expected pay to the owner. When the company is near breaking even, the owner will make about $40 000. It is not until the company profits over $20 000 when the owner truly benefits (Table 12 – Sensitivity Analysis). You can see a large difference when there is an expected 22 customers a day.

5.11 Risk Analysis

For most businesses, viewing the net present value and the internal rate of return can give the owner a good idea if the venture is low risk or high risk. In this case, average owner compensation was able to judge the risk level of Premier. Based on the base case, this venture is risky because profits will not be made for the first two years of business.

6.0 Summary

To conclude, this business plan is not ready for deployment. This is based on the base case that has been built. There needs to be way of acquiring more customers and reducing operating costs, specifically leasing a building. The solution to this could be to operate this business out of another brick and mortar store or to operate exclusively online. The business would be strong in the Canadian market offering high quality products and service but may have difficulties penetrating the Saskatoon market with fewer brands and no history. Another reason that shows that the business is not ready is the expected owner compensation. It is difficult to make a living for the first two years because the business most likely not be profitable.

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