Gifts and Collectibles Retail Shop Business Plan

Classique Gifts Etc. is a start-up retail store offering fine gifts, collectible dolls and doll accessories. The store will be located in Lexington, Kentucky, catering to the middle- and upper-class consumers who look beyond the congested retail malls for the special shopping experience. In addition to offering a wide array of unique, quality products, the consumer will enjoy friendly and knowledgeable customer service and a convenient, uncongested location.

This business plan is prepared to obtain financing in the amount of $50,000 to purchase inventory and to help cover expenses in the first year of operations. We are also asking for a credit line of $10,000 to be used as necessary in low cash flow periods. Brenda and Charles Gajdik will own and operate the store together as a team. They will provide $40,000 in cash as an equity investment to be used in start-up costs, equipment purchases, and operating capital.

The sales forecasts used in this plan are very conservative compared to a similar business now operating in Lexington. Brenda has observed the strengths and weaknesses of this store and is convinced it can be done better.

1.1 Objectives

• To develop Classique Gifts Etc. into the premier gift retail store in Central Kentucky.
• To begin and maintain a gross profit margin above 40% for the first year.
• To acquire a customer base of 4,000 by the end of the second year by using personal customer service and marketing.
• To achieve a substantial net profit by the end of Year 3.

1.2 Mission

Classique Gifts Etc.will be a retail gift store specializing in fine gifts, collectible dolls and doll accessories. We want to provide products from quality suppliers and provide professional customer service in a friendly environment.

1.3 Keys to Success

To succeed in this business we must:

• Sell products the customer desires and are of the highest quality.
• Provide friendly customer service.
• Establish excellent vendor/supplier relations that will facilitate quick shipment of orders.
• Advertise and promote our store immediately to take advantage of the current Christmas shopping season.
• Continuously review our inventory and sales and adjust our inventory levels based on detailed records.

Classique Gifts Etc. is proposed to be a sole-proprietorship company operated by Brenda and Charles Gajdik and is a newly established retail store offering unique gifts and elegant collectible dolls.

Located in Lexington, Kentucky, we will cater to special consumers who are interested in finding unique items to supplement their doll collection or finding a gift that cannot be found in the national chain store in the very busy, very congested shopping mall. 

We intend to expand our business by carefully building a repeat customer base and provide the products and merchandise they wish to purchase. We feel it is important to offer personal customer support and services to achieve our business philosophy.

2.1 Company Ownership

Classique Gifts Etc. will begin operation as a sole-proprietorship. The company will be owned by Charles and Brenda Gajdik.

2.2 Start-up Summary

Total current and long-term assets will make up 78% of start-up requirements. Start-up expenses, which are detailed in the following start-up table comprise the remaining 22% at $20,058

Funding

As detailed in the start-up funding table, $90,000 with a $10,000 line of credit will be required to fund Classique Gifts Etc. This proposal is to be accomplished as follows:

• Owners’ investment from Charles and Brenda of $40,000
• Commercial loan of $50,000, calculated at 7% for seven years
• Line of credit of $10,000 to be used as necessary

Details of other start-up expenses include:

• Research and Development:

Buying trip expenses to Columbus, OH.	$133
Buying trip expenses to Atlanta, GA.	$430
Internet provider service paid in July, for the Year 1	$120
Total	$683

• 1st Month Rent & Deposit (proposed location):

Rent = $9.50/square foot	$1425/mo.	$17,100/yr.
Common Area Maintenance (CAM) = $1.50/square foot	$225/mo.	$2700/yr.
Total Rent and CAM	$1650/mo.	$19,800/yr.

• Leasehold Improvements:

Slatwall Panels and Accessories	50 panels @ $50 each	$2500
Ceiling Tiles	1,400 sq ft @ $.50/sq ft	$700
Carpet with Pad	1,400 sq ft @ 2.50/sq ft	$3500
Carpenter Estimate	Display Risers and Counter	$300
	Total	$7,000

• Phone line installation: Single line installation $100
• Insurance: Medical insurance for Brenda and Charles $650 first month

• Advertising & Promotion:

Newspaper	$76/week for 26 weeks (Community Section on Wednesday)	$1976
TV	Shopping with Santa in the Bluegrass	$1500
	Total	$3476

2.2.1 Start-up Current & Long-term Asset Listing

2.3 Location: Proposed

The most desirable location we have found is in Imperial Plaza Shopping Center located on Waller Avenue. The center will soon be renamed to Waller Center. The property manager estimates that 20,000 cars pass this center daily.

Imperial Plaza: This location has 1,800 sq. ft. and is priced at $9.50 per sq. ft. The CAM expense is $1.50 per sq. ft. and is adjustable and refundable at the end of the year. In other words, if the common area maintenance fund has not been fully used during the year, the remaining portion of the fund will be credited toward the tenant’s lease payment.

Approximately 350 sq ft in the back room can be used as work space and storage. The sales counter is adequate but could use some paint. The drop-down ceiling panels need to be replaced. The floor needs carpet and the walls need to have the pegboard panels removed or covered with slatwall. The window display risers are adequate but could use some carpet.

Monthly rent is $1,425 and the Common Area Maintenance (CAM) is $225 for a total of $1,650 per month. However, the owner’s representative said he would consider taking less. All appropriate insurance for liability and inventory is the tenant’s responsibility. The owner appears to be very flexible and helpful. The start-up leasehold expenses have been based on this property.

Other potential sites we have looked at are as follows:

Southland Drive:  The location has 2,000 sq. ft. at the very end of  Southland Drive close to Lane Allen Rd.  It was previously occupied by Southland Florists, which moved to a new location. The property has been available for about three years. The space is one of 4 or 5 spaces of the same size in a stand-alone building at the end of Southland Shopping Center.

The back room, which serves as a work and storage area, has a bathroom and will need remodeling. The floor will need new tile and some of the walls in back need repair.

There is an office area with a separate ceiling which should be removed for additional ventilation. An additional small room is adjacent to the office and should be removed to provide additional retail floor space.

The retail portion of the property needs the carpet replaced. The sales counter and the display window risers need to be replaced. The front door needs advertising material removed and the walls throughout the front and back need painting. The entire ceiling must be repaired.

The business sign must be flat against the outside surface. The existing sign with a new face can be utilized. However, the signs cannot be seen from Southland Drive because of three very large pine trees blocking the view. Parking is small but probably adequate for these shops.

The rent is $1,800 per month with the first month free for renovation. There is no common area maintenance (CAM) charge. The deposit is $1,800 and is due along with the first month’s rent. The tenant must provide the appropriate insurance for liability and protection of his assets. The owner said he would repair the ceiling and walls. The tenant is responsible for all other leasehold improvements.

This space will need considerable leasehold improvements. An existing tenant next door is not happy with the owner or her current situation and has only been in the location for six months.

Chinoe Center: The location has 2,280 sq ft in an upscale strip center with a mix of office space and retail outlets anchored by Kroger Supermarket Grocery Store. The property is located next to Kroger and with the right sign will receive a tremendous amount of visual advertisement exposure with the Kroger traffic. However, there is no display window, which explains the relatively inexpensive rent and CAM expenses. We have not seen the inside space.

The door leading to the space is located between a carryout Pizza store and Kroger. The door leads to a hallway about 25 to 30 feet long into a space which turns into three separate oddly shaped rooms. The space was previously used as a modern dance studio.

The space is priced at $8 per sq ft and $1.65 per sq ft CAM fee. That is $1,833.50 per month. The tenant assumes full insurance responsibility for inventory and liability.

Classique Gifts Etc. plans to carry special occasion gifts and merchandise from the San Francisco Music Box Company, Swarovski crystal, Lennox crystal, Outback Chair Company, Traditions Artglass Company, children’s books from Harvest House and other suppliers who display their products at the Atlanta International Gift Market or the Columbus Marketplace for Gift, Garden and Home.

We will also purchase merchandise from the most well-known collectible doll manufacturers and suppliers in the United States, including Steiff, Madame Alexander, Turner Dolls, Lee Middleton, Wendy Lawton, Susan Wakeen, Kish Dolls, Lloyd Middleton and others that provide the quality products that our customers wish to purchase.

According to Pam Danziger, President of Unity Marketing, the collectible doll industry generated $3 billion in retail sales in 2000. The gift industry, which includes general gifts, collectibles, stationery and greeting cards, generated $54 billion in sales in 2002. As predicted by Unity Marketing, “the future of the gifts and home accents market is positive for the next several years.” Source:Unity Marketing, The Home Report 2001:The Market, The Competitors, The Trends

4.1 Market Segmentation

The ideal customer we expect to serve is:

• Middle to Upper Class
• Primarily Female
• 30-75 Years of Age
• Educated
• Homeowner
• Quality Conscious
• Value Conscious
• Family Oriented

We will attract these customers by offering unique and uncommon product selections not found in the mass-market retail stores.

4.2 Industry Analysis

• More and more consumers are seeking independent retailers that offer them the feel of home with a more personalized shopping experience.
• As consumers become more time-deprived, they are looking to shop at stores whose service offerings are as equal in quality and value to their products.

4.2.1 Competition and Buying Patterns

Brand name products sell well in stores that maintain a good selection, good location, and knowledgeable, friendly employees. These are the most important factors when selling collectibles and gifts.

There is only one store in the Lexington area that carries a wide variety of collectible dolls. However, the doll inventory only makes up about 25% of the total inventory.  We do not consider this store serious competition because their lease for the 4800 sq. ft. store expires in March, 2004, and it is rumored the business will not renew the lease.

Other stores in the Central Kentucky area carry one or two lines of dolls but do not offer a wide variety of collectible doll lines. We intend to offer many different doll lines, doll accessories,  personalized knowledgeable service, and a variety of other unique gift merchandise.  

The Internet offers dolls at discount prices.  However, most of the merchandise is retired or discontinued lines that the manufacturers sell in bulk at discount wholesale prices. These are not the products we intend to carry in Classique Gifts Etc.

We intend to develop a web page at some point, probably in year three to market our merchandise on the Internet.

Classique Gifts Etc. will develop product offerings and marketing strategy to increase its customer base while driving sales and profit. The following sections review the various strategies that will support this effort.

5.1 Marketing Strategy

Classique Gifts Etc. will focus its marketing efforts by advertising in the Lexington Herald-Leader and Insight Media Advertising on cable TV.

We will also increase consumer awareness, retain the existing customer base and promote sales via seasonal postcard and newsletter mailings. The mailings will announce special events or holiday specials during the year. These events will be used to sell slow-moving products and vendor special promotions. This means our marketing resources will be centered around both sales promotions (events, displays) and personal sales (customer service, friendly atmosphere).

Classique Gifts Etc. will offer $5 coupons for every $100 spent. The coupon can be used by the customer on future visits to the store.

5.2 Sales Strategy

Classique Gifts Etc. will approach sales from a salesperson-customer relationship basis. All customers will be assisted in a very personal manner. Gathering key customer information and seeking performance feedback on the products and services offered will assist us in the following ways:

• Targeting our marketing efforts more effectively.
• Developing product offers and merchandising formats that will increase sales.
• Developing services that enhance the shopping experience.
• Increase awareness of Classique Gifts Etc. within the retail consumer marketplace.
• Develop future sales opportunities that allow for continued growth of the business.

5.2.1 Sales Forecast

Sales in the retail gift and collectible doll industry is enhanced by seasonal holidays and special gift giving occasions. The following sales forecast is from direct retail sales and does not include miscellaneous income. The figures also include dips in sales for those slow periods the business usually experiences in the summer months.

Sales Forecast
	Year 1	Year 2	Year 3
Sales
Dolls & Accessories	$72,105	$80,758	$90,449
Gifts	$71,405	$79,974	$89,570
Total Sales	$143,510	$160,731	$180,019
Direct Cost of Sales	Year 1	Year 2	Year 3
Dolls & Accessories	$40,871	$42,915	$45,060
Gifts	$40,885	$42,929	$45,076
Subtotal Direct Cost of Sales	$81,756	$85,844	$90,136

5.3 Competitive Edge

Classique Gifts Etc. will establish itself competitively as a unique retail environment through product offering and friendly, personal customer service. With St. Joseph Hospital, medical offices, the Kentucky Inn, the University of Kentucky and the Campbell House all located within 1/2 mile of the proposed site, we will attempt to offer items that appeal to this diverse population as well as the doll collector.

5.4 Milestones

The following table lists important milestone dates.

Classique Gifts Etc. will be managed and operated on a daily basis by Brenda and Charles Gajdik, a husband and wife team.

Brenda will manage merchandising, sales, customer relations, and all part-time staff. She will also provide the information necessary to develop a marketing plan to attract repeat customers. Brenda has been employed for three years at Schwab’s Collectibles, a retail collectible and gift store in Lexington. She is currently the assistant store manager which she has held for two years. Some of her management duties include shipping and receiving, merchandising, and sales. She has always served the public in most every position she has previously held. She understands what customer service is and has a loyal following of repeat customers. 

Charles will manage the finances and financial records, operations, data processing and assist in all other areas of the business. Charles has 14 years experience in accounting and nearly 15 years experience in information technology as an Information Systems (IS) Support Specialist. He also maintains the financial records for a family owned business and has some experience in retail sales.

6.1 Personnel Plan

The personnel plan is included in the following table. It shows the owners’ salaries along with one part-time employee used as needed.

• Growth will be moderate.
• Costs will be managed and forecasts for future needs will be performed on a regular basis.
• Finding the right product, at the right price will enable the business to meet planned margins and maintain inventory at an acceptable level.

7.1 Important Assumptions

Key assumptions are:

• We do not sell anything on credit.
• We assume the continued popularity of collectibles.
• We assume access to financing sufficient to maintain our financial plan as shown in the tables.

7.2 Projected Profit and Loss

The following table shows our planned three-year profit and loss estimates. We expect to have a gross margin percent above 40% our first year, which will continue to grow in years two and three.

The associated charts show that we will have a negative profit/sales percentage for the first two years with a positive net profit by year three.

7.3 Break-even Analysis

The following table and chart show our estimated monthly revenue break-even point.

7.4 Projected Cash Flow

The following table and chart represents the projected cash flow.

7.5 Projected Balance Sheet

The following table shows our projected Balance Sheet.

7.6 Business Ratios

The following table outlines some of the more important ratios from the Gift Shop industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code 5947.