West2East: Interior Design Services for Retail Environments - Assignment Example

West2East    Interior Design Services for Retail Environments                     The reasons for being self-employed Self-employment offers many opportunities if the entrepreneur is willing to take the chance to launch a new business concept. Being successful, however, is all about motivation to reach one’s personal goals. West2East was motivated by a personal desire to earn a quality salary and also to utilise a flair for interior design. Many retail environments lack the quality furnishings and décor necessary to build higher sales volumes, therefore West2East will provide interior design services to fill this gap. Providing a quality service is another personal motivation for the new store start-up. These motivations are shared by many in general society, especially in Westernised countries. For example, there is an increasing awareness and demand for responsible business activities with a focus on customer service. Businesses which do not provide quality customer service do not delight their customers and can achieve a negative reputation on the consumer or business market. Having a service-minded company fits perfectly with individual motivation to succeed, which will likely create a successful start-up company in terms of managing community and citizen relationships. When the business is able to contribute back to the local community through excellence, it is likely to spread quality word-of-mouth advertising as well. Motivation, of course, is not all that is needed for success. Entrepreneurs must be prepared to take risk. Risk can be represented by anything from changing buyer behaviours in a particular market, social and economic changes in foreign business environments, economic slowdown in the local region, or even being willing to take a sizeable loan for the pursuit of an uncertain business expansion. An entrepreneur must assess the external business environment, perhaps using a SWOT Analysis or PEST Analysis diagram, and determine whether a business risk is worth the effort and whether it will bring high financial and sales revenue rewards. These motivations are definitely not shared by all entrepreneurs. Two local entrepreneurs were interviewed for this West2East project; for anonymity they will be referred to as Subject One and Subject Two. Subject One is a small-business owner with a majority of sales products occurring online from a home office. Subject Two is a small business owner with a bricks-and-mortar retail store selling various small-ticket items like collectibles and vintage antique products. Subject One believed that having a proper pricing strategy, even over customer service, was the key to entrepreneurial success. The subject implied that because competition is growing fiercer each year, businesses must consistently consider whether their pricing of products is competitive. Subject Two suggested that follow-up, as an entrepreneurial advantage, was the most important in keeping loyal customers. However, both of the subjects believed that taking risks could be considered success factors for their business’ successes. Subject One launched his online company with only £ 250 investment and is currently earning twice what he earned in typical business employment. He quit his job prior to launching his online company, suggesting he was confident about his business plan. Subject Two believed that customers proposed the highest risk to their business model because their buying behaviours cannot be predicted. (However, Subject Two clearly showed a dismal marketing plan and concept). The Skills Required Gupta and York (2008) reveal the results of a study of various American entrepreneurs which suggests that most Westernised citizens believe that small business owners should give back to the communities in which their business’ function. This is highly important as an entrepreneur to give the buyer perception of a business which is strongly focused on relationship-building and positive customer service. One professional mentions that “successful entrepreneurs of today are not the industrialists of yesterday. They are younger and more interested in sustainable investments” (Grene, 2008: 1). This might suggest that the author believes that entrepreneurs are taking less risks and are putting their investment funds into areas which have the ability to maximise return on investment without putting the company at long-term risk. As part of business strategy at West2East, sustainable investments such as secure bonds will be part of the strategic policy. One business expert tells entrepreneurs to simply “forget about security” when starting a new business (Goldsmith, 2008: 46). This puts more emphasis back on areas of business risk where the entire business venture becomes a risky investment when certain external or internal conditions cannot be predicted, such as changes in buyer behaviours. A successful entrepreneur, then, must be aware that there will always be fluctuations in business and have a successful contingency plan in the event of business slowdown or sales declines. Leach (2008) offers that entrepreneurs must know their own weaknesses and also understand their strengths. This professional opinion suggests that entrepreneurs must realise their limitations and work even harder to develope their strengths. Capitalising on business strength and using it to strategic and competitive advantage is key to entrepreneurial success and not making plans which clearly cannot be accomplished based on the owners’ skill levels or educational abilities. Special strengths at West2East will involve a strong artistic focus for interior design, using talents with colour pallette and fabric design, using furniture as works of art, to develope different décor schemes within various retail environments. This flair is useful in the lower-budget interior design scheme as well as the upscale fashion environment in need of expertise. The company’s further focus on relationship-building and corporate social responsibility will enhance the firm’s image locally and abroad in the future with expansion plans in place. This entrepreneur’s current skills in business, such as calculating budget and economics, will be critical success factors in West2East in terms of saving payroll to fulfill these functions and to give the entrepreneur more control over the business at the administrative level. This business-minded philosophy will allow the owner to look at various sales data, recognise financial trends by charting revenue over a weekly/monthly period, and determine whether new marketing strategies will be necessary to make West2East stand out as a leader in interior design services. Recognising personal weaknesses, as another skill of a successful entrepreneur, uncovered a lack of understanding regarding international buyer behaviours. This will be of critical importance if the business is to expand into the near future to ensure higher profitability. To sharpen these skills, this entrepreneur will research various study materials online to recognise various trends which exist in the non-domestic sales environment. The entrepreneurial interviews are closely linked with this entrepreneur’s current skill level, as Subject Two strongly emphasised the importance of pricing to business success. Part of knowing your strengths is to identify the external environment and see where competition (or buyer behaviours) can serve to erode profitability. West2East will have to depend on quality pricing based on competitive services of this nature, as another critical entrepreneurial success factor, as a routine business operation at the administrative level. Various ways to start the business The personal needs of this entrepreneur are to maintain a great deal of control over the company. Most entrepreneurs are motivated by independence and freedom (Alstete, 2008). Having existing skills in business and finance will ensure high administrative control as a form of centralised management hierarchy. Having a more liberal business model where employees are empowered to make decisions may actually harm the reputation of West2East as all final decisions regarding buyer accounts must be cleared through ownership. It is the owner who maintains the most expertise in this area and should be consulted for all high-ticket (and low-ticket as well) purchasing and presentation decisions for the buyer. A liberal staff model would be ineffective at this company for this reason. This entrepreneurial trait regarding control will also be ineffective if this were to be a start-up company as a partnership. Sole proprietorship allows the entrepreneur to maintain administrative and economic control and avoids complications with indecision or account disagreement. Because the nature of West2East products are highly-publicised in presentation, there can be no opportunity for disagreement among ownership as decisions must be made with high expertise and rapidly to fulfill customer demands. The business proposal West2East will provide high-quality furnishings and interior décor for a variety of retail environments, from the generic, low-end store to the upscale boutique and other high-ticket sales environment. West2East will offer a selection of various fabrics, furniture, custom-buying services, mosaic tiles, and other in-store design fashions to please any variety of buyers. Based on customer needs and demands, some of the furniture will be housed as inventory and others will be on special purchase, creating some difficulty in the inventory model which can be identified as sales volumes increase and buying behaviours become chartable. The chart below shows the expected start-up costs needed to launch West2East. Start-up     Requirements       Start-up Expenses   Legal £ 1,000 Stationery etc. £ 800 Insurance £ 2,000 Rent £ 3,000 Computers £ 1,500 Total Start-up Expenses £ 8,300     Start-up Assets   Cash Required £ 2,500 Start-up Inventory £ 25,000 Other Current Assets £ 2,500 Long-term Assets £ 6,000 Total Assets £ 36,000     Total Requirements £ 44,300 The chart below shows the expected markets with a projected growth rate of one percent each year. General auction buyers will buy outdated, inventoried furniture items online to help West2East close out old stock and make profit. Market Analysis     2009 2010 2011 2012 2013   Potential Customers Growth           CAGR Large Corporate Buyers 1% 2,000 2,020 2,040 2,060 2,081 1.00% Small to Mid-Size Companies 1% 3,000 3,030 3,060 3,091 3,122 1.00% Entrepreneurial Buyers 1% 8,000 8,080 8,161 8,243 8,325 1.00% General Auction Buyers 1% 500,000 505,000 510,050 515,151 520,303 1.00% Total 1.00% 513,000 518,130 523,311 528,545 533,831 1.00% The chart below shows a unit-based, preliminary sales forecast for different categories of items at West2East Sales Forecast   FY 2010 FY 2011 FY 2012 Unit Sales       Chairs 500 600 700 Fabrics 1,000 1,100 1,200 Props (Mannequins) 150 180 200 Lighting 200 300 400 Mosaics, Tile 100 150 180 Total Unit Sales 1,950 2,330 2,680         Unit Prices FY 2010 FY 2011 FY 2012 Chairs £ 200.00 £ 200.00 £ 200.00 Fabrics £ 75.00 £ 75.00 £ 75.00 Props (Mannequins) £ 150.00 £ 150.00 £ 150.00 Lighting £ 180.00 £ 180.00 £ 180.00 Mosaics, Tile £ 200.00 £ 200.00 £ 200.00         Sales       Chairs £ 100,000 £ 120,000 £ 140,000 Fabrics £ 75,000 £ 82,500 £ 90,000 Props (Mannequins) £ 22,500 £ 27,000 £ 30,000 Lighting £ 36,000 £ 54,000 £ 72,000 Mosaics, Tile £ 20,000 £ 30,000 £ 36,000 Total Sales £ 253,500 £ 313,500 £ 368,000         Direct Unit Costs FY 2010 FY 2011 FY 2012 Chairs £ 50.00 £ 50.00 £ 50.00 Fabrics £ 15.00 £ 15.00 £ 15.00 Props (Mannequins) £ 30.00 £ 30.00 £ 30.00 Lighting £ 45.00 £ 45.00 £ 45.00 Mosaics, Tile £ 20.00 £ 20.00 £ 20.00         Direct Cost of Sales       Chairs £ 25,000 £ 30,000 £ 35,000 Fabrics £ 15,000 £ 16,500 £ 18,000 Props (Mannequins) £ 4,500 £ 5,400 £ 6,000 Lighting £ 9,000 £ 13,500 £ 18,000 Mosaics, Tile £ 2,000 £ 3,000 £ 3,600 Subtotal Direct Cost of Sales £ 55,500 £ 68,400 £ 80,600 Since most administrative functions will be handled by ownership, below is an estimation of the necessary labour costs for extra staff expertise during the start-up year. Employees will be part-time as needed, based on customer sales volumes. Personnel Plan   FY 2010 FY 2011 FY 2012 Assistant Manager £ 25,000 £ 25,000 £ 28,000 Design Specialist £ 20,000 £ 22,000 £ 24,000 Total People 0 0 0         Total Payroll £ 45,000 £ 47,000 £ 52,000 Profit and Loss   FY 2010 FY 2011 FY 2012 Sales £ 253,500 £ 313,500 £ 368,000 Direct Costs of Goods £ 55,500 £ 68,400 £ 80,600 Other Costs of Goods £ 0 £ 0 £ 0   ------------ ------------ ------------ Cost of Goods Sold £ 55,500 £ 68,400 £ 80,600         Gross Margin £ 198,000 £ 245,100 £ 287,400 Gross Margin % 78.11% 78.18% 78.10%                 Expenses       Payroll £ 45,000 £ 47,000 £ 52,000 Marketing/Promotion £ 800 £ 0 £ 0 Depreciation £ 0 £ 0 £ 0 Rent £ 1,200 £ 1,250 £ 1,300 Utilities £ 5,000 £ 5,500 £ 5,800 Insurance £ 2,000 £ 2,200 £ 2,400 Payroll Taxes £ 6,750 £ 7,050 £ 7,800 Other £ 500 £ 550 £ 680   ------------ ------------ ------------ Total Operating Expenses £ 61,250 £ 63,550 £ 69,980         Profit Before Interest and Taxes £ 136,750 £ 181,550 £ 217,420 Interest Expense £ 0 £ 0 £ 0 Taxes Incurred £ 41,025 £ 54,465 £ 65,226         Net Profit £ 95,725 £ 127,085 £ 152,194 Net Profit/Sales 37.76% 40.54% 41.36% Balance Sheet   FY 2010 FY 2011 FY 2012 Assets               Current Assets       Cash £ 102,757 £ 227,595 £ 375,806 Accounts Receivable £ 24,928 £ 30,828 £ 36,187 Inventory £ 4,625 £ 5,700 £ 6,717 Other Current Assets £ 2,500 £ 2,500 £ 2,500 Total Current Assets £ 134,809 £ 266,623 £ 421,209         Long-term Assets       Long-term Assets £ 6,000 £ 6,000 £ 6,000 Accumulated Depreciation £ 0 £ 0 £ 0 Total Long-term Assets £ 6,000 £ 6,000 £ 6,000 Total Assets £ 140,809 £ 272,623 £ 427,209         Liabilities and Capital FY 2010 FY 2011 FY 2012         Current Liabilities       Accounts Payable £ 9,085 £ 13,813 £ 16,205 Current Borrowing £ 0 £ 0 £ 0 Other Current Liabilities £ 0 £ 0 £ 0 Subtotal Current Liabilities £ 9,085 £ 13,813 £ 16,205         Long-term Liabilities £ 0 £ 0 £ 0 Total Liabilities £ 9,085 £ 13,813 £ 16,205         Paid-in Capital £ 44,300 £ 44,300 £ 44,300 Retained Earnings (£ 8,300) £ 87,425 £ 214,510 Earnings £ 95,725 £ 127,085 £ 152,194 Total Capital £ 131,725 £ 258,810 £ 411,004 Total Liabilities and Capital £ 140,809 £ 272,623 £ 427,209         Net Worth £ 131,725 £ 258,810 £ 411,004 Economic external conditions, as part of the PEST diagram, will greatly impact these projected sales numbers. Higher buying interested could drive them into higher profit due to more positive, regional economic stability. These could also decrease if retail companies decide to scale back. West2East will be different from competition because the firm will position all of its products according to business lifestyle and corporate organisational culture. If the retail environment is high-end, the company will provide interior design services with this type of relationship-focus in mind. While other competitors are looking to stretch their bottom line, West2East will provide superior, quality products at an affordable price, which was cited as a critical success factor by interview Subject Two. West2East will also give back to the local community through various sponsorships and community-minded activities. Southon (2008) offers that mentoring young people is a quality business practice as a means of giving back. West2East will donate funds, based on profit expectations, to local community organisations designed to offer youths quality development and self-esteem as part of corporate social responsibility. Bibliography Alstete, Jeffrey W. (2008). ‘Aspects of entrepreneurial success’. Journal of Small Business and Enterprise Development, Bradford. 15(3): 584. Goldsmith, Marhsall. (2008). ‘We’re All Entrepreneurs’. Business Week, New York. Iss. 4097: 46. Grene, Sophia. (2008). ‘New era for sustainable investing’. Financial Times, London. 1 Sep: 1. Gupta, V.K. and York, A.S. (2008). ‘Attitudes toward entrepreneurship and small business; Findings from a survey of Nebraska residents and small business owners’. Journal of Enterprising Communities, Bradford. 2(4): 348. Leach, Steve. (2008). ‘The reluctant gambler’. Director, London. 62(1): 31. Southon, Mike. (2008). ‘Give back to the needy: Mike Southon My Business’. Financial Times, London. 28 Jun: 34. Read More