Fashion Garment Store at High Street - Term Paper Example

 «Business Plan» Introduction This paper contains the description and in depth study of features of a model business plan. Alongside the theoretical discussion, a proposed plan of a fashion garment store at high street is also discussed. In the end general weaknesses in any business plan that were specific to our fashion garment trading business plan have been sorted and discussed. Mission Statement Mission statement is the signature statement of a business plan. “A business or corporate mission statement spells out overall strategy or intent that will govern the goals and objectives of a business or a company.” (Scott Roberts, page 24)iThis statement does not specify objective of the business but a mission that clarify the purposes of business to be carried on. For example we are developing a business with following mission statement: “Fashion chain stores on a high street of every fashion city that provide apparel to those who want to make a fashion statement is the mission of the business. ‘Basic wear with honorable fashion’ is the motive of the business, and quality sale with reasonable profit margins is the approach than the quantity sale with low margin approach. There will not be any reduction sales to increase the turnover, but prices will be reduced to clear the shelves for replacement with next fashion season. Nature of Business Next component of a business plan is specification of nature of the business. It is a sort of road map of processing the business. For example in retail fashion store the location of the store is important. The location should be at the central part or at a corner of high street where customer footfall is expected to be the highest. Accordingly the business plan for fashion store should carry the following description for the location of store: Retail clothing store at a well located London High Street visited by gentry that believe clothing a fashion statement to reflect the character and style of those adoring them is the nature of business. In a business plan “describe the nature and uniqueness of the products and/ or services provided and briefly review general history and future goals of the company.” (Lind Pinson, page 26)ii That is why in our plan of garments retail trading, the process of fabrication should be explained in detail as far as possible. This will provide the readers an in depth information of the process of business and help them in taking a decision about financing if the plan is studied by say a bankers. Nature of business processing may be like as under: Readymade garments will be designed by world fame designers for the ensuing season. Fashion shows will be held to get the feeling of high and upper middle class gentry. Range of clothing will be selected keeping in view the results of fashion shows. Printed material will be distributed, displaying the fashion show pictures with details of each garment but not the prices, among the would be customers to get their opinion in the attached prepaid business reply cards. Teams of experts will be sent to select and purchase the required fabrics as envisaged by the designers. The main point is that sales prices will not be declared at any stage of promotional level. A panel of the reputed fabricators will be developed after inviting portfolios of selected few on international basis. The motive will never be to save the cost of material and fabrication cost, as sale will not be to masses but to classes who make fashion statements.. It is clear that cost of such fashion garments will not be economical but the business will strive for reasonableness as the ultimate motto of every business is to increase profits by reducing cost. But quality will never be compromised for economizing the cost of fabrication. After provide the detailed description of the manufacturing, a flow chart describing the process may be included to add graphic value to the business plan. Ownership structure As per available resources, an organization may be a proprietary concern, a partnership, a limited partnership, a private limited company, a cooperative, or a public limited company. Business plan must clear the organizational structure to be followed. Factors those are important in a taking a decision about ownership structure are the nature of business and the personal preferences of promoters. Like in fashion garments trading where the stakes will be high requiring institutional and public finances, it is suggestible that promoters should take a decision in favor of public corporation. This is because “a corporation is, by law, a separate legal entity. Shareholders invest but are not responsible for the corporation’s liabilities. Any law suits will be filed against the corporation and not its shareholders, and therefore, personal assets are protected. C. corporations are the most common, and are allowed an unlimited number of shareholders. The disadvantage of c.corporation is the double tax. The business and shareholders are both taxed.” (Kate Kenworthy and Stephen Rodrigues, page 106)iii The main limitation or shortcoming in our business plan for fashion garment trading will be the preferences of promoters, as sometime promoters select ownership structure that suits their personal whims and likings and not the business requirements. Business plan should decide about ownership structure strictly as per the nature of business and the scale of financial requirements for the business. Long and short term goals Business plans are prepared keeping in view long term and short term objectives to be achieved. For example in fashion garment store short term goal may be to establish a successful fashion store in one of the busiest London high streets, and the long term goal may be to have such chain stores in every fashion city of the world. Long term goals are always achieved when those are involved in the initial planning of the business. As the businesses grow idle funds are required to be invested. Those who do not plan expansions initially find it hard to reinvest earnings in business itself and try to find opportunities elsewhere. When profits are ploughed back into the business, the power of business gets established and earning increases manifold. Accordingly long term goals must relate to the business for which plans are being made and not for purposes outside the business. “Most business plans are prepared with a singular purpose in mind: to generate an interest in the business that will cause people to either lend money or invest. There is, however, a much better reason to create a business plan: to give management a clear picture of the short term and long term goals of the company. A periodic rewriting of plan will cause you to recognize the shortcomings of the previous plan and adjust your thinking for the future. This is the reason for constantly revisiting and restarting your business plan.”(Ira Nottonson and Theresa A. Pickner, page 158)iv Customers Business plans must explain the clientage base or the demographic structure of clientage that will be attracted by the plan. “It makes sense that your business will bring a higher price if it is profitable, is well managed, has an existing customer base, and good projected sales forecast.”(Priscilla Y. Huff, page 273)v Customer base is the source to initiate sales and thereby provide the cash flow so necessary to run a business and earn profits. Though marketing and promotional activities play a major role in attracting new customer base, but an existing customer base helps in starting a new business activity easily for the corporation. Loyal customer base is the life line of any business. Attracting new client base is a marketing art, but quality of products being traded also attracts new customers. Existing client base usually become source for adding new clientage. It is mouth publicity of existing customers that is more valuable and important than any marketing plan or tactics. The pattern of clientage base plays a long role in developing the product under business plan. In our business plan of fashion garment trading, the client base has to be young and educated class who build the society as responsible citizen. The location of the store for fashion garment trading business is decided taking into account the class of young customers it will serve. Naturally the locations in high streets near reputed educational institutions are more suitable for fashion store if customer base is university going students. But young generation that carries the responsibility to build the society ranges from 15-16 years to 40-45 years. This class carries and develops the fashion style for the society, and that decides the type of garments to be developed and fabricated for this class of young people of the society. Client base also gets developed over a period with the development of the business. But developing a client base also need finances and these finance should form part projected investment depicted in the business plan. It is necessary to keep business intimacy with the existing client base as this “intimacy with customer base enables to quantify the potential market very accurately and plan its growth strategy very clearly.”(Christoph H. Loch and others, page 29)vi. There is another approach that helps in building good client base. It the product and its quality that matters. In our fashion stores garments to be sold will be designed by well known designers who understand the likings and needs of the customers. Fashion store will introduce new fashion garments that will attract new customers and enhance the existing customer base. “One way to ensure a smooth flow into a new customer base is to plan from the beginning to expand into other demographics. To do this you must have a product or service that lends itself to such expansion, but if you take steps in the early stages to eventually broaden your reach, you will be ready to take appropriate measures to design new market materials, educate your sales staff, and create new distribution channels, if necessary.”(Nadine A. Thompson, page 30)vii Suppliers Suppliers section in a business plan plays a crucial role. Without supplies no business can be transacted. Either the entity will indulge in manufacturing or it will purchase goods for reselling. In either case suppliers are required to supply either raw material for manufacturing or finished goods for reselling. Moreover credit provided by suppliers plays an important role in deciding the available credit period so necessary for working capital management. As manufacturer of fashion garments, the business plan must carry the details of raw material suppliers along with their basic terms. In fact in fashion garments, purchasing of cloth for garments play an important role. After purchasing the cloth and other accessories, those are required to be distributed among fabricators for manufacturing of garments. Accordingly timely delivery plays an important role. The return policy of the suppliers must match with the tradition or rituals in the industry, as sometime the suppliers purchase or get manufactured the goods only for your business, and if those are returned, the supplier will think twice to deal with your concern. Accordingly inspection of goods received from suppliers is very important as those make an impact on payment terms with suppliers. Arrangement of working capital funds depend a lot on terms with supplier. If supplier provide longer credit period, the entity can plan the size of funds for working capital requirements. Competition Description of competition prevalent in the industry is necessary in a business plan. “In analyzing competition, your business or strategic plan must discuss present or potential prices by answering these questions. For example, can you raise prices or use different prices for different market segments? Does your pricing maximizing dollar of income over time based on competitive advantages in features, benefits, type of product, and type of customer?” (Robert J. Calvin, page 45)viii Finances It is important that capital structure of the proposed business be discussed in the business plan. Finances can be arranged either through equities or debt capital. It is the proportion of owned capital and debt capital that becomes relevant for financial institution like bank to provide working capital and other facilities to the proposed entity. Similarly accounts receivable average period and accounts payable average period decide the total credit period enjoyed by the entity; and this in turn is important for deciding the working capital requirements for the proposed business. It is customary to present projected financial statements of the proposed business for a number of accounting periods. These periods may range from say five years to seven years. With such information in business plan the investors and other stakeholders come to know about the break even stage of the business, and the time when the business will start earning profits. This helps investors in taking a decision about the amount of investment they intend to make after comparing the proposed financials with other alternatives of investments. Similarly, financial institutions can take a decision whether to provide finances to the entity or not; and also the proportion of debt for long term and short term period. Marketing The proposed marketing strategy of the entity should be expressed in the business plan. If possible the budget of marketing should be compared with its effect on increase in business. “The marketing plan will need to show how these end users are to be identified and what promotional strategies will be employed to target them.” (Roger Lewis and Quentin A. Whitlock, page 44)ix. Also marketing strategies must commensurate with other plans of the entity. It is seen that marketing if not coordinated with other business plans destroy the entire business plan, and under such circumstances it is difficult to join loose ends of the plan. Weaknesses of Business Plans It is seen that some entities make different versions of a business plan for submitting each to bankers, suppliers, and other agencies. Every version of business plan is modeled as per instructions and requirements of each agency. This is a limitation and not a fair practice. If your projected financial statements in business plan show high profit margin for bankers and the other copy for suppliers show low profit margins, the interests will get clashed for the entire operational periods of the entity. In each accounting period the entity will have to make efforts to justify the financial position shown by actual financial statements to one agency or the other. In our fashion store plan the marketing planning was completely missing. The financial aspect of the business was also not planned. Many companies undertake a SWOT analysis to observe whether mission of the plan coordinates with other aspects and features of the plan. In our planning this SWOT analysis has not been carried out. Also competition threats in the international market in respect of fabrication of garments have not been analyzed. Analysis renders opportunities to reduce the cost and increase profitability. Above all, it should be kept in mind that it is not possible to prepare a perfect business plan that is free from any kind of weaknesses. “The point is build on your strength, limit your weaknesses, capitalize on your opportunities, and survive the threats to your business. (Jan B. King, page 19)x Conclusion The important features of a business plan are mission statement, nature of business, ownership structure, long and short term goals, projected customer base, terms and conditions of suppliers, prevalent competition in the industry, marketing plans, and projected financial statements and capital structure of the entity. There is nothing like a perfect business plan. Weaknesses exits in every business plan, and those are removed when plans get converted into practical business exercise. Word Count: 2726 References Read More