Designs By Kendra

Business Plan

Kendra JamesCO

Table of Contents Page

The Executive Summary 61.0 Introduction 7 1.1 Industry Overview 7 1.2 Mission Statement 8 1.3 Goals and Objectives 82.0 Operations Plan 8 2.1 Site Plan 8 2.2 Building and Floor Plan 9 2.3 Flow of Organization 10 2.4 Quality Control Programs 10 2.5 Organizational Tasks 10 2.5.1 Daily 10 2.5.2 Weekly 11 2.5.3 Monthly 11 2.5.4 Yearly 11 2.6 Supply Analysis 11 2.7 Service Providers 12 2.8 Capital Budget 12 2.9 Cost of Sales 13 2.10 Operating Expenses 13 2.11 Working Capital 14 2.11.1 Cash 14 2.11.2 Inventories 14 2.11.3 Accounts Receivable 14 2.11.4 Accounts Payable 143.0 Human Resources Plan 15

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3.1 Organizational Structure 15 3.2 Job Descriptions/ Qualifications 15 3.2.1 Manager 15 3.2.2 Seamstress 16 3.2.3 Crystal Artist 16 3.3 Human Resource Strategy 17 3.4 Shareholders’ Agreement 174.0 Marketing Strategy 17 4.1 Target Market 17 4.2 Purchasing Patterns of Customers 17 4.3 The Marketing Mix 18 4.3.1 Products 18 4.3.2 Pricing 20 4.3.3 Promotion 21 4.3.3.1 Selling and Advertising 21 4.3.4 Place 22 4.4 Competitive Analysis 23 4.5 Marketing Expenses 245.0 Financial Plan 25 5.1 Capital Requirements 25 5.2 Summary of Projected Income Statement 26 5.3 Summary of Projected Balance Sheet 26 5.4 Risk Analysis 26 5.4.1 Critical Variables 26 5.4.2 Contingency Plan 27 5.5 Dividend Policy 27 5.6 Economic Forecasts 27 5.7 Ratio Analysis 27

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5.8 Break-Even Analysis 27 5.9 Net Present Value 28 5.10 Internal Rate of Return 28 5.11 External Rate of Return 286.0 Summary 29

Figures Figure 2.1 Site Location 8 Figure 2.2 Floor Plan 9 Figure 3.1 Organizational Chart 15 Figure 4.1 Showmanship Outfit 18 Figure 4.2 Horsemanship Outfit 19 Figure 4.3 Pleasure Jackets 19 Figure 4.4 Chaps 20 Figure 5.1 Break-Even Graph 28

Tables Table 2.1 Initial Investment 12 Table 2.2 Cost of Sales 13 Table 2.3 Cost of Goods Manufactured 13 Table 2.4 Operating Expenses 15 Table 4.1 Competitive Analysis 23 Table 4.2 Marketing Budget 25 Table 5.1 Capital Requirements 25 Table 5.2 Projected Revenues, Net Income, and Retained Earnings

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Table 5.3 Balance Sheet 26

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Appendices 30 Appendix A- Ratios 31 Appendix B- Breakeven 32 Appendix C – Investment Analysis 33 Appendix D – Base Case Financial Statement 34 Appendix E – Best Case Financial Statement 35 Appendix F – Worst Case Financial Statement 36Works Cited 37

Executive Summary

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The growing trend to have the most unique and intricute show outfit has become a driving force for new show clothing designers. With this increaseing popularity, no one person can have the best idea because every designs is unique and large sums of money are spent to ensure that these designs are not duplicated. The overall cost of showing is increaseing due to a large part of the specific clothing demands.

The following document is a business plan proposing to develop a high end custom show clothing company, Designs By Kendra. The business plan outlines the operations, human resources, marketing and financial components of the proposed business. The plan determines that the proposed business is a profitable opportunity exceeding the inverstor’s required rate of return.

Designs By Kendra will cater exclusively to women of all ages competing in the horse showing industry. The marketing component of the business plan outlines how the business plans to achieve its projected sales, which is its most critical variable. The location is a strong advantage as the majority of its direct competitors are all located in the United States. It would be the only competitor of its kind in Alberta, which is the horse show central of Canada. Alberta has the highest concentration of breed shows in western Canada. The manufacturing location of Designs By Kendra is in Lloydminster Alberta. This location is in close proximaty to both Saskatchewan and Alberta breed shows, to allow for less expensive travel for promotional activites.

Designs By Kendra will have two employees and one manager, to meet the demands for the projected 5 year plan. The team will be trained in the industry and trips to major events will be provided to ensure that we stay up to date on the emerging fashions in the show arena. This training is essential to ensure that our products meet and exceeds our high standards of customer service and satisfation.

Financially the business has potential for significant returns on the $30,000 investment. The $30,000 investment is anticipated to be entirely financed by equity giving a 117% return on investment and a 80% external rate of return. The business generates significant revenues, which allow dividends to be paid starting in the third year.

With the introduction of Designs By Kendra to the Canadian market, we will be able to maximize the opportunity and gain a competitive advantage over other competitors.

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1.0 Introduction

1.1 Industry Over ViewThe horse showing industry is growing and as research shows that an increase of money is being spent on the apparel for competition purposes. The increasing demands for the newest and most unique, eye-catching outfit has opened up opportunities for show clothing designers and manufacturers. There are some companies already established in the Unite States but few in Canada, all competing for market share.

There are a large variety of competition events that people could be involved in. The events that Designs By Kendra is looking to cater to is:

Showmanship at Halter: This class involves an exhibitor on the ground leading their horse through a series of maneuvers called a pattern. The judge decides the pattern and posts it prior to the class. The exhibitor is judged on how well he or she executes the pattern with their horse.

Western Horsemanship: Horsemanship judges the correctness of the rider's seat, hands and feet, the finesse in riding, and the strength of his or her lines and angles. The competitor rides a pattern, is devised by the judge, that includes a serious of maneuvers.

Western Pleasure: The horses are the main focus of this class. The judge evaluates the horses movement and disposition. They are expecting to see a collected and cadence gait. The horse is to appear to be a "pleasure" to ride and very comfortable, while being very smooth.

Western Riding: As stated by AQHA, “Judges the abilities of a horse to change leads precisely, easily and simultaneously, using both hind and front legs. Following one of four patterns consisting of a log and a series of pylons, the horse and rider must change gaits – from a walk to a jog or a lope – throughout the course. Reward is given to the horse that changes fluidly and precisely between the middle of the pylons within the pattern.”

Trail: “The trail class tests the maneuverability of a horse through an obstacle course. Mandatory obstacles include one in which the rider will open, pass through and close a gate. Scoring is based on the horse’s willingness, ease and grace in negotiating the course. The other two mandatory obstacles are riding over at least four logs or poles and one backing obstacle.” (AQHA)

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The industry has set standards at to what clothing designs are acceptable in each event. Some outfits can cross over from one class to the next but certainly one outfit will not suffice all the events.1.2 Mission Statement“Offering a superior, unique product at a reasonable price to a select market of equestrian athletes.”

1.3 Goals and ObjectivesThe goals and objectives for Designs By Kendra are:

To achieve the projected sales of 150 shirts and 100 pairs of chaps in the first year.

To maintain a customer sales growth of 10% for 5 years. To achieve a 25% return on equity. To dominate the Canadian Market. To be the first show clothing company to come to mind when

consumers are looking to purchase that truly unique outfit.

2.0 Operations Plan

2.1 Site PlanDesigns By Kendra will be located in the down town area of Lloydminster, Saskatchewan. The specific location of the shop is proposed to be located at 5106 -49th Ave in a building with other occupants. The other occupant in the building is a western wear store. Though their customer base is not entirely the same as my target market, I will get exposure to Designs By Kendra through the traffic of his customers. The map below Figure 2.1 shows the location of the buildings location.

Figure 2.1 Site Location

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While this is just a location for manufacturing purposes, the overall location of Alberta, Canada contributes to Designs By Kendra’s competitive advantage. All major competitors are located in the United States giving Designs By Kendra an advantage for the Canadian market. This location also gives us the benefit of being the most strategically placed show clothing company in Canada as Alberta has the highest number of registered Quarter Horses and members in all of Canada.

The building that we are leasing is 1500 sq ft, which leaves lots of space for the manufacturing functions of the business. As it provides a space for only manufacturing purposes there is no plan for new development or need for updating decor in the first five years. If the company out grows the building that it is in, we will simply terminate the lease an look for a larger location that will satisfy our manufacturing space needs.

2.2 Floor and Building PlanThe floor plan shown in Figure 2.2, is the building that we are leasing is a 1500 sq ft building that has two other tenants in it. The layout of the floor plan will accommodate 2 serger machines, 2 regular sewing machines and 1 leather machine. There will be an area for cutting and design space, for the assembly and designing of the garments. The layout includes a front counter and an office for the manager. A staff room for the employees is located at the back of the building along with one washroom and space for material storage as well as finished goods storage.

Figure 2.2 Floor Plan

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2.3 Flow of OrganizationThe flow of work at Designs By Kendra will be on a custom order bases for one of a kind show shirts, chaps or complete outfits. Once an order is received the manager will either source the material from inventory or suppliers. Once material has been located and the client has approved a design the manager passes the approved order and material to the seamstresses for cutting and assembly. Once the order is assembled, the manager for quality standards reviews the product. Upon approval the item moves to the crystal artist for further designs work if required. When item is completed, it is checked a final time by the manager for quality control standards. When product is completed client is contacted to arrange payment and delivery.

2.4 Quality Control ProgramDesigns By Kendra will not need ISO or HACPP, but will have developed protocols for each product made, to ensure quality and consistency with each product sold. Ensuring that every shirt produced by Designs By Kendra meets the high quality expectations of its customers is very important. The manager to ensure that the customer receives the same high quality experience every time will check every customer order prior to being shipped out to its destination.

2.5 Organizational Tasks

2.5.1 DailyThe operating hours for DBK are: Monday to Friday 8-5. These hours may be adjusted for peak production times of the year.

The manager will be the first to arrive. They are responsible for opening DBK, which will include turning on all lights and lamps, making coffee, making sure everything is neat and tidy and ready to go for the day. During this time the employees will start to arrive and getting their work areas set up. In the event of the managers absence the seamstress will have keys to the building to open and close. The seamstress will also be responsible for handling the daily operations.

Through out the day the employees will work on products set out for them by the manager. Manager will be responsible for answering phones and taking special orders. On days that the manager is gone to trade shows the seamstress will be in charge of the daily operations.

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At the end of the day the employees will clean their stations, as well as sweep and mop the floors before leaving for the day. Once everything is cleaned up and ready to go for the next day employees will go home and manager will lock up the building.

The manager will be working as office clerk, taking care of day-to-day activities that come up. This will involve ordering, paying bills, answering emails, marketing, human resources, finances etc.

2.5.2 WeeklyEvery 2 weeks the manager will do inventory reports on materials and crystals. This will ensure that there is enough supplies and products on hand. If necessary the manager will make orders of the inventory needed to continue production. Other task such as tracking the employee’s productivity and performance and reviewing accounts payable will also be looked after.

2.5.3 MonthlyAt the beginning of each month, the manager will place orders for supplies needed. Month end reports will also be run to track and analyze performance. Any bills that are due will also be paid at the end of each month. Current marketing efforts will be viewed and analyzed. Future marketing efforts will be continuously worked on through out the year.

Monthly one-on-one performance reviews will be done to give an opportunity to discuss performance with employees. These are also an opportunity for each employee to express any concerns or ideas in the operation of DBK.

2.5.4 YearlyAt the end of each year annual reports will be run and analyzed, by the board of directors, to determine the overall performance and future path of DBK. After analysis is completed of the documents changes will be considered for the next year. Inventory will also be counted at the end of each year.

A new marketing plan will be developed for the next year. To determine appropriate price changes the manager will perform a competitive analysis. Finally, the manager will develop a budget for the upcoming year, this will help to determine how much money can be spent on what areas of the business and also what opportunities can be taken on by DBK.

2.6 Supply Analysis

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To supply Designs By Kendra with fabric, which is bought on a custom order bases, we plan to use HJ Fabrics out of Saskatoon, along with Spandex World, for the supply of spandex materials. Michelle’s Fabrics out of Winnipeg, and Fabricland will be used for the supply of various other material and miscellaneous items. Tandy Leather, out of Saskatoon, will be used for the supply of leather. Rapid Tags will be the supplier of custom woven labels. Cowgirl Finesse, from Wainwright, will supply custom garment bags. Lastly, Dreamtime Creations will by the chosen supplier of Swarovski Crystals. Administrative supplies, such as paper, pens, printer ink, staples, will be purchased from a stationary store in the city. Other miscellaneous supplies will be purchased form the appropriate local store.

2.7 Service ProvidersDBK staff will include:

1 Manager/Owner 1 Senior Seamstress 1 Crystal Artist

These numbers are for the startup of DBK and will increase as the demand for the product increases.

DBK has an accountant hired to for month end statements and year end. Other services that will be out sourced are electrical, plumbing, computer technical issues, web site technician and sewing machine servicing.

2.8 Capital BudgetThe maximum capacity in sales of Designs By Kendra with this number of employees is 220 shirts and 146 pairs of chaps, which is reached by the fifth year of operation. At this time we could either decide to increase prices even further or hire more staff to meet demand. For this business plan, I projected sales of 150 shirts and 100 pairs of chaps in the first year growing at 10 per cent each year. The capital costs seen in the table below consist mostly of equipment including various types of sewing machines and equipment.

A small inventory of crystals will be required, of which we will keep a 14 day inventory. No credit will be given to customers, thus no need for financing for receivables as well as no payable because all bills will be paid online upon receipt.

Table 2.1 Initial InvestmentFixtures and Equipment   Enclosed Bumper Pull Trailer 7,500

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Various Sewing Machines 6,200 Tables 2,100 Additional Lighting 200 Trade Show Booth 1,000 Sewing Tools 600 Office Equipment 2200 Total Capital Budget 19,800

For a more detailed cost breakdown of capital costs including working capital, see appendix D.

2.9 Cost of SalesExpected Cost of Sales for clothing products in year one is as follows (for a total sales of $200,000)

Table 2.2 Cost of SalesBeginning Inventory - Cost of Goods Manufactured 153,878

Ending Inventory 992 Cost of Goods Sold 152,885

Table 2.3 Cost of Goods ManufacturedYear 1

Item Cost Selling Price MarginShirts 789 1,000 21%Chaps 356 500 29% 

Year 5 Item Cost Selling Price MarginShirts 782 1,461 46%Chaps 359 541 34%

See appendix D for a cost of goods manufactured detailed breakdown.

2.10 Operating Expenses

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Table 2.4 shows the operating expenses for year one of the business. The largest operating expense that this business will occur is marketing expenses.

Table 2.4 Operating ExpensesLegal and Accounting 1,500 Repairs and Maintenance 2,500 Incorporation Fee 300 Marketing Expenses 40,740 Total Operating Expenses 45,040

A more detailed look at operating expenses can be viewed in appendix D.

2.11 Working Capital Planning

2.11.1 CashThe initial capital invested in the start up of the business gives a margin for additional cash not used directly by the capital budget. This left over amount ensures that there is enough cash in the business account to pay all bills necessary. Once the business has generated cash from profits, not all will be paid out in dividends. Some of the cash will remain in the company for any unexpected expenses, for example the unplanned need to purchase a new machine.

2.11.2 InventoriesThe manager on a bi-weekly or monthly bases will order inventory. The only inventory that we will stock is the Swarovski crystals that are used on the shirts. We will carry various sizes and colors to keep production from being stalled waiting on inventories. The materials required for the production of the garment will be bought as the client place their orders, ensuring that we get exactly what they are looking for.

2.11.3 Accounts Receivable

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We will not offer any credit as it is not common in the industry. The custom order garments will require a deposit prior to production and the balance will be paid in full when the item is complete.

2.11.4 Accounts PayableDesigns By Kendra will also have no accounts payable, as all bills will be paid online as soon as they are received.

3.0 Human Resources Plan

3.1 Organizational Structure: Corporation

The Staff at DBK will consist of a manager, seamstress and a crystal artist. The manager will be responsible for running the company, ensuring that DBK has what it needs to be a successful business. The manager is also in charge of quality control and ensuring that the customers are satisfied with their products. The manager will be away from the shop occasionally to go to trade shows to advertise and promote Designs By Kendra. In the event that the manager is away from the office, the full time seamstress will be responsible for handling the day-to-day manufacturing operations. The following is the organizational chart for Designs by Kendra.

Figure 3.1 Organizational Structure

3.2 Job Descriptions/ Qualifications:

3.2.1 ManagerThe manager will be in charge of the operational and fiscal activities of the company. They will be responsible for all planning and procedures to improve the operating quality and efficiency of the company. They will supervise staff and be responsible for hiring, training, and coaching employees. The manager will be responsible for managing information and general administration as well as monitoring and reporting employees performance. The manager will be the only person dealing with the customers. They will be responsible for taking all the customer orders and searching out the fabrics and other materials necessary for the order. Being that the manager will be the only one dealing directly with the customers, excellent people skills are a must

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as we are relying on positive word of mouth to help increase presents and our sales.

The manager must have previous experience in the horse show industry, as well as a background in sewing and design. They will be doing the majority of the designing of the garments and therefore creativity is a must as well as knowledge of the industry. Also a large part of the managers job title will include marketing the Designs By Kendra brand and the products that it produces. Therefore it is essential for the manager to have extensive background in sales and marketing.

Kendra James will be the Manager of Designs By Kendra. Kendra will complete her B.A. in Commerce in April of 2010, major in Marketing. She has worked in sales for 5 years and consistently holds the top sales position in the company. She has over 6 years of experience competing in the American Quarter Horse Association breed shows, and has been involved in horses and showing for about 18 years. By competing not only locally but internationally in the industry, Kendra has made many connections through networking and has learned the do’s and don’t for fashion in the show pen. Kendra is a prime candidate to be the manager of Designs Be Kendra.

3.2.2 SeamstressThe seamstress plays an important role at Designs By Kendra. This is the person who must manage daily operations when the manager is away. Obviously, the essential requirement is the ability to sew. The seamstress that we are looking for should have knowledge of linings, fabrics, button and zippers, cutting patterns and pieces and creating solid seams. Any use of specific equipment or processes will be learned on the job. Good hand-eye coordination and dexterity are essential attributes. We expect that seamstresses joining our company will learn specifics through on-the-job training and experience. Once the seamstress has acquired knowledge and experience in the designing process with the manager, they will be able to take on more responsibility of the design process.

3.2.3 Crystal ArtistThe crystal artist is responsible for the embellishments on the garments. This person should be creative and articulate. They will need patients for this job, as the work is very intricate. While they will get some direction for the designs, they need to be creative to come up with new innovative design ideas. Hand-eye coordination as an absolute must for this job because the person will be working with very small and expensive crystals and various other embellishments. As

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they become more experienced in the industry and learn the trends they will be expected to take on a bigger responsibility of developing the design ideas.

3.3 Human Resources StrategyThe HR strategy that we will employ will be based on creating a sense of pride for our employees. Being such a small business we want the workplace to have a more personalized family feel. We want to create a workplace that is both a comfortable and friendly work environment. Monthly meetings and one-on-one performance evaluations will also be held with the staff. These meetings will discuss individual performance as well as overall company performance. We want to create an environment were the employees feel empowered to explore their creative side as individuality and uniqueness is a big part of the success of Designs By Kendra.

Employees will continuously be further educated about new trends in the industry. Trips to various horse shows will be made to give employees an insight on the latest trends in the show pen. Designs By Kendra will target potential employees who seem to have a vested interest in horses, designs or the horse show industry.

3.4 Shareholders’ AgreementThe Manager will hold 100% of the shares for Designs By Kendra and it will be a private corporation.

4.0 Marketing Strategy

4.1 Target MarketThe target market for Designs By Kendra is women, of all ages, who compete with their horses in a variety of events, with an above average income. Our target market will be a competitive, image conscious women who strives on being the best. These women want show clothing that works not only for them but will complement their horse, to give them the overall stunning look that they are searching for. They are willing to pay a higher price for the ‘unique’ garment that Designs By Kendra offers because it is important to these individuals that they are the only one with a particular outfit and design. The team at Designs By Kendra strives to design and embellish each garment, spotlighting and defining the persona of each client.

4.2 Purchasing Patterns of ConsumersWomen will be the customers at Designs By Kendra who use the products, however men may purchase gift certificates for their wives, daughters or girlfriends to have an out fit made for them.

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The purchasing patterns in Canada will vary with the seasons. Our busy months will be the spring and summer months. The peak of our busy time will be early spring, as most clients want to start out the new show season with something new. The Canadian shows, focusing mostly Alberta and Saskatchewan, begin in April and end in September. The other times where orders will increase is for major shows such as the Canadian Nationals in August, Youth AQHA World Show in August, and the Amateur/Open AQHA World Show in November.

4.3 The Marketing Mix

4.3.1 ProductsDesigns By Kendra offers a custom made product that is individual and one of a kind. We design and manufacture custom show clothing. Our offering of products includes showmanship outfits, horsemanship shirts, pleasure jackets/rail shirts, as well as chaps in various colors and leathers. These products are designed to be one of a kind garments that are individual to each and every customer. The team at Designs By Kendra, design and embellish each garment, spotlighting and defining the persona of each client.

The following is a description of the products offered at Designs By Kendra:

Showmanship Outfit: These outfits include both a jacket as well as matching pants. The jacket it worn un-tucked and usually a zipper runs up the front. This event involves a person on the ground leading a horse through a series of maneuvers called a pattern. The exhibitor is judged on how well he or she shows their horse.

Figure 4.1 Showmanship Outfits

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Horsemanship Outfit: On this shirt the zipper will go up the back and the majority of the pattern stays at the top of the shirt. There is an option to have pants made to wear under chaps, as well as they can have chaps made to match the outfit. In this class of western horsemanship the rider is judged on the correctness of their seat, hands and feet, the finesse in riding, and the strength of his or her lines and angles as they ride a series of maneuvers in a pattern devised by the judges. Because the rider is being judged on their riding ability the correct fit and design is essential in this outfit.

Figure 4.2 Horsemanship Outfit

Pleasure Jacket: These outfits have fewer specifics about them. They can have a zipper up the front or back (most commonly the front) and the design focus can encompass the entire jacket. In a western pleasure class the focus is more on the horse. The horse is judged on its movement, as it should be collected and cadenced. The horse is to appear to be a "pleasure" to ride and very comfortable, while being very smooth.

Figure 4.3 Pleasure Jackets

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Chaps: Chaps are worn in all western riding classes. There are few options to change on chaps. The client can pick the color to match a specific outfit but the most common color is black.

Figure 4.4 Chaps

Designs By Kendra’s garments are made with only the best materials to insure a higher standard of product quality. The tops that are made with out leather will be 100% washable and the crystal work will be guaranteed. The embellishments on the garments including crystals, pearls and nail heads, come from only the best, Swarovski. Swarovski produces the best crystals in their crystallized line of products for the maximum sparkle that our clients are looking for in the show ring. Using these materials allows us to charge a premium price for our garments.

Designs By Kendra is the personal fashion design for our select number of exhibitors. We are giving our clients the confidence to compete with the best in the industry. When a customer orders a custom outfit, they

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can be certain that it will be what they were looking for and will catch the attention of the judges.

4.3.2 PricingThe horse show clothing industry is competitive, however, in Alberta there are few direct competitors for Designs By Kendra. The majority of Designs By Kendra’s major direct competitors are in various areas of the United States. There are some indirect competitors, these include some western stores such as Jones Boys in Red Deer and Lammles Western Wear in Alberta, which are just retailers selling mass produced show clothing of a much cheaper and generic caliber. These competitors do not offer any custom work, as they are just simply retailing and not producing the products.

The pricing for the product produced by Designs By Kendra will use a competitive pricing strategy. Many of our competitors’ prices are substantially higher than ours, Designs By Kendra will have to build brand recognition and equity before charging the outrageous premiums that it major competitors are able to. See competitor analysis for further information.

Discounts will not be given on individual garments. The only situation that discounts will be given is to equestrian teams ordering more than one of the exact same shirt. Only in this case will Designs By Kendra produce more than one of a design and give a discount.

Prices at Designs By Kendra will increase gradually as our reputation grows. The prices will also increase in response to increases in inflation, material prices, wages, etc. Such increases in expenses will be evaluated on an annual basis to ensure that Designs By Kendra is making an economically feasible profit.

4.3.3 PromotionDesigns By Kendra’s positioning statement is:

“To the serious competitor that enjoys showing, Designs By Kendra is the hand made, unique clothing to make you standout from the crowd. – When you need to be noticed.”

Designs By Kendra offers a personalized touch to clients show clothing need. Our individualized service will ensure the perfect outfit will be made for each and every client. Each piece is unique and never duplicated, with an option of being completely washable.

4.3.3.1 Selling and Advertising

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Advertising will play a very intricate role in the awareness of the Designs By Kendra name and the products that we offer. The methods that we plan to use to effectively reach our target market are exhibitor sponsorships, trade shows magazine advertisements and website. Using these methods will ensure that Designs By Kendra will obtain the sales it needs to reach our projections.

To increase awareness of the Designs By Kendra brand name we plan to sponsor a few competitors to advertise for us. These competitors will be chosen carefully to maximize the potential of this opportunity. A lot of sales in this industry are gained by positive word of mouth. By targeting a few top well know competitors to wear our products we can potentially stimulate the positive word of mouth. The exhibitors that we choose will be required to display promotional signage at their stalls and around the show grounds.

The trade shows will include events and locations such as, the Canadian Nationals in Red Deer Alberta, All American Congress in Ohio, Mane Event and the Paint Zones, both in Red Deer, and the North West Congress in Washington, DC. The two horse shows that are located in Red Deer will bring in approximately 500-800 people. The Mane Event in Red Deer will see approximately 60,000 people over the course of the weekend. The major show that we will attend in our first year is the All American Congress in Ohio, they have approximately 17,000 entries and 650,000 people that come to watch and explore the trade fair. The other show location that we will pursue in the first year will be the North West Congress in Washington, which averages approximately 10,000 people.

Designs By Kendra will also advertise in a variety of magazines. The magazines that we have chosen to reach our target audience are the AQHA Journal, The Chronicle, and The Western Horse Review. The AQHA Journal will reach a large number of Quarter Horse enthusiasts of all ages. The majority of the big time major competitors subscribe to this magazine for all the information on up coming show and events in the AQHA association. Our second choice, The Chronicle, is not exclusively quarter horse focused but paint horse focused as well. This magazine will help us to reach a broader demographic of not only quarter horse breed show exhibitors but paint horse exhibitors as well. The last magazine that we chose to advertise in is a more local magazine, The Western Horse Review. This magazine does not target horse show exhibitors exclusively but rather the horse people of western Canada. This magazine will help to bring awareness to the local market of Alberta and Saskatchewan Exhibitors.

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The last form of advertising will be done through the internet on the Designs By Kendra website. The website will feature a picture gallery of past and current clients success in the show ring. It will feature contact and order information to place orders. A display of example designs and products will also be showcased on the site.

When people hear the name Designs By Kendra the image of beautiful unique clothing and great-individualized service will come to mind. Designs By Kendra will be the most sought after show clothing in the industry, a must have when preparing to compete in the most prestigious of competitions.

4.3.4 PlaceThe manufacturing of Designs By Kendra’s products will be done in a building located in downtown Lloydminster Alberta. This location is perfect for Designs By Kendra because a store front is not necessary for our store as the majority of the selling will be done through trade shows and promotional advertising, not at the actually manufacturing location. The other benefit to this location is our neighbor in the building. Frank’s Saddlery is situated in the same building as Designs By Kendra. While the majority of his customer base will not be customers of Designs By Kendra there will be a select few that will either be interested in becoming customers or know someone who might be interested. This flow of traffic will help with exposure of the Designs By Kendra brand name.

Designs By Kendra will be selling their products on a custom order bases directly to the end consumer. Our target market of higher income breed show competitors is the most heavily populated in Alberta. The location of the Alberta/Saskatchewan border allows less expensive travel to both Saskatchewan and Alberta breed shows. The most effective channel of distribution will be networking at various onsite locations mentioned before with the trade shows. This will allow the manager to travel to both provinces to gain exposure and promote our products and maximize sales potential in Canada.

4.4 Competitive Analysis

Table 4.1 Competitive AnalysisName Description/Image Location Price Range

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Paula's Place

Very High end, clients on a contract basis and does not accept new clients. Custom Work only.

United States $5,000- 9,000

Berry Fit

High end custom work as well, has some ready made garments for sale.

United States $3,000- 6,000

Showtime Show Clothing

Well known but does no custom work. Two of a kind shirts with a few one of a kind out fits.

United States $1,500- 4,000

Connie's Customs

Produces the same shirt design in 6 different sizes. More generic.

United States $800- 3,500

Lindsay JamesCustom work only, not well known.

United States $1,800- 4,000

Hobby Horse

Very generic, mass produces a single shirt design.

United States $80- 350

The above table lists the majority of Designs By Kendra’s direct competitors. All of these competitors are located in the United States, which means that the Canadian market of exhibitors either have to travel to the United States to a horse show to look at the competitors merchandise or buy off a web site. This leaves much room for error. Clothing is never easily bought with out being tried on to ensure the fit. A few competitors offer custom work, which will help with this uncertainty, but customers, will still pay extra for currency exchange and shipping.

The established direct competitors vary in the price range that they charge for their work. The more custom and individualistic the products are the higher the prices. Their prices seem to continue to rise as there is a steady demand for this type of product.

The indirect competitors for Designs By Kendra include retail stores such as Lammles Western Wear in Alberta and Jones Boys located in Red Deer. These types of stores carry an alternative to custom show clothing. They sell mass produced show shirts at a significantly lower price. These are more commonly bought for open show purposes rather than for breed shows. The mass produced shirts are less

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expensive but obviously lack the unique and individual designs as well as quality of materials desired by breed show competitors. Designs By Kendra has an advantage over the indirect competitor as our team can offer a more personal touch to the transaction. We also have the advantage of catering to unique body styles of customers who find it difficult to purchase off the rack clothing.

4.5 Marketing ExpensesTo reach and maintain the projected sales and revenues, the marketing of Designs By Kendra is imperative to its success. The promotional expenditures that Designs By Kendra will use will consist of business cards, flyers and posters, magazine advertisements, website, promotional sponsorships, networking and trade show appearances. These promotional materials will be used year round with the exception of the trade shows, which will be limited to the dates that they have set.

The following is a list of the marketing expenses incurred in year 1 of operation.

Table 4.2 Marketing BudgetMarketing Expenses:  Managers Salary (50%) 20,000 Manager Benefits (6%) 1,190    Advertizing:  Magazines 10,000 Business Cards 350

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Flyers and Posters 300    Promotion & Development:  Website 2,400 Travel 5,000 Trade Shows 1,500 Total Marketing Expenses 40,740

In the second year, the marketing budget falls slightly due to a decrease in website costs. The initial 2,400 is for the set up of the site and the following years maintenance will decrease to $500 a year. All of the other promotional material will remain the same with the exception of an increase of inflation. See appendix D for a detailed copy of the marketing budget for the projected 5 years.

5.0 Financial Plan

5.1 Capital Requirements

Designs By Kendra requires a total capital investment of $30,000. It is anticipated that the capital requirement will be raised entirely by equity. The initial capital requirements are projected below:

Table 5.1 Capital RequirementsLong Term Debt - Common Shares 30,000 Total Financing 30,000

It is expected that the equity requirement will be met through my parents and I.

5.2 Summary of Projected Income StatementThe revenues for Designs By Kendra are based on the sale of 150 shirts and 100 pairs of chaps in the first year, growing at 10% in the following years. The price of these garments is growing at an average rate of 10% starting with 5% in year two. I believe that this projection is a very achievable estimate as I predict that with an increase of brand recognition we should be able to increase prices substantially more than the projection estimates.

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The following is the total revenues, net income, and end retained earnings for the 5 years projected. See appendix D for a detailed income statement for Designs By Kendra.

Table 5.2 Projected Revenues, Net Income, and Retained EarningsYear 2010 2011 2012 2013 2014

Revenues 200,0

00 257,4

00 304,049 371,1

20 439,7

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Net Income 1,753 39,46

3 67,852 112,1

79 143,0

14 End Retained Earnings 1,753

41,216 59,068

96,247

139,261

5.3 Summary of Projected Balance Sheet

Table 5.3 Balance SheetYear 2010 2011 2012 2013 2014

Total Assets 30,81

2 69,24

0 85,953 121,8

79 163,5

15 Total Liabilities - - - - -

Total Equity 31,75

3 71,21

6 89,068 126,2

47 169,2

61 See appendix D for the complete balance sheet for Designs By Kendra.

5.4 Risk Analysis

5.4.1 Critical VariablesDesigns By Kendra has one very critical variable, which is the number of sales to customers. The company’s success is extremely sensitive to the amount of sales. The other critical factor to the success of the business is the expected growth of the selling price of the outfits. Our starting price is very competitive with the competition and as our brand equity grows we anticipate being able to increase our prices relative to that of our competition.

Designs By Kendra is targeting niche market clients from upscale horse showing enthusiasts. Competitive exhibitors, who thrive on being the best and having the best, drive the purchase of product from Designs By Kendra. In this industry we will face very strong competition from already established competitors in the United States.

5.4.2 Contingency PlanIn creating the base case scenario as well as a worst-case scenario we have found that there is not a lot of room for our sales to fall.

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Therefore our contingency plan will be that if we do not reach our targeted goals for sales by the end of the second year, I will scale down the operation to a part time business, which I will run on my own. I will already have the equipment necessary for operation and the investment is quite small therefore I will not be out a lot of money.

5.5 Dividend PolicyThe financial model shows that dividends will be paid out starting in year 3 with a dividend of $50,000. Following that, in year 4 a dividend of $75,000 will be paid to equity investors. Finally in the 5th year a dividend of $100,000 will be paid out. It is anticipated that the dividends will level off at $100,000 to $150,000 to investors annually.

5.6 Economic ForecastIn the financial model for Designs By Kendra, an assumption was made that the Canadian economic situation will continue to stabilize over the long-term. To reflect this I used an average inflation rate of 2.0% and an interest rate of 10.0% for the development of future projections.

5.7 Ratio AnalysisThe ratios used in the analysis of the business were gross profit margin, net profit margin and return on assets. The gross profit margin starts in year one at 24% and grows to about 50% by year 5. In year one the net profit margin is 1% as we only make a very small profit in the first year because our projected sales are just above our break-even. This ratio grows to 33% by year 5. The return on assets ratio in year one is 6% and grows to 84 % by year 5. To see a detailed yearly projection of the ratios see appendix A.

5.8 Break-Even AnalysisThe break even of sales was calculated by determining how many shirts needed to be sold to make net income zero. In the first year our projections are just above break even as we are able to make a very small profit of $1,753. Our projection is to sell 150 shirts and 100 pairs of chaps in the first year and break-even is 147 shirts and 98 pairs of chaps. As the years progress through the projected financial model, the gap between break-even and projected sales grows. The third line in the figure below shows the economic break even at 100% equity investment. This shows the amount of shirt sales needed to produce the exact return on investment required by investors, in this case 25%. As you can see our base case projections are above the number of sales required to return enough profit to investors to make this venture worth while. See appendix B for break-even numbers.

Figure 5.1 Break-Even Graph

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1 2 3 4 50

50

100

150

200

250

Base CaseNet Income Break EvenEcomomic Break Even 100% Equity

5.9 Net Present ValueThe net present value of the investment of 100% equity for this venture is $137,502

5.10 Internal Rate of ReturnBased on 100% equity investment the internal rate of return is 117%.

5.11 External Rate of ReturnThe external rate of return for this venture is 80%. This was based on the termination of the business at the end of year 5, as much of the equity in the business survives by the owner.

6.0 SummaryDesigns By Kendra is a high-end show clothing manufacturer catering to the needs of women exhibitors. With its competitive advantage of being the first major competitor in Canada to offer custom, unique clothing designs, Designs By Kendra will be able to dominate the Canadian market. This business plan shows that Designs By Kendra is a feasible venture and has a lot of potential for a return on investment.

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Appendices

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Appendix A – Ratios

Year 2010 2011 2012 2013 2014Gross Profit Margin 24% 35% 41% 48% 49%

Net Profit Margin 1% 15% 22% 30% 33%

Return on Assets 6% 55% 76% 89% 84%

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Appendix B – Break –Even Analysis

Break Even Analysis          Year 2010 2011 2012 2013 2014 Base Case           Shirts 150 165 182 200 220 Chaps 100 110 121 133 146            Net Income BE Sales           Shirts 147 122 121 120 135 Chaps 98 81 81 80 90

% Difference 1.76% 26.11% 33.31%39.65

%38.35

%

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           Economic BE Sales 50% Debt           Shirts 111 122 134 148 163 Chaps 74 81 90 99 108

% Difference25.98

%                   Economic BE Sales 100% Equity           Shirts 117 129 142 156 172 Chaps 78 86 95 104 114

% Difference21.83

%        

Appendix C- Investment Analysis

Investment Analysis100% Equity 50% Debt

Value of the Equity 167,502 164,539

Net Present Value 137,502 149,539

Internal Rate of Return (All Equity) 117% 183%Present Value of the external Cash Flows 142,622 140,740

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External Rate of Return 80% 112%

Appendix D- Base Case Financial Analysis

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Appendix E- Best Case Financial Analysis

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Appendix F- Worst Case Financial Analysis

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Works Cited

American Quarter Horse Association. 5 November 2009 <http://www.aqha.com/>.

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