Professional Documents
Culture Documents
Executive Summary
Keith's Sporting Goods (KSG) will be in the business of selling athletic equipment to people at every fitness
level, from aspiring college athletes to weekend warriors. With our knowledgeable staff we will provide an
environment where everyone feels comfortable coming in and asking for training advice and discussing
equipment needs.
Based in Eugene, KSG wants to be a recognized sporting goods store. An exact location has yet to be set,
but owners are avidly searching for a high foot traffic location. Ideally that location would be in central
Eugene where anyone can travel a short distance to find our store.
We fully expect to grow quickly. Many businesses start under the same assumption but due to work ethic,
desire, job enjoyment, KSG is expecting to make a profit in the early stages of its life. Sales are forecasted
to be conservative in the first month but are expected to increase by 2% each month thereafter, with a first
year growth rate of 12%. This assumption appears to be accurate given the fact that the sporting goods
wholesale industry is growing at an 11.5% annual rate.
Keith's Sporting Goods will be filed as an S Corporation where owners will be protected from various forms
of liability and tax shields. In the early stages of business, we will be primarily debt financed through a local
bank and the Small Business Association (SBA). We have forecasted the need for 60% debt, the owner and
operator will invest the rest.
Depending on the timing of financing, we expect to have the store open by January next year and to
produce strong profits by the end of that same year.
1.1 Objectives
The primary objectives for the store are:
1. Brand recognition. KSG will be a recognized sporting goods and fitness store in Eugene.
2. To be operating at a profit by the end of the first year of business.
3. Achieve a 15% growth rate in sales from years one and two, and then maintain no less than
a 11.5% growth rate thereafter.
4. Maintain a constant gross margin of 40%. If we are able to do this and keep costs fixed, sales will
be able to grow faster than total costs.
1.2 Mission
KSG strives toward building long-term relationships with our customers and employees. Working within the
community, promoting community service, and encouraging the additional education of our employees will
be constantly emphasized by store management. We feel it is extremely important to give back to the
community that supports our operations, while also maintaining an atmosphere where our employees have
the opportunity to improve as individuals.
Company Summary
KSG intends to provide customers with the quality products they need to maximize athletic performance and
accomplish their physical and mental goals. We will provide our customers with a knowledgeable staff that
enjoys working in an athletic atmosphere and helping others. We will be located in Eugene where there is a
high concentration of health conscious individuals and a devoted following to both high school and college
athletics.
Under these circumstances, and the fact that the investment is a relatively small undertaking, KSG will be
filed as an S Corporation. The ownership will be split up evenly between myself and the other investor, and
the rest will be debt financed.
Requirements
Start-up Expenses
Legal $300
Operating Assets $0
Brochures $0
Consultants $0
Insurance $0
Rent $4,310
Marketing/ Advertising - Grand Opening $1,000
Renovation $1,000
Other $0
Total Start-up Expenses $6,610
Start-up Assets
Cash Required $8,489
Start-up Inventory $82,901
Other Current Assets $0
Long-term Assets $2,000
Total Assets $93,390
Start-up Funding
Assets
Non-cash Assets from Start-up $84,901
Cash Requirements from Start-up $8,489
Additional Cash Raised $0
Cash Balance on Starting Date $8,489
Total Assets $93,390
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $60,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $60,000
Capital
Planned Investment
Owner/Operator $20,000
Angel Investor $20,000
Additional Investment Requirement $0
Total Planned Investment $40,000
Products
Keith's Sporting Goods will be a high quality fitness store that focuses on athletic performance and
maximization of athletic potential. In other words, KSG will be designed to supply athletes with the essential
products that are necessary for active lives.
• Shoes
• Apparel
• Athletic equipment
• Polymeric boxes
• Medicine balls
• Health supplements
• Training literature
These groups comprise the majority of athletes in the city, and we find them to be the ones with the
disposable income to spend on athletic apparel.
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Parents 17% 3,150 3,686 4,313 5,046 5,904 17.01%
High School Athletes 25% 3,600 4,500 5,625 7,031 8,789 25.00%
College Students 7% 15,000 16,050 17,174 18,376 19,662 7.00%
Middle-aged Adults 10% 50,000 55,000 60,500 66,550 73,205 10.00%
Total 10.65% 71,750 79,236 87,612 97,003 107,560 10.65%
We strive to build long-term, personal relationships with our customers, in order to do this, we will need to
attract customers at young ages. Therefore, our primary target market will be parents with young children.
By building a trust relationship, we may be able to maintain a family right up through the child's college
years.
It will be important to target these groups because youth sports are growing at an incredible rate. Data has
indicated that youth sports has the highest growth rate of any segment within the athletic industry. Capturing
the market at a young age will lead to future sales when athletes spend more money on their athletic needs.
Young parents and high school students will not be the only groups that we will focus on because they also
make up the smallest population. Focusing on college students and active adults will also be key.
In the sporting goods retailing many companies compete in different ways. For example, Copeland's tries to
sell products more on a cost basis using their capitol power to sell products at the lowest price. When doing
this, they sacrifice the customer service and support that many athletes are looking for.
As a smaller company we intend to provide customers the support and knowledge they need to fulfill their
goals.
We want our customers to have complete trust in what our employees are saying. We want them to know all
the information about what they are buying and what is best for them. If customers have a good experiences
with what they purchase, not only will they more likely be repeat customers, but also they will tell friends
about the quality of operations at KSG.
The type of equipment that KSG will provide will also be a source of competitive edge. Much of the
equipment found at Keith's will not be found at larger chain stores. For example, it is tough to find polymeric
equipment. In fact the only way one can buy high-quality equipment is through catalogs. It is the same for
many types of shoes. Stores like Copeland's tend to only sell shoes that are trendy. Trendy shoes are not a
sign of high quality; they are a sign of great marketing. KSG will provide quality equipment and will be able
to educate customers on why certain equipment is better than the typical mainstream brand equipment.
Employees will be paid on an hourly wage with no commissions at the beginning of operations. After the
store has a history, a commission package based on sales and education advancement can be
implemented.
KSG will carry a relatively low amount of inventory and have frequent order repurchases in an attempt to
maintain inventory levels and storage costs. Finally, all sales will be in cash to prevent the problems brought
along by late accounts receivable payments.
Management Summary
The owner of KSG will also be the operator and decision maker. The philosophy behind the workforce will be
one of total customer satisfaction and education. Since many customers are not aware of the many
repercussions brought on by athletics, employees will be encouraged to continually gain new knowledge and
insight.
We plan on starting with one full time employee who will be the store manager. The manager will work
closely with the owner. During slow hours, they will work closely implementing new strategies and making
store changes. The manager will work 40 hours per week, and will have the weekends off. The manager's
salary, below, includes benefits (paid sick time, holidays, and insurance coverage).
The owner will work the weekend with the other employees. Aside from the owner and manager, KSG will
need an estimated 51 man-hours over the course of the week. There is no estimated number of employees
needed; we just need to fill the extra 51 hours. Employees will make $8/hr, and will be looked upon as
an integral part of the operation.
Personnel Plan
Year 1 Year 2 Year 3
Owner Operator $36,000 $36,000 $40,000
Manager $43,200 $45,000 $46,000
Employees $22,032 $24,000 $25,000
Total People 5 6 6
Financial Plan
Keith's Sporting Goods will regularly monitor all financial statements because they have a direct correlation
with the health of our business. We have forecasted into the future with a steady but moderate growth rate
where sales will grow by 2% every month. All sales will be in cash leading to positive cash flows whenever
asset acquisition is maintained. Profits will be reinvested into the business in hopes of future product and
store expansions. If no appropriate investment opportunities present themselves excess cash will be placed
into the market through a respected financial consultant.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0
Assumptions:
Average Percent Variable Cost 60%
Estimated Monthly Fixed Cost $13,016
Expenses
Payroll $101,232 $105,000 $111,000
Sales and Marketing and Other Expenses $21,600 $21,600 $21,600
Depreciation $0 $0 $0
Utilities $9,600 $9,600 $9,600
Rent $23,760 $23,760 $23,760
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Current Assets
Cash $91,374 $79,275 $71,611
Inventory $26,588 $27,705 $28,838
Other Current Assets $0 $0 $0
Total Current Assets $117,962 $106,980 $100,449
Long-term Assets
Long-term Assets $2,000 $2,000 $2,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $2,000 $2,000 $2,000
Total Assets $119,962 $108,980 $102,449
Current Liabilities
Accounts Payable $29,335 $27,633 $28,509
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $29,335 $27,633 $28,509
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 4.20% 4.09% 4.20%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 40.00% 40.00% 40.00% 31.80%
Selling, General & Administrative Expenses 33.60% 22.50% 21.21% 19.00%
Advertising Expenses 1.66% 0.85% 0.77% 1.90%
Profit Before Interest and Taxes 4.06% 4.67% 4.79% 1.40%
Main Ratios
Current 4.02 3.87 3.52 1.97
Quick 3.11 2.87 2.51 0.75
Total Debt to Total Assets 64.47% 58.39% 51.25% 57.70%
Pre-tax Return on Net Worth 28.81% 37.40% 39.18% 3.40%
Pre-tax Return on Assets 10.24% 15.56% 19.10% 8.20%
Activity Ratios
Inventory Turnover 8.89 10.01 10.00 n.a
Accounts Payable Turnover 9.13 12.17 12.17 n.a
Payment Days 27 31 30 n.a
Total Asset Turnover 3.62 4.15 4.60 n.a
Debt Ratios
Debt to Net Worth 1.81 1.40 1.05 n.a
Current Liab. to Liab. 0.38 0.43 0.54 n.a
Liquidity Ratios
Net Working Capital $88,626 $79,347 $71,940 n.a
Interest Coverage 3.30 5.04 7.52 n.a
Additional Ratios
Assets to Sales 0.28 0.24 0.22 n.a
Current Debt/Total Assets 24% 25% 28% n.a
Acid Test 3.11 2.87 2.51 n.a
Sales/Net Worth 10.19 9.99 9.44 n.a
Dividend Payout 0.00 0.79 0.69 n.a