AA Audio Video Installers
Business Plan
Jason McGonigal
Jordan Kist
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
Executive Summary
This is a proposed business plan for AA Audio Video Installers in Saskatoon, SK. The store will be located
in the new Southeast divisions of Saskatoon. More specifically, the store will be located in Lakewood
Common, which is an area of developing box stores in the new Rosewood area. Nonetheless, business
will be conducted all throughout Saskatoon, even though the target market is in the proximity of the
store. This area will be very convenient for customers to stop by and have a meeting and setup a date
for delivery and installation. Lakewood Common is relatively new and currently has only a few stores in
operation. Some of these stores include TanFX and Blockbuster.
AA Audio Video Installers is a company that is involved in the design, sales and installation of home
audio and video equipment. Customers of AA Audio Video are looking for a lifestyle change. They are
looking to make a statement and have the latest in audio and video technology. Moreover, they want to
have the ‘place to be’ when it comes to watching large sporting events. In addition to selling a lifestyle,
only high quality products will be sold and professional installation will be offered. AA Audio Video will
also focus on ensuring that their customers are: educated on their purchase, satisfied with their
product, satisfied with the installation and are comfortable contacting the company for any further
questions.
AA Audio Video Installers will employ a total of five people until the market has increased demand and
the store is unable to keep up with the workload. There will be two managers for the store. One
manager will be in charge of coordinating and training installers, purchasing and preparing supplies for
installation, and assistance in the installation itself. The other manager will be in charge of managing
relationships with key contacts, meeting with customers that come into the store, and taking care of any
other in-store operations that take place.
The store expects approximately 0.7 customers per day and will operate six days a week. This is going to
be critical variable for the company’s break-even. The average purchase at the store will be just under
$3500, including product and installation expenses. A key market for the store is going to be contacts;
which relationships are maintained by one of the managers. These relationships will be extremely
profitable if contracts can be made with developers and contractors throughout the city. It will also
mitigate some risk and allow for an accurate measure of forecasted sales.
2
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
The Financial analysis of this company has indicated that this would be a very profitable business
venture, experiencing significant profits in the second year. The financial plan has been forecasted for
the next 5 years and indicates that the company will experience greater profits from year to year while
paying out considerable dividends to the two owners, each year. The present value was conservatively
calculated at approximately $177,000 and has an internal rate of return of 71.1%.
AA Audio Video Installers will have a great product and service offering and is operating in a growing
industry. The high quality products and service will build long-term, profitable business relationships
with customers and will lend to word-of-mouth advertising. Key contacts, strategic partnerships and a
good standing in the community will be integral components of the viability and success of this venture.
3
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
Table of Contents
Executive Summary
2
1.0 Introduction
1.1 Industry Overview
1.2 Mission Statement
1.3 Goals and Objectives
5
5
6
6
2.0 Operations Plan
2.1 Location
2.2 Floor Plan
2.3 Organizational Structure
2.4 Typical Business Week
8
8
9
10
11
3.0 Human Resources
3.1 Job Descriptions
13
13
4.0 Marketing plan
4.1 Industry and Current Markets
4.2 Competition
4.3 Direct Competition
4.4 Customers and Target Markets
4.5 Product and Service Features
4.6 Pricing Strategy
4.7 Promotion
4.8 Place
15
15
15
15
16
16
17
17
18
5.0 Financial Plan
5.1 Net Income
5.2 Break Even Analysis
5.3 Operating Expenses
5.4 Numbers Break Down
5.5 Financing Budget
5.6 Dividends
5.7 Key Ratios
20
20
20
21
21
21
21
21
6.0 Conclusion
22
4
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
1.0 Introduction
The following business plan is for AA Audio Video Installers to be established in Saskatoon,
Saskatchewan. The store will be located in the Southeast division of Saskatoon. More specifically, the
store will be located within the new Lakewood Common development. This development is central to
many of the newer neighbourhoods in Saskatoon, including: Rosewood, Briarwood, Lakewood and
Lakeview. Residents of these neighbourhoods are continuously passing this area and may use other
amenities surrounding the store, daily. AA Audio Video Installers sells very high end products and will
offer some of the best installation quality in the city.
The financial analysis of this venture demonstrates the expenses and critical numbers that should be
reached if this venture is to be viable. These critical numbers include:

Customers per day average of 0.7 in the first year.

The gross revenue in the first year is $855,925.
The gross profit margin is 33% of revenue and this is expected to remain at this level over the

next 5 years.

Net income in the first year is $2,822 and is expected to grow to $194,181 by the fifth year.

The IRR for this venture is projected to be 71.1%

The net present value of the company is calculated to be $176,657.

Dividend payouts average $90,000 per year.
1.1 Industry Overview
The market for audio and video sales has become fairly fragmented in Saskatoon in the past few years.
Key competitors in the sales of the product are: Krazy Kiley’s, Visions, Audio Warehouse and
Futureshop. Each one of these businesses has their own respective market share and specializes mostly
in the sales of the product, other than Audio Warehouse. Moreover, there exists an opportunity in the
area of the design and installation of these systems. Since Audio Video Installers will operate in all three
of these parts of the market, capturing market share won’t be as difficult if it was only involved in the
sales. As well, many of the new homes being built include the necessary infrastructure to have AV
systems installed. Audio Video Installers has a great opportunity to capture some of this market share
and build a profitable business in Saskatoon.
5
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
1.2 Mission Statement
“AA Audio Video Installers plans to design, sell and install home theatres at an affordable price, while
building an ongoing relationship that does not end at the time of sale.”
1.3 Goals and Objectives

To achieve a return on investment of 25% or greater.

To offer a ‘lifestyle’ to our customers.

To offer the best in product, installation and service quality.

To develop key profitable business contacts and gain market share in Saskatoon.
6
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Operations Plan
7
Comm 447
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
2.0 Operations
AA Audio Video Installers will focus on selling, designing and installing high end home theatre systems.
We will operate primarily on a just in time inventory system, with each install acting as a unique sale. A
typical sale will take multiple visits and discussion with customers, due to the unique needs of individual
customers as well as the size of the bill of sale. After the sale our work is not complete with the
customer as a custom install is often necessary, as well as a continuation of follow up service and if
necessary repairs.
2.1 Location
AA Audio Video Installers will be located in a relatively new development, called Lakewood Commons.
This location allows us to be within 5 km of over 25,000 people with an average house hold income
exceeding $95,000. This location is also located right next to Rosewood, Saskatoon’s latest development
and AA Audio Video Installers are in a prime position to capitalize on this growing area.
8
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
2.2 Floor Plan
Our leased space will be split into half, the front part of the location will be used to show case product
and to assist customers in their product enquiries. The back half of the store will be used for storage,
offices and will contain our meeting/lunch room. This meeting room will also be used to sit down with
larger corporate clients and develop strategies that best suit their present and future needs.
9
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
2.3 Organization Structure
AA Audio Video Installers will have two managers/owners who will be acting in an entrepreneurial
partnership. Jason will be primarily concentrating on the sales and marketing aspects of the business.
On the other hand, Jordan will be primarily focused on the latest technologies, installing large corporate
systems and ensuring the other installers are properly trained.
10
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Jason
Jordan
Installer 1
Comm 447
Installer 2
Administrative
Assistant
2.4 Typical Business Week
The store will be open from Monday-Saturday, with weekday hours being 9AM till 5Pm and Saturday
hours being 10AM until 4PM. Each Manager will be working from Monday-Saturday, the administrative
assistant will only be working Monday-Friday and the installers will work Monday-Friday, as well as
alternating turns working Saturdays. The larger install jobs will be taking place on weekdays, with some
of the smaller at home jobs occurring on Saturdays.
11
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
Human Resources Plan
12
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
3.0 Human Resources
It will be up to Jason to train the administrative assistant and Jordan will be in charge of the installers.
AA Audio Video Installers will put a lot of emphasis on hiring and keeping the best possible employees.
Employees will be expected to assisted customers to the best of their abilities and do everything in their
power to help separate AA Audio Video Installers from the competition. The installers will be expected
to be friendly with clients and create a lasting impression that will allow clients to be comfortable in
enquiring about any follow up services they require. The administrative assistant’s most important job is
to create a first impression that clients won’t soon forget.
3.1 Job Descriptions
Manager #1 (Jason) - Will be in charge of long term planning for the business. Jason’s primary duty will
be marketing himself and the business to contractors and developers in the city, as well as securing large
corporate jobs.
Manager #2 (Jordan) - Will focus on the installation side of the business. Jordan will be required to stay
up to date on the latest products and technologies. Jordan will be the primary designer of home theatre
systems, optimizing each individual system, so that every client receives the optimal system for their
home or business.
Installers - Will be in charge of physically installing the home theatre systems into client’s homes and
businesses. The installers will work directly under Jordan, and over time will be given increased
responsibilities and leadership on projects.
Administrative Assistant - Is the first face a client sees when entering AA Audio Video Installers. The
administrative assistant will be in charge of answering phones, maintaining the website, setting
appointments for Jason or Jordan and answering basic customer inquiries.
13
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Marketing Plan
14
Comm 447
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
4.0 Marketing Plan
4.1 Industry and Current Markets
The market for Audio Video Installations is fairly fragmented within Saskatoon. There are several
players that operate in the industry at different levels. Many of the competitors in this market are
involved in some areas more than the others and some have a clear focus on just installing and selling
audio and video systems. Audio and video systems are becoming more and more popular in many new
homes. Many of the new homes being developed, especially in the area surrounding our potential
office, are being built for or with the options of mounting televisions and ideal arrangements for audio
systems.
Purchasing and installing an audio-video system can be quite a difficult process for many people. People
often purchase the product, install it themselves and are unhappy with the performance of their system
or are not confident that it is installed properly. Our products and services will satisfy this need and our
customers will experience a much smoother process when installing one of these systems.
Having a home theatre has become increasingly important to many residents of Saskatoon. People are
looking to have a great system for when they decide to watch the big game or movies. However, many
rash decisions are made in terms of purchasing and customers often find that their systems lack in
performance and component compatibility. AA Audio Video plans to appeal to this market and offer
great product quality and professional installation at a reasonable price.
4.2Competition
The competition in the Audio and Video industry has been very competitive and has become almost a
pricing war. Companies are willing to sacrifice some of their profit margins in order to make sales and
earn their profit through volume. Indirect competition with AA Audio Video Installers includes any
company that attracts the few extra dollars from the general public. This competition may include
recreation vehicle dealerships, travel agencies, or even clothing stores. Our direct competition in
summarized in the following table.
4.3 Direct Competition
Name
Visions
Audio Warehouse
Krazy Kiley’s
Futureshop
Inland AV
Sharp’s AV
Prices
Very Competitive
Competitive
Competitive
Very Competitive
Competitive
Competitive
Product Offering
Very Broad
Very Broad
Broad
Very Broad
Narrow
Narrow
Installation Focus
Medium
Strong
Medium/Strong
Weak/Medium
Strong
Strong
Many of these competitors operate in several other parts of the audio and video industry. As well,
companies like Inland AV and Sharp’s AV operate mostly in the installation industry for corporate or
15
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
larger jobs. Considering our target market, our main competitors will be Visions, Audio Warehouse and
Krazy Kiley’s as they will sell similar product and have a similar focus to our company. To capture
market share from these competitors, AA Audio Video will have to offer quality advice and service,
speedy service, competitive installation prices and quality products.
4.4 Customers and Target Markets
Our target market has been determined by psychographic segmentation. As a company, we are
appealing to the middle-class individual who is looking for a lifestyle change and wants a high-quality
audio-video system. We will work to sell this lifestyle that will be attractive to this segment of
customers. These customers are looking to have the ‘place to watch the game’, or to have a great home
theatre to watch the latest movies. Geographically, our target market is located in the Southeast district
of Saskatoon. As well, the demographic we are targeting are mostly young to middle-aged families in
these southeast neighbourhoods. These customers have a mean income of just over $90,000 and many
of them live in new or developing homes.
4.5 Product and Service Features
At AA Audio Video, we are not only selling a product and service, but we are selling a lifestyle. Our
customers are looking to purchase some of the latest technology in the audio and video world. These
customers are also looking to make a statement, in an attempt to have the place where all of your
friends watch the game or have some of the best family night movie experiences.
In addition to selling a lifestyle, AA Audio Video Installers offers both a product and a service. The focus
of the business is on our professional and timely service. There exists a very fragmented market solely
for televisions and audio systems. Moreover, the final product that we are going to offer is our
installation services as well as exceptional customer satisfaction. We will draw our product from the
main players in the audio and video industry. Although we are still involved in the sales of the physical
products, the overall value of our service is what our customers are seeking. There are many steps
involved in our overall service. Once a customer decides that they would like to purchase a system, we
will have a sit-down meeting with them and identify their needs while making recommendations as to
what products would best suit their needs. We will display two different systems at the store to
exemplify what our finished product looks like. Once we have built a system for the customer, a date
will be arranged for the installation process and once it has been installed, we will initiate a follow-up
process that ensures they are satisfied.
There are far too many competitors involved in this industry that do not give the attention to customers
that they require. Customers often go uneducated into their purchasing decisions and may not receive
the product that is right for them. The sit-down meeting with our customers will allow us to find the
specific product that they are looking for and will make for a smoother purchasing process as we as
customer referrals.
The installation process is another area of our service that we will be able to distinguish ourselves from
the competition. AA Audio Video will employ professional installers and ensure that quality is major
16
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
focus. Many of the installations being completed by competitors are completed far too quickly and
quality is hindered because of the attention that is paid to this service. Our company will not be
producing the volume that the major players in the market achieve; we will allocate the right amount of
resources to each customer and will depend on repeat purchases and referrals.
Many companies that operate within this industry lack the necessary follow-up that ensures that
customers are satisfied. Once the sale is final, the company is satisfied that their work is complete.
After speaking with many customers in this industry, we have found that they often have questions and
concerns with their systems that go unanswered. As well, there are many customers that experience
buyer remorse and are unsure of their purchase. We hope to eliminate this market inefficiency by doing
follow-up phone calls, getting customers to fill out surveys, and making ourselves available to answer
any questions they may put forth.
4.6 Pricing Strategy
The pricing of televisions has become extremely competitive all throughout the industry. Companies
within Saskatoon are operating on 6% to 10% margins and are achieving their profits strictly through
volume. On the other hand some competitors operate on a little higher of a margin and offer better
customer service and deal with larger individual sales where margins are achieved in components and
accessories. Audio systems are a little different, in that, they have are much less of a commodity than
televisions and are often premium priced based upon brand and perceived quality. We will sell fairly
prestigious brands that are still affordable that will coincide with the budgets of our target customers.
Audio systems, for the most part, are sold on a margin the neighbourhood of 20 to 40%. Our audio
products will fall somewhere in the middle so that they remain quality systems, but at an affordable
level.
When it comes to the pricing of our installation and design service, the pricing strategy is to be very
similar to other competitors in the market. The professional and complete service that we offer will
allows us to charge a bit of premium. Many of the competitors in the market charge approximately $55
to $80 per hour. In our projections, we have chosen to charge $75 per hour, which is situated in the
upper portion of the pricing spectrum. From the analysis of some of the current installers in the
industry, our price of $75 per hour is fairly conservative, considering the complete service we are
offering.
4.7 Promotion
As a part of our marketing plan, the promotion of our products and services is quintessential to our
business’ success. We have considered many different channels and ways to get our name and details
of our services out there. The different methods we have chosen are as follows:


Radio and Yellow Page advertisements – these advertisements will be continuously utilized and
will be an effective method of passive marketing. Customers that are looking for our services
will be aware of our product and service offering.
Contacts
17
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
o



Contractors – We intend to build and maintain profitable business relationships with
contractors throughout Saskatoon. We will partner with them and potentially gain
business through the jobs they are currently working on.
o Developers – Many of the new homes being developed by these companies require the
similar products and services as to what we offer. Partnerships with these developers
may land our company numerous jobs. It would be in our best interest to offer them
discounted rates so that we are competitive and gain their business.
 North Ridge – Wally Mah
 Gaudet Holdings – Garry Gaudet
 Leo Morrison & Associates – Leo Morrison
 Ehrenburg Homes – Joe Ehr
o Partnership with NetFlix – At AA Audio Video, we are selling products and components
for a home theatre system. Thus, the partnership with a company and rents out movies
would go hand-in-hand with what we are offering.
Sponsorships – Involvement in the community is a very effective tool for small businesses to
ensure their local support and longevity. Sponsorships of golf tournaments and sports teams is
not only showing this local support, but it is advertising and targeting groups of people that may
be very interested in our product offering.
o Golf tournaments
o Sports teams
Word-of-mouth – For any small business, a good reputation is integral. If our initial customers
are pleased with our offerings, they will mostly refer us to their neighbours and friends.
Moreover, since most of our business is targeting the neighbourhoods of south-east Saskatoon,
word-of-mouth is paramount.
Website – Many people choose to their shopping at home these days and a solid and
maintained website will appeal to these crowds. Whether it is to show some of the things that
you are able to do as a business or provide contact information, a website is very important.
4.8 Place
AA Audio Video will be located in the southeast corner of Saskatoon. The location of the store will be in
Lakewood Common, which is a new development in the Rosewood area. This location is ideal for our
business, as this is where the target market is located. Customers will be able to stop in by the store at
their convenience because of the close proximity to their homes. Within this area, the average
household income is roughly $93,000 and there are 28,000 residents. We hope to target all of these
residents as well as residents throughout Saskatoon. The location offers plenty of parking and
convenience. It is a brand new building and we will be leasing our store. This will allow us to create a
modern look in and outside the store.
18
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Financial Plan
19
Comm 447
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
5.0 Financial Plan
The financial plan section will explore the financial side and predictions of AA Audio Video Installers.
5.1 Net Income
AA Audio Video Installers expects to make a slight profit in year 1 and experience growth in sales for the
first four years. Year 1’s net income is projected to be $2,822 and by year 5 the projected net income
rises to $194,181.
Net Income
250,000
200,000
150,000
Net Income
100,000
50,000
1
2
3
4
5
5.2 Break Even Analysis
The key variable for AA Audio Video Installers is number of sales per day. In the first year projected sales
are .7 home theatre systems per day, which is essentially at the break-even level of .69 home theatre
systems per day. By year 5 there is a healthy gap between the break-even point and projected sales.
1.40
1.20
1.00
Base Case - Cust./day
0.80
0.60
Break Even Cust./day
0.40
0.20
1
2
3
4
5
20
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
5.3 Operating Expenses
AA Audio Video Installers expects to be fully staffed and equipped from day 1. Operating expenses
essentially remain the same throughout the five years of projections, only increasing by the standard 3%
inflationary amount.
5.4 Numbers Break Down
Average # of Days in Inventory- 7
Average # of Days Accounts Receivable- 30
Average # of Days Accounts Payable- 14
Profit Margin on AV System- 25%
Profit Margin on Installation- 100%
5.5 Financing Budget
Both Jordan and Jason will be contributing $40,000 of their own money and will be obtaining a bank
loan for $100,000 with a 6 year term at 10% per annum. This will give AA Audio Video Installers the
$180,000 necessary for start up and to maintain an appropriate level of cash throughout the business’s
life cycle.
5.6 Dividends
AA Audio Video Installers expects to be able to pay out healthy amounts of dividends starting in year 2.
The projected dividends are as follows:
2011- $30,000
2012- $80,000
2013- $160,000
2014- $180,000
5.7 Key Ratios
NPV- $176,657
IRR- 71.1%
ERR- 68.6%
21
AA Audio Video Installers’ Business Plan
Dec. 4, 2009
Comm 447
Ratio
Year 1
Year 2
Year 3
Year 4
Year 5
Debt Ratio
45%
37%
27%
17%
9%
Gross Profit
34%
33%
33%
33%
33%
Gross Profit Margin
0.3%
3.9%
8.2%
11.7%
11.7%
Wages/Sales
23%
19%
16%
13%
13%
6.0 Conclusion
Audio Video Installers’ planned entrance into the market may be happening at just the right time.
Considering the proposed location and developing neighbourhoods, there will be sustainable profits for
years to come. The business’ ideal location will take advantage of the new homes being developed in
Rosewood, Briarwood and area. Moreover, the contracts and potential contracts with developers and
contractors will be very beneficial for the business and may be a solid source of income. Marketing will
prove to be one of the most critical strategies to ensure this business’ success. To break even, our
business requires, a rather conservative, 0.7 customers per day. With the intense marketing strategy
and key relationships we intend to develop, our business can be a very profitable one. Although we
experience relatively low profits in the first year, we experience much greater profits by the fifth
projected year just over $190,000 and have an accumulated $450,000 in dividends over the five years.
Thus, this is a great opportunity for our investment and appears to have the necessary components to
be a great long-term business.
22