Shamrock Convenience Store's Development Perspectives - Case Study Example

Shamrock Convenience Store Financial and Marketing Plan Financial Plan The financial plan of the business is based on the following assumptions. The firm will experience a 15% annual growth in sales revenue The firm will use debt financing to start the new store Sensitivity analysis The convenience store will be located at a strategic place where there is a guarantee of customers. The store will offer fast moving goods such as snacks, soft drinks and fuel. It is expected that the store will survive economic turbulences because demand for snacks and fuel is relatively stable. In this regard, the business can remain competitive and stable. The projected growth rate can ensure that the business remains profitable despite the several drawbacks it may experience. Set up costs The new store is strategically located at 213 West Highway 241, Birmingham, AL. The strategic point implies that the set up cost is expected to be relatively high. The startup capital is estimated to be $600000 with stock taking a $500000. The remaining amount will be used in other expenses such are business registration, licenses and refurbishing the premises. Sales revenues are expected to grow by 15% for the next three years. The growth in sales will be used to offset debt obligations of the firm. As noted, the firm will use debt financing to start and operate. Despite the increase in expenses and taxes, the sales revenue will be high enough to offset the expenses and retain the high profit margin. Operations The business will rely on debt financing to fund its operations for the first 3 months. After 3 months business operations will be funded from the sales proceeds. The implication here is that the business will be able to sustain itself. The business will start servicing its debt while maintain a degree of profitability. Marketing strategy According to Levinson (2007), guerilla-marketing strategies are essential for small business since they are inexpensive and thus require a small marketing budget. The guerilla strategies aim at attracting the attention of the target audience. In this regard, the Shamrock Convenient Store will use the strategies to reach out to prospective customers. The strategies are advised by the fact that the convenience store targets the local population as well as travelers. Shamrock Convenient Store will use strategies such as legal graffiti, raising awareness on social media, word of mouth, and creating partnerships. Legal graffiti and in-store promotions Graffiti is important as it boosts visibility of the business and curiosity of the target audience. The business will identify some of the dirty walls within the neighborhood and clean them. The walls will then be painted with attractive colors with the stores logo and several of its products (Mumaw, 2011). By so doing, the community will appreciate the work done in cleaning the walls and also in painting. Painting the store’s logo and some of its products will gain the attention of the residents, thus attracting them to the store. The most possible graffiti will include images of fresh farm products being sold at the store such as snacks. Social media In today’s world, many people subscribe to at least one social media site. The major sites are Facebook and Twitter. The store will use social media such as Facebook and Twitter. However, it will not subscribe to social media marketing. Since the strategy is guerilla, the store will open Facebook page and take as many friends as possible from the local population. The store will also create a twitter page and also follow many people from the locality. The strategy will help in keeping the target audience aware of the new store in the neighborhood. The store will attract social media followers and friends through attractive posts and pictures of its shelves and location. By so doing, people will become more aware of the store thus increasing sales. Creation of partnerships Creation of partnerships exposes the business at no cost. The store will seek to create partnerships with other enterprises with a similar customer base. The store will target to partner with suppliers. The store will offer to include popular brands on its marketing platforms as long as the partners put the store in their marketing platforms. The objective of the tactic is to expand the visibility of the store and also relate it with popular brands to increase market penetration and hence sales. A good example is that the store will establish partnerships with the Pepsi Company as a major retailer of its products in Birmingham. In return, the store will include Pepsi products as one of its major products in its marketing platforms. Location Economics The second Shamrock Convenient Store will be located at 213 West Highway 241, Birmingham, Alabama. The choice of the venues is based on several factors that include accessibility, traffic and ample parking, and rent rates. Accessibility is important as it defines the number of customers that will visit the store. The store will be located at a strategic point where customers can easily drive or walk in easily. The presence of a highway is a boost to the store, and many people will drive in for some snacks and fuel as they travel. Further, there are no other stores in the neighborhood, thus making the store the only choice for customers. The West Highway is a wide road that is free from congestion. As such, many people prefer using the road. Locating the store along the road will improve its prospects of getting customers. The customers’ preference of a road that is free from excess traffic will boost the stores visibility. In addition, the location has ample parking to attract customers with vehicles. The West Highway serves an area with a high population. The situation means that many people drive in to buy supplies as they go home from work. The store is particularly convenient for motorists since it along the road. As shown in the financial analysis, land rates in the location are lower as compared to other parts of the county. The rent for the premises for a year amounts to an average of $15000. The rate is economical and enhances the sustainability of the costs of operations. The lease is also on a contract basis. The store will rent the premises for a period of 5years after which the business will renegotiate terms of the lease. Plan for Securing Sources of Debt Financing The business intends to use debt financing to finance its startup capital of $599700. According to Longenecker, Petty, Palich & Hoy (2013), debt financing is important for a business since it does not include sharing of revenues or management with the lenders. In this regard, the business will secure funds through trade credit, factoring and bank loans. Bank loans The business will document all its financial projection to a bank for consideration. The business will seek a loan amounting to $250000. The loan will be used to finance the startup cost of the business and purchase of equipment, rent and also in paying the relevant levies to the government. From the loan, $100000 will be used to buy part of the stock. The business will use its detailed financial plan to lure the banks to award the loan. Further, the business will have supporting documents of financial position of the current store to show the financial returns of the business. The existing store will also act as collateral for the loan. Trade credit Trade credit will be used to increase the stock of the store. The store will enter into agreements with suppliers to recompense for the goods or services at a later date, probably after selling the goods. By so doing, the store will enhance the amount of stock available. The business plans to use trade credit to stock goods and fuel amounting to $250000 with a repayment period of not exceeding 90 days. From the financial projections, the store will have sales amounting to $800000 in 2015 implying that it can comfortably offset the trade credit. Bank overdrafts The business will seek overdrafts to finance its stock. The store will seek the overdraft facility from commercial banks or trade unions. The overdraft will allow the business to expand its scope beyond the amount of finances it has. The business will prove the need for an overdraft with its projections on profitability for three next three years. Government loans The United States government, offers loans and grants to small business in the country. The government offers the loans through the U.S Small Business Administration (SBA). The management will draft an application for a loan from the government. The business will seek a loan of up to $100000 to go towards the expansion program. The existing store will act as collateral for the loan. References Card, E. (2014). How to Start a Convenience Store Business. MicJames. Levinson, J. C. (2007). Guerrilla marketing, 4th edition: Easy and inexpensive strategies for making big profits from your small business. New York: Houghton Mifflin Harcourt. Loans & Grants | The U.S. Small Business Administration | SBA.gov. (n.d.). Retrieved from https://www.sba.gov/category/navigation-structure/loans-grants Longenecker, J., Petty, J., Palich, L., & Hoy, F. (2013). Small Business Management (17th ed.). Boston, MA: Cengage Learning. Mumaw, S. (2011). 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