business plan - julian vu | creative marketingjulianvu.com/temp/biz plan -...

Business Plan

Prepared by:

Julian Vu

Table of Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

About the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Product and Service Lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Management & Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Financials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Business Plan | pg. 2

Executive Summary

Cyclearium is a business concept that will sweep the nation by storm. By offering the best prices on the best bicycles, as well as new and innovative services that will serve the commuter cyclist community, Cyclearium will become the national household name in bicycle retailers. Cyclearium is on the forefront of tomorrow because the concept behind it supplements Americaʼs trend towards cycling and smart commuting.

Cyclearium is essentially a chain of retail and services outlets, and will work to bring lower prices and better quality bikes to the mass.


About the Company

Cyclearium is a services and retail start-up concept designed to cater to cyclists in large cities. Due to increasing gas prices and efforts to reduce energy use, bicycle usage as a method of transportation is rapidly growing. Most bicycle-commuting takes place in larger cities with metropolitan areas, which are markets currently under-serviced by bicycle retail outlets in the industry. Though cycling saw a decline in popularity since the 1970ʼs, it has since been increasing, and the timing is perfect for a company like Cyclearium to enter the market.

Though taking advantage of a trend may not seem good for long-term growth or operations, the truth is that cycling will still be around regardless of how popular it is. In fact, we intend to build up brand equity into a national name, and turn Cyclearium into a national franchise with branch locations in most large metropolitan areas.

From the initial-startup phase, Cyclearium will be incorporated as C-corporation, so as to alleviate liability to shareholders, as well as to maintain the ease of new capital and ownership as the operation continues to grow.

Cycleariumʼs mission and vision statements are as follows:

Mission: “By providing the best prices and the best services in cycling, we strive to be the cyclistʼs best friend; there when you need us, and here to help you along the way.”

Vision: “Our vision is to grow our corporation into the largest bicycle retailer and services chain in the United States, and to reduce the collective impact on the environment, through promoting bicycle use.”

Cyclearium is unique for several reasons. Already in the United States, there are bicycle retail and service outlets, however they are generally small businesses. They are considered by the market to be “specialty outlets” and have to make their money by higher prices to justify their profit margins. On the other hand, there are big businesses such as Dickʼs Sporting Goods™, Academy Sports and Outdoors™, and


The Sports Authority™. All of these retailers sell bicycles, however they also sell other sporting goods and have no service department for cyclists. Thus, Cyclearium strives to fit the middle area. By incorporating and having multiple outlets, we will be able to take advantage of bulk purchasing, and be able to negotiate lower prices, passing the savings on to the consumer, but still providing the feel of a specialty store.

Cyclearium actually has multiple core competencies in addition to retailing and bicycle service. In large metropolitan areas, Cyclearium will have bicycle parking for commuting workers. Cyclearium will also have a cafe with coffee, food items, and energy smoothies. And depending on the outlet, Cyclearium will also provide guided bicycle tours of the city or local mountain bike tracks, complete with rental service.

Cyclearium is a fully-fledged bicycle center, and will have an option for membership. As a cyclearium member, consumers will be able to take advantage of discounts, free bicycle parking, and many more incentives regardless of which of the many nationwide outlets they are at.

With the right capital management, Cyclearium will grow into a national name, and in time an international name as well. Subsequently, we invite you to become a part of the Cyclearium name, and to take advantage of a tremendous business opportunity thatʼs environmentally pro-active.


Product and Service Lines

There are six parts (or branches) to the Cyclearium product and service lines. They are as follows:

- Bicycle Retailing- Service Department- Bicycle Rentals- Bicycle Tours- Commuter Services- Dining

Bicycle RetailingThis is the core of Cycleariumʼs business. Cyclearium is designed to sell many different types of bicycles catering to cyclistsʼ different needs. Primarily however, the bicycles can be broken down into five types of bicycles: commuter, road/racing, mountain, bmx, and leisure. Cyclearium will carry all of these types with a stronger emphasis on commuter, leisure, and road/racing bicycles, commuter being the strongest emphasis.

Our Bicycle Retailing department will carry all the top brands in cycling including:- Cannondale - Trek - GT- Schwinn- Giant- K2- Electra- Skeppshult- Raleigh- many more as the operation grows

In addition to Bicycles, we will also sell apparel and accessories that will supplement a cycling and commuter lifestyle. These items include jerseys, helmets, eyewear, and other paraphernalia typically found in specialty bicycle outlets.


Service DepartmentThe service department will have a fully trained staff of bicycle repair professionals. Regardless of where the cycle was purchased, Cyclearium will be able to provide repairs, tune-ups, and custom bicycle fittings for the cyclist. Our service has to be one of our main points, and thus will require a very large staff capable of handling quick turnaround times. Each Cyclearium service department will be able to offer the following turnaround times:Service Turnaround TimeTire-repair 15-30 minutesBrake-work 30-60 minutesTune-up 1-5 hoursCustom Fit 20 minutesGear-work 1-5 hours

These turnaround times, when compared to most specialty outlets will be drastically shorter. Cyclearium will also charge less than competitors for services, making up for it in sales in other departments. Cycleariumʼs service department will still be profitable however, due to anticipated higher volume of service.

In addition to an in-house service department, Cyclearium will also have an on-site repair service which will help cyclists regardless of their location, so long as it is within the metropolitan range. There will be a premium for this service, though it is one that is not generally offered, therefore presenting a business opportunity.

Bicycle RentalsBicycles are a popular method of transportation in large cities, but often times it is cumbersome for cyclists to bring their cycles with them when traveling. Thus, we hope to eliminate this hassle by providing a bicycle rental service. There is a large market for this service, be it tourists or professional cyclists. We will have three types of cycles for short term (hourly) rental, or long-term (daily-weekly) rental. We will also carry well-known brands, and for some of our commuter bicycles, we will place advertising for local businesses on the cycles to generate additional revenue. Depending on the city, bicycle rentals will be one of the strongest generators of revenue.


Bicycle ToursIn addition to rentals, we will also have guided bicycle tours which will allow tourists to explore the city by bicycle. There will be different types of city tours ranging from historical tours, architecture tours, dining tours, and even some tours that take place outside of the city such as mountain biking tours or road tours. This is subject to interest however, and will be supplemental to Cycleariumʼs rental service. The city tours however, will definitely take place on weekends, and by special appointment.

Commuter ServicesAs previously indicated, Cyclearium plans on opening retail outlets in large metropolitan areas, particularly where conditions are good for bicycle commuting (e.g. condos near or in the city, good road conditions, and mild/temperate climate conditions). As bicycle usage increases, bicycle parking becomes more of an issue. There will be higher demand for bicycle parking, and Cyclearium plans to cater to this need. Rather than having to leave bicycles locked outside exposed to thieves or inclimate weather, Cyclearium will have indoor and protected parking at a greatly discounted rate to Cyclearium members. In addition, Cyclearium will have showers on-site if commuters wish to shower before entering work. Cyclearium will also run a local shuttle within a downtown area picking up commuting workers as the demand sees fit. The parking services are not exclusive to Cyclearium members, rather a benefit. Anyone can use the parking services, though it is a good way to encourage Cyclearium membership.

There is a second phase of Cyclearium commuter services that will occur as capital becomes available. This phase is to provide protected on-site cycle parking at large events such as sporting events, festivals, or large concerts. Many cyclists wish to commute to these types of events, however theft is a very large problem. By providing on-site protected and covered parking, event-goers will have a better peace of mind.


DiningAll metropolitan Cyclearium outlets will also have a Cyclearium Cafe that will serve low-cost coffee, sandwiches/wraps, and smoothies. Being in a metro area, the Cyclearium Cafe will be able to attract city-workers during the weekdays, and hopefully weekend cyclists during the weekend. By providing coffee, commuters can easily pick up their morning brew on the way to work after commuting from home. Lunch will be available for the lunch crowd, and smoothies will use organic and local fruit, as well as have options for energy boosters. The food and beverage selections at Cyclearium will be healthy, but also priced competitively to maintain a constant clientele.


Marketing Plan

Sub-contents:I. Potential Markets

A.Austin, TXII.Industry surveysIII.Market AnalysesIV.SWOTV.PricingVI.AdvertisingVII.Membership

Potential MarketsCyclearium plans to open its outlets in markets which prove suitable for business. There exist several criteria that are integral to the success of Cyclearium. A potential market for Cyclearium must have a minimum population of 500,000 or more, contain a downtown metropolitan area, have condos within a 3 - 7 mile radius of the site, and have road conditions suitable for biking. Generally, Cyclearium will enter markets that show signs of progressive lifestyles and attitudes. This can be determined by the type of legislation and ordinances passed in regards to bicycle commuting. Chicago, for example, has strived to put in bicycle commuting lanes and pathways, and is therefore an ideal location for an outlet. Before entering larger markets like Chicago however, we will start in smaller, yet still significant cities. For our first Cyclearium, we will open in Austin, TX, followed by Nashville, TN, and Seattle, WA.


Market AnalysisAustin, TX

Austin is the capital of Texas, with an estimated population of 709,8931. Though it is the capital of a typically conservative state, Austinʼs population is becoming increasingly progressive. Bicycle commuting is already fairly standard, however very few services cater to bicycle commuters as well as we intend to do. Austin, TX is home to national hero Lance Armstrong, and he has taken great strides to promote bicycle usage in Austin. Many condo developments are being built near downtown, and an active nightlife has attracted many locals downtown. As downtown Austin becomes increasingly popular, parking has undoubtedly become a problem and thus bicycle usage has increased.

In addition to additional bicycle usage, we have to consider average income and how it relates to not only bicycle purchases, but also the possibility of spending money on ancillary items such as accessories, food items, or more importantly, Cyclearium memberships. Generally, our range is to have an average household income of $50,000 or higher. In 2004, Austin, TX had an average income of $65,000, and shows no signs of slowing2.

Austin has proven itself very bicycle and environment friendly, seeing as to its tax incentives for being energy efficient. We hope to work with local government in promoting bicycle usage in Austin, and applaud their approach to environmentalism and smart living. It is for these reasons that we have chosen Austin, TX as the site of our flagship Cyclearium.


1 http://en.wikipedia.org/wiki/Austin,_Texas

2 http://austin.about.com/od/localstatistics/a/costofliving_2.htm

http://en.wikipedia.org/wiki/Austin,_Texas

http://en.wikipedia.org/wiki/Austin,_Texas

http://austin.about.com/od/localstatistics/a/costofliving_2.htm

http://austin.about.com/od/localstatistics/a/costofliving_2.htm

Industry Surveys/Market AnalysesAccording an industry study by the National Bike Dealers Association, the current market is primarily comprised of two types of retailers: big-name sporting goods retailers, and small specialty retailers. There is currently no national chain catering to cycles alone. Given that such is the case, this presents a great opportunity to establish a brand with national recognition. With the two types of retailers on two ends of the spectrum, consumers are forced to choose whether to purchase cheaply produced bicycles, or whether to spend money on expensive bicycles. There is no general medium ground. Cyclearium wishes to take the middle position, and eventually include the specialty positions, yet making it an affordable experience for consumers. Within the specialty markets, cycles can range from $200 - $5,000, with the average cycle selling at $4733. Mass-retailers sell lower range bicycles, and carry different brands from the specialty stores. Mass-retailers sell bicycles at an average price of $1424. The aim of Cyclearium is to sell bicycles that would normally be sold in specialty stores, yet to be able to take advantage of large-volume purchase discounts, and pass the savings on to the consumer. Thus, we anticipate our average cycle to sell at approximately $350, yet with some models almost as affordable as the big-name retailers such as Wal-Mart or Dickʼs Sporting Goods. Our $350, compared to the specialty store average of $473 is clearly a cost advantage to the consumer. We hope to make up the difference through our purchasing discounts, as well as membership enrollment and other services.

Within the Austin market, we have to consider competition within the area. Currently,the market has specialty bicycle retailers in the city, and big-box retailers such as Wal-Mart and Target in the suburbs. Our primary competition will come from a large retailer called R.E.I., that specializes in outdoor equipment, however we suspect that with our service offerings, we will be able to capture significant market share in the downtown area.


3 http://nbda.com/

4 http://nbda.com/

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SWOT Analysis

Strengths

- Strong Brand Equity/National Identity- Lower Prices- Best Service- Fast Turnaround- Service at any location, with

membership- Diversity of core competencies,

reduces risk- Entering markets with strong tourism,

which will ensure more stable business

Weaknesses

- Only a start-up (may be difficult to penetrate market)

- Being small, we cannot take advantage of purchasing discounts until we grow to larger operations

- Due to the size of the operation, it will take longer to break-even. (Approx. 9 months).

Opportunities

- Enter a market that is under-serviced- Create a national brand- Increased Bicycle Usage due to fuel

costs- Service commuter cyclists by creating

a new type of business (bicycle parking)

Threats

- Slow growth will open up opportunities for competitors to enter market

- Seasonal usage due to climate situations depending on markets

- Due to lower margins and dependency on high volume sales, if service and clientele declines, Cyclearium will only break even

StrengthsProvided that Cyclearium enters the market with the intended size and volume of business, combined with fast growth into other markets, Cyclearium will become a strong national name. This name alone is enough to generate revenue from amateur cyclists seeking advice, good service, or a great deal on a bike. The bigger the operation, the better we can service the consumer. Also, because Cyclearium will generate revenue from different areas, the risk is spread such that if any seasonal fluctuations occur in one area of business, Cyclearium will still be able to remain profitable with help from other sectors. Tourism is the final strength. As fuel costs rise, domestic tourism is increasing, and Cyclearium will benefit from this since a significant portion of revenue will come from tourists.


WeaknessesThe primary weakness of Cyclearium at this stage in the business process is that it is a start-up. Though it will incorporate as a c-corp, it is still theoretically a small business. The objective of Cyclearium is to develop into a national name, and this is dependent on the initial success of Cycleariumʼs flagship Austin outlet as well as growth. Until Cyclearium can grow bigger, taking advantage of mass-purchase discounts will be difficult. This may prolong the time between start-up and break-even, though assuming that the other areas of Cyclearium can generate the necessary revenue, then Cyclearium will more than likely be profitable by the end of the first fiscal year.

OpportunitiesCyclearium has massive opportunities. First is the chance to be the national name in bicycle retail. Second is to service the commuter cyclist market which is increasing in large cities where parking and fuel costs are a problem. In becoming a national name, Cyclearium will be able to pass the savings on to the consumer, without having to compromise service unlike most traditional big-box retailers.

ThreatsAs the bicycle market is becoming increasingly popular, specialty stores may consolidate with one another to create national brands that may compete with Cyclearium. A possible way to counter this is to offer to purchase stores and turn them into smaller Cyclearium outlets without some of the services that the flagship outlet will offer (e.g. bicycle parking).


PricingNext to service, and possibly even more important is pricing. Because Cyclearium wants to cater towards the middle class of the cyclist market, it is imperative that Cyclearium maintains low prices. Cycleariumʼs price points will not compete with big-box retailers, however because those cycles are of inferior quality, whereas Cyclearium will carry bicycles on par with those found at specialty outlets.

We plan to use the following ranges of prices for our products and services:Membership$100 annual membership (includes a one-time 20% discount purchase)

BicyclesFor non-members: Cost + 25-35% (the higher the bike, the less the markup)Members can use a one-time 20% discount.

ApparelFor non-members: Cost + 25-35% (the higher the MSRP, the less the markup)

ServicesService PriceTire-repair $5 - $15 (depending on the type of tire)Brake-work $10 - $20 (depending on type of brakes [disc vs. pad])Tune-up $35Custom Fit $30 or $5 with purchase of new bikeGear-work $15 - $50 (depending on type of bike)

Members receive an additional 10% discount.


RentalsHourlyLeisure $7 an hourRoad/Mtn. $7 an hour

Minimum of two-hour rental

DailyLeisure $20Road $30Mountain $30

WeeklyLeisure $90Road $100Mountain $100

Members receive a 30% discount on bicycle rentals.

ToursCity Tour $10 (without rental)City Tour $25 (with rental)

Commuter ServicesParkingMember $1 a dayNonmember $10 a day

ShowersMember Free with parking useNonmember $2.00 surcharge

CafeBrewed Coffee $1.50Latte $2.25 / $3.25Cappucino $2.25 / $3.25Iced Coffee $2.00 / $3.00Assorted Pastries $1.00 - $3.00

Sandwiches and Wraps will range between $5 and $9

Smoothies will range between $2.50 and $4.50

Members receive a 15% discount.


Advertising/Sponsorships

Most advertising will be placed in local publications, such as the Austin Chronicle. We will also advertise heavily on the internet, utilizing Googleʼs Adwords service. As our operation grows, we will include advertising media such as national magazines as well as local billboards. We plan to use “Bike the planet! ” as our slogan for our advertisements. In our advertisements, we will try to use two approaches, one involving professional cyclists such as Lance Armstrong, and another approach using every day cyclists with their testimonials.

On our bicycles that we rent out, we will be able to place advertisements on them for both our business as well as other local businesses. Progressive companies are taking more hands-on and unique approaches to advertising, so we hope to utilize this new medium of advertising.

Cyclearium will also sponsor cycling teams locally for races and competitions. A sponsored team is a great way to garner support and loyalty from the cycling community. In addition to sponsoring the team, Cyclearium will sponsor events such as races and critical mass™ events locally.


Management and Labor

Ownership and Ownersʼ CompensationThere are currently three primary investors, myself: Julian Vu, and my business partners, Andrés Calderon and Russell Hehn. The rest of the financing will come from debt-financing during the initial stages however we are striving to pull in more equity capital. By the end of the second fiscal year, we hope to have our financing be comprised only of 40% debt (as opposed to the current 85% debt), and the remainder from equity and retained earnings. As a forward-thinking company, we would like to provide stock and profit-sharing options for our employees. We do not intend to go public until we have at least 15 outlets. During this initial period of high-growth, dividends will be paid, though they will not be significant when compared to the amount reinvested for capital purchases and expanding the company.

Key Management and ExperienceThough I plan to start the business, there is still a great demand for managers within this business, as well as experts in the field. Though there are no technical schools providing the necessary skills for bicycle knowledge, we will hire industry specialists to train our continuing education staff who will be able to pass the knowledge to our employees. Training and expertise are of utmost importance to our business. I will take the position of Chief Executive for the first five years of the business, with my business partners as V.P.ʼs of the organization.


EmployeesA business of this size will require many employees. Each of the following divisions require the following amounts of people: (Estimated total of: 60 per location)

RetailLocation Managers 1 per locationDivision Managers 1 per divisionProcurement Agents 1 per location, and 3 at corporate levelSales Staff 5 per location

ServiceSpecialists 5 per locationOn-site specialists 2 per locationCashier 2 per location

Rentals/TourSales Staff 5 per locationTour Guides 1-2 per location

Commuter ServicesAssociates 10 per location (5 full-time, 5 part-time)

CafePrep Employees 7 per locationCashiers 5 per location

On-site Supplemental EmployeesCleaning/Maintenance 2 per locationLocal Marketing 1 per locationHelp Desk Staff 2 per locationHuman Resources 2 per locationAccounting 2 per locationInventory Management 3 per location


FacilityThe facility we have chosen to use will be built on-site. It will meet LEED certification, and will be partially powered by solar and geothermal energy. The look of the location will be well-lit and have a modern look and feel. The design does not centralize around the retail aspects, but rather to give the impression of a bicycle center as a whole. We do not expect customers to make large purchases every time they visit, we just wish to make them more comfortable whenever they do make large purchases.

The location we have chosen is situated at 1600 Red River Blvd in Austin, TX. It is centrally located in downtown Austin and is nearby most bicycle commuter paths. It is also located nearby condo developments and is at the gateway between residential Austin and downtown Austin.


Financials

Pro-Forma Income Statement for Q1-Q4 of 2009, with 2010 and 2011 projectionFiscal Year End 12/31/2011 2011 2010 2009 Q4 2009 Q3 2009 Q2 2009 Q1

Revenues

Cost of Goods Sold

Gross Profit

Operating Expenses

Selling, General, and Administrative Expenses

Depreciation and Amortization

Other Expenses

Operating Profit

Interest Expense

Other Revenues or Gains

Other Expenses or Losses

Earnings Before Taxes

Income Taxes

Net Income

$1,500,000 $1,300,000 $400,000 $300,000 $200,000 $150,000

$700,000 $700,000 $150,000 $150,000 $150,000 $150,000

$800,000 $600,000 $250,000 $150,000 $50,000 $0

$90,000 $70,000 $20,000 $20,000 $20,000 $20,000

$170,000 $160,000 $37,500 $37,500 $37,500 $37,500

$30,000 $30,000 $7,500 $7,500 $7,500 $7,500

$10,000 $9,000 $3,000 $3,000 $3,000 $3,000

$500,000 $331,000 $182,000 $82,000 ($18,000) ($68,000)

$64,000 $64,000 $16,000 $16,000 $16,000 $16,000

$12,000 $12,000 $3,000 $3,000 $3,000 $3,000

$448,000 $279,000 $169,000 $69,000 ($31,000) ($81,000)

$161,280 $100,440 $60,840 $24,840 ($11,160) ($29,160)

$286,720 $178,560 $108,160 $44,160 ($19,840) ($51,840)

Pro-forma Balance Sheet(see last page)

Start-up costsDue to the size of Cyclearium, significant startup costs are required. Going in, we have $150,000 of equity collectively. We project a necessary total of $1,000,000 to finance the first year, so that remaining $850,000 will come from debt financing.

Capital Equipment ExpendituresMost of the initial purchases will come from building the property, as well as permanent fixtures, racks, and repair equipment. The Capital Equipment Expenditures will total $200,000, which should provide a return by the end of fiscal year 1.


Break-even Analysis

Judging by our pro-forma statement, we believe to break-even between Q3 and Q4. We cannot use the individual break-even analyses due to a large assortment of unit costs and unit prices.

Total Sales less Total Variable Cost = Total Contribution Margin$1,150,000 - $700,000 = $450,000

Total Contribution Margin Divided by Total Sales = Total Contribution Ratio$450,000 / $1,150,000 = 39.13%


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