portfolio project: stomp drum shop retail business plan | csu-global mkg 410 – february 2015

Running head: PORTFOLIO MILESTONE: STOMP DRUM SHOP 1

Portfolio Milestone: Stomp Drum Shop Business Strategy

Julieta Randall

MKG410 – Retail Marketing/Management

Colorado State University – Global Campus

Eva M. Ananiewicz

February 28, 2015

PORTFOLIO MILESTONE: STOMP DRUM SHOP 2

Executive Summary: Stomp Drum Shop Business Strategy

Stomp Drum Shop is a "mom and pop" independent drum and percussion goods retailer

that focuses on personalized customer attention, product value, and knowledgeable assistance in

the suburban town of Georgetown, Texas. The competitive advantage of this business--after 7

years of being in business--can be felt in the local community, at local schools drum programs

and supplies, professional musicians wanting services from Austin and across nearby towns, and

long term customer loyalty. Stomp Drum Shop's fair pricing has allowed this advantage. In this

strategic evaluation, current market situation and financials will be evaluated, available and

future products will be elaborated, and projected financials using available information will be

produced.

What Stomp Drum Shop will do set itself aside from other independent and big drum and

percussion goods retailers (like the case of Jerry Ryder, Danny Ray, and Guitar Centers), is to

offer competitive advantage by offering discount programs to working musicians and students,

weekly classes given by customers themselves (giving the store control of the weekly scheduling

and allowing them a place to work for free), and giving fellow drum novices, hobbyists, and

professionals a place to build a network for exchange, whether it is physical or notified via social

media.

Owners Steve and Patricia Roger project the complete ownership of the commercial

building the shop is in 7 years, but in the short-term, they project a profit of by implementing

adjustments, such as: once-a-year family store maintenance (performing fixtures themselves that

can be tax deductible and cost less), make less but more strategic advertisements utilizing social

media and sponsored posts, learning social media lingo for better reach, cutting back on

purchasing from questionable quality manufacturers, having the aforementioned drum classes on


3 of 6 days of the week (which will bring customers), and extending store hours in certain

sensitive times of the year.

Strategic Objectives

Mission

To create a fraternal community of drum professionals and enthusiasts who are willing to teach

others in their community and to offer top notch personalized attention to the customers' needs.

Objectives and Goals

· To expedite payments owed towards the property.

· To provide music lessons in the facilities by qualified community members to

improve store’s revenue, reach, and word-of-mouth.

· To be the best boutique specialty drum store in the Austin, Round Rock, and

Georgetown area.

· To keep and maintain a gross profit margin of

· To adapt to adapt to the industry’s financial times and still make a profit.

Keys to Success

· Mom and Pop approach to customer service, prompt transactions, extreme care

with equipment, quick response special orders, good relationship with suppliers, and top quality

available stock.

Company Summary

Stomp Drum Shop is an independently owned, drum specialty store located in the

Williamson County’s city of Georgetown, Texas. It differentiates itself from competition with a

"mom and pop" customer service approach and most recently, lessons by the community

members themselves.


Company Ownership and Management

Owned jointly by Steve and Patricia Roger, Stomp Drum Shop was started during an

incubation planning that went from 2008 to 2009, which is when it launched in officially. Steve,

a former sales associate himself, learned sensitive ownership information when he worked at

Sam Ash, New York in the nineties. Cunningly so, he kept notes and contact numbers to most

suppliers and manufacturers whenever it was time to re-stock. He established good relationships

with them and his sales numbers spoke volumes. When he and Patricia were getting ready to

have a child in the mid-nineties, they decided to move to his hometown Round Rock which is

middle way to Georgetown or Austin, Texas. Here, he and former bookkeeper at a real estate

company Patricia did a market study plan about the area that they lived in. The start-up money

included: store fixtures, legal documentation, insurance, inventory expenses, cash requirement,

equipment, and mortgage down payment of $95,000 (property value is $182,500, with yearly

fixed mortgage payments of $12,000 for 7 years). The initial total of the start-up was $160,500.

Company location and facility. Stomp Drum Shop is located in the commercial address

of 2005 S Austin Ave., Georgetown, TX (ZIP code: 78626), It is conveniently placed in a

popular suburban area where local restaurants, coffee shops, and other small businesses are

located. The hours are Monday through Saturday 9-6 P.M.

Product and Service Description. The shop offers a varied line of drums, percussion

instruments, and accessories including: cymbals & gongs, hardware, sticks & mallets, drum

heads, world percussion items, kid percussion, concert percussion, marching drums, cases and

bags, mallet percussion, parts, and more. Brands sold include: Toca, Tama, Roland, DW,

Zildjian, Meinl, Sabian, Latin Percussion, Ludwig, Gibraltar, Pearl, and more.


The services include: returns, special orders, rare requests, light fixtures, drum lessons,

occasional free lessons (by semi-famous friends of the owners who come to town), and special

events accommodations.

Use of Technology. The store uses an integrated mid-to-low level debit and credit POS

system by Pacific Amber Technology (Amberpos.com, 2015), a dedicated computer system with

Windows 2009, two laser code scanners (one for incoming inventory and another to bring up

customers), and one cashier system. With Patricia's background as a bookkeeper and Steve as a

sales person, they are managing just fine.

Future Services or Products. To an increase in demand for school's instruments, they

wish to re-stock more efficiently student kits, value kits at the right sensitive times so that they

don't take up too much warehouse or shelf space when these orders take place. As mentioned

before, a special sound-proof area in the back will serve as the teaching space for students and

teachers.

Market Analysis Summary

According to City Data (city-data.com, 2015), the estimated median household income in

their two zip codes (78628 and 78626) was $58,111 and $81,294 respectively. Nielsen’ PRIZM

segmentation systems also sheds light in aspects of the area. What this system does is divide

American households into lifestyle categories according to geographic segmentation (Urban,

Suburban, Second City, Town/Rural, Town, and Rural), life stage group, social group, income

producing assets, age, education, employment, race/ethnicity, household composition, income,

household tenure, and urbanicity (Claritas.com, 2015). What this system unravels is consumer

behaviors, shopping patterns, and media preferences as it categorize every household in the

United States in terms of 66 demographically and behaviorally distinct types, or so called


"segments." Life stage groups are divided into Young, Family, and Mature (Y, F, and M); Social

groups are in terms of urbanization, such as: Urban, suburban, second city, town and rural (U, S,

C, and T). For instance, in the area 78626 produces these segments: 20 Fast-Track Families-

Upscale Middle Age w/ Kids, 50 Kid Country USA- Lower Mid Younger w/ Kids, 37 Mayberry-

ville-Upper Mid Older w/o Kids, 32 New Homesteaders-Upper Mid Younger w/ Kids, 13

Upward Bound-Upper Middle Age w/Kids. The median income range here is 50-75k, but it also

goes up to 150k, which means that it's a rather well-off community. It's a penetrable market,

most importantly because it's located to the music scene attraction of Austin, Texas.

Figure 1: PRIZM Analysis for 90028 (Claritas.com, 2015)

Competitive Comparison

Market competitors in the area are two independent drum and percussion goods retailers

with the names of Jerry Ryder's Drum Shop in Austin and Danny Ray's Music in Round Rock.

The big competitor is in Round Rock as well, which is Guitar Center.

Industry Analysis

According to the NAMM’s (National Association of Music Merchants) 2014 Global

Report and Industry Analysis (NAMM.org, 2015, p. 23-24), the industry in 2013 declined 4.0%

to $381.6 million. This may seem impacted by the existence of electronic drum kits (impacting

also the lack of sticks and drum head sales). Even though it may seem negative, electronic kits

are mostly used for convenience of practice, and on a positive note, educational percussion and

hand percussion are on the rise, plus traditional drum kit sets are still the most sold in the big

picture. This is good news for Patricia and Steve who are about to break in deeper into

educational percussion and drum teaching. Since people are being more cautious with their

money since the Big Recession, having a small town drum store as a place to connect, interact,


and try out drum instruments, motivates the consumer to buy. Selling instruments is a sensitive

thing, and even though there is an important online sector purchasing online, customers like to

touch and feel the instruments that they will play with. Besides, great institutions like Guitar

Center (to be acquired by Bain Capital) or

Sam Ash (closing stores nation-wide), will

give opportunity to small shops like this one

(Kirn, 2014).

Marketing strategy

Our fair pricing methods include:

price-matching, negotiation and bartering,

and student and teacher's discount. Most

recently, the shop has a Facebook and

Twitter page where sensitive information, promotions, sale events, schedule of classes, and free

drum events are posted.

Service or Product Support

What gives us competitive edge is our willingness to work with people and retain their

loyalty. We will teach our customers how to make the best use out of their instruments and give

them pointers on how to improve themselves. We have a 30-day return policy, more than most.

Sales Strategy

Our sales strategy approach is not up selling, but to give the right instrument to the right

type of person. Other competitors like Guitar Center, opt for pushing expensive sales to novices

who don't know any better or just trying to sell to just sell. We have a different approach.

Figure 1: Retrieved from NAMM.org (2014)


Financial Plan

The owner's joint salaries go to $90,000 and the store's 2013 year profit went up to

$182,500. They are saving for their son's college fund and the plan is to send him to Texas A&M

University to major in Business (with a Music Minor), so they don’t plan on taking in more

salary in the 2015 annual cycle. David is a drummer himself—Buddy Rich being his favorite—

and would like to create his own brand of drums one day.

Current Profit-and-Loss Statement 2014

Also called income statement, a profit-and-loss statement provides a detailed summary of

the income of a business including operating expenses, taxes, sales totals, and cost of goods sold

(Berman & Evans, 2013, p. 306-307). The nature of all expenses in this business are operational,

including: salaries for the owners, advertising (local radio, yellow pages, small printing of flyers,

posters posted around town), supplies (such as: paper, pens, pencils, stamps), shipping costs,

yearly cost of insurance for the business, maintenance (painting walls, cleaning products, hiring a

cleaning crew every two months), and other expenses. It's important to mention that Steve and

Patricia have a total of yearly fixed mortgage payments of $12,000 (with an initial down

payment of $95,000). Since the store has been doing well (and hopefully for years to come) their

current plan is fixed to 7 years so that they finish paying the property value of $182,500. They

plan on owning this commercial lot so that their son can eventually create his own shop inside

the facility and hopefully, expanding it. What this is does is give insight into what needs to be

done for profit planning, like cutting costs in supplies and maintenance.


Stomp Drum Shop, Fiscal 2014 Profit-and-Loss Statement

Itemization Amount ($)

Net Sales $700,550.00Cost of goods sold $260, 600

Gross Profit $439,950.00Operating ExpensesSalaries $90,000.00Advertising $6,000Supplies $2,000.00Shipping $1,800.00

Insurance $5,000.00Maintenance $3,500.00

Mortgage payment $12,000.00Other ____ $1,950

Total $122,250.00

Other costs $15,000.00Total costs $137,250.00

Net profit before taxes $302,700.00Taxes $120,200.00

Net profit after taxes $182,500.00

Balance Sheet

What a balance sheet does is to understand equity and value of a property with its assets

(as in: ownership, fixtures, equipment) vs. the debt related to the liabilities of running the

business (i.e., payroll, accounts payable, loans, mortgage). As Pope mentions (2005), it is “like a

snapshot of the entity,” which is why it is also called a “statement of financial position (Pizam,

2005, p. 49)”. Basically, this is how accountants can compute the net worth of a business minus

its liabilities, which can alter the way decisions are made in terms of risks, such as: taking in


more debt, lowering debt, making larger mortgage payments, and investing in

upgrading/maintaining the business.

Stomp Drum Shop, Fiscal 2014 Balance SheetAssets Liabilities

Current CurrentCash on Hand $30,000.00 Payroll expenses payable $8,500.00

Inventory $100,000.00 Taxes Payable $19,000.00Accounts Receivable $2,300.00 Accounts Payable $55,000.00

Total $132,300.00 Short-term Loan $3,000.00

Total $85,500.00

Fixed (present value) Fixed

Property $182,500.00 Mortgage $84,000.00

Building $70,000.00 Long-term Loan $8,000.00

Store fixtures $8,000.00 Total $92,000.00

Equipment $3,000.00 Total Liabilities $177,500.00

Total $263,500.00 Net Worth $217,850.00Total Assets $395,800.00 Liabilities + Net Worth $395,800.00


Benchmarking in the Industry

With benchmarking, Patricia and Steve can set standards and measures based on their

industry sector, which is instrument retailing (Berman & Evans, 2013, p. 520). This information

is difficult to obtain, so they will opt to purchase it for a low fee from an official provider. The

NAMM 2012-2013 U.S. Music Retail Revenue at a Glance compares those two years in terms of

sales and profit (NAMM.org, 2014, p.7).


Business Ratios: 2014 vs. 2015

Business Ratios compare profit and loss amounts in each of their categories in terms of

percentage (up or minus). Here are the contrasted amounts for 2014 and 2015.

Stomp Drum Shop, Business Ratio 2014-20152014 2015 Percentage (%)

Figure 2: Retrieved from NAMM.org (2014)


Net Sales $700,550.00 $695,095.00 -0.78Cost of goods sold $260, 600 $240, 400 -7.75

Gross Profit $439,950.00 $454,695.00 3.35Operating ExpensesSalaries $90,000.00 $90,000.00 0Advertising $6,000 $4,000 -33.33Supplies $2,000.00 $1,800.00 -10Shipping $1,800.00 $1,800.00 0Insurance $5,000.00 $5,000.00 0Maintenance $3,500.00 $2,010.00 -42.57

Mortgage payment $12,000.00 $12,000.00 0Other ____ $1,950 ____ $1,403 -28.05

Total $122,250.00 $118,013.00 -3.47

Other costs $15,000.00 $14,000.00 -6.67Total costs $137,250.00 $132,013.00 -3.88

Net profit before taxes $302,700.00 $322,682.00 6.6Taxes $120,200.00 $110,200.00 -8.3

Net profit after taxes $182,500.00 $212,482.00 16.43

Projected Profit-and-Loss for 2015

Considering that the industry is not doing well, the Roger family projected less net sales,

instruments bought/acquired, as well as lowering operating expenses in certain aspects. The

projected profit would be of $29, 982 which is a 16.43% in profit.

Stomp Drum Shop, Projected Profit-and-Loss StatementItemization Amount ($)Net Sales $695,095.00Cost of goods sold $240, 400Gross Profit $454,695.00Operating Expenses

Salaries$90,000.00

Advertising $4,000Supplies $1,800.00Shipping $1,800.00


Insurance $5,000.00

Maintenance$2,010.00

Mortgage payment $12,000.00Other ____ $1,403

Total $118,013.00Other costs $14,000.00Total costs $132,013.00Net profit before taxes $322,682.00Taxes $110,200.00

Net profit after taxes $212,482.00

Conclusions

The Roger family has had a rather conservative idea of how they should work their

upcoming years’ expenses. Cutting down expenses and being able to lower their tax bracket, they

could potentially come out at a gain and not at loss. Even though their balance sheet evens out in

case a rainy day comes, they should consider more cash assets and profits as liquid amounts. It is

smart of them too to keep paying themselves a lower joint income and to do maintenance

themselves. Giving back to the community by providing a place for music lessons is also a smart

move.


References

Berman, B., & Evans, J.R. (2013). Retail Management: A Strategic Approach (Twelfth ed.).

Upper Saddle River, NJ: Pearson Prentice Hall.

Claritas (2015). PRIZM. Retrieved from

http://www.claritas.com/MyBestSegments/Default.jsp

2010 U.S. Census (2011)

Retrieved from http://www.census.gov/2010census/popmap/ipmtext.php?fl=49

Armstrong, G., Adam, S., Denize, S., & Kotler, P. (2014). Principles of Marketing. Pearson:

Australia.

Amber Technology POS (2015). Retrieved from http://www.amberpos.com/

Kirn, P. (2014). Deep in Debt, Big Retailer Guitar Center May Be Acquired. Create Digital

Music. Retrieved from http://createdigitalmusic.com/2014/03/deep-debt-big-retailer-

guitar-center-may-acquired/

NAMM (2014). Global Report 2014. Retrieved from

https://www.namm.org/files/ihdp-viewer/global-report-2014/

A7352D4907B25A95B2CE27A075D3956F/2014MusicUSA_final.pdf

Schiffman, L., & Wisenblit, J. (2015). Consumer Behavior (Eleventh ed.). Boston: Pearson.

City Data (2015). Georgetown Texas. Retrieved from

http://www.city-data.com/zipmaps/Georgetown-Texas.html

Yelp.com (2015a). Jeff Ryder’s Drum Shop. Retrieved from

http://www.yelp.com/biz/jeff-ryders-drum-shop-austin

Yelp.com (2015b). Danny Ray’s Music. Retrieved from


http://www.yelp.com/biz/danny-rays-music-round-rock

Yelp.com (2015c). Guitar Center Round Rock. Retrieved from

http://www.yelp.com/biz/guitar-center-round-rock

Pizam, A. (Ed.). (2005). International encyclopedia of hospitality management. Amsterdam:

Routledge.

Adrian, T., & Shin, H. S. (2011). Financial intermediary balance sheet management. FRB of

New York Staff Report, (532).

portfolio project: stomp drum shop retail business plan | csu-global mkg 410 – february 2015

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