APRIL 2003
BUSINESS PLAN
TABLE OF CONTENTS
Executive Summary ............................................................................................................................ 3
Description of the Business ............................................................................................................. 5
Industry and Market Analysis ....................................................................................................... 14
Marketing Pan .................................................................................................................................... 18
Management Plan .............................................................................................................................. 23
Operations Plan.................................................................................................................................. 28
Financial Plan ..................................................................................................................................... 33
Risk Assessment and Contingency Plan .................................................................................... 38
Supporting Documents.................................................................................................................... 40
CONTACT
Diane Browning
President
Appalachian By Design, Inc.
208 South Court Street
Lewisburg, WV 24901
T 304.647.3455 x13 / F 304.647.3466
dbrowning@abdinc.org
www.abdinc.org
April 2003
© 2003 Appalachian By Design, Inc.
Table of Contents
no. 2
EXECUTIVE SUMMARY
Business
Description
During the last ten years, Appalachian By Design (ABD) has developed a home-based
machine knitting industry in mid-Appalachia. The sparsely populated, mountainous
terrain does not encourage economic development. However, for the families who are
rooted here, there is a strong tie to home and land that is more important than
relocating for economic gain. ABD has targeted handloom knitting because it can be
done at home, while allowing Appalachian residents to receive the training and access
to larger markets so they can increase their income and assets.
The enterprise has built a national wholesale marketing program and a retail business
at The Greenbrier, a premier resort, so it can become a true player in the knitwear
industry. Its technical training program works one-on-one with women (and some
men), 60% of whom are low income. Its efforts to raise the skills and wages in the
trade through accessing high-end market channels is creating systemic change both
in individual lives and in the wider perception of cottage industry. ABD has now
cultivated a critical mass of technical skills, human capital and systems for distributed
manufacturing. It is poised to leverage this capacity into a higher wage niche market
through a women’s custom-made knit suit line called the ABD Collection.
Business
Highlights
Listed below are the reasons ABD believes the ABD Collection is a strong investment
opportunity:

Proof of concept. Developed and test-marketed a core collection of knit
women’s separates and suits through its retail shop at The Greenbrier and three
trunk shows. Garnered over $25,000 in revenue during nine-month test period.

Seasoned management. ABD has an experienced and committed management
team, complemented by a strong Board of Directors to provide institutional
oversight and successfully guide the venture. Management includes Diane
Browning, President with 20 years experience in community and economic
development in mid-Appalachia, with 10 years as President of ABD; and Jonathan
Harrison, CFO with seven years experience working with social enterprises, with
a focus on improving cash flow and increasing long-term earnings.

Industry viability. ABD research estimates the market size for high-end luxury
knitwear to be between $700 million and $800 million and market trends show an
upswing in made-to-measure apparel.1 Women’s knitted suits are a profitable
niche in the apparel industry, with double-digit net margins reported by the top
competitors.

Established, high-quality product line. Refined selection of dresses, slacks,
skirts, and tops created to suit a wide range of body types. Knit in an 80%
lightweight wool and 20% rayon yarn that maintains its shape, resists wrinkles
and travels well. The Collection offers 21 styles of jackets, dresses, tops, skirts,
and slacks in a selection of six classic colors. ABD has positioned the line as a
good investment in a product that has been made expressly to fit the customer
1
Wall Street Journal, November 8, 2002
April 2003
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Description of the Business
no. 3
Social Impact
ABD uses the production of high-end knitwear to provide training, technology, and
an entrepreneurial outlet to its direct beneficiaries, the knitters. Social benefits
include:





Services
Target
Customers
ABD provides the following services to its knitters:
 Technical knitting apprenticeship program;
 Machine lease program;
 Computer training; and,
 Knitter retirement program.
The key demographics of our target customers include:




Products &
Value
Proposition
Capitalization
and
Performance
Provides home-based work to low-income women in isolated rural Appalachia,
increasing their self-sufficiency and independence;
Offers a “place-based” work option, eliminating commuting costs and facilitating
child care;
Reduces isolation by creating a network of mutual support;
Creates opportunities for career advancement; and,
Provides an incubator for women to cultivate and spin off new ventures through
training and access to equipment.
Professional women who desire classic styles;
Women between the ages of 40 and 70 years old who travel to resorts;
Women who know the styles and silhouettes that suit them, and purchase
clothing based on what they know works for their body type; and,
Women who want to support a social purpose enterprise.
The ABD Collection’s suit and separates line is knit from a luxury yarn and made-toorder. The key benefits of the ABD Collection to our consumers include:





Made to fit widely different bodies and lifestyles;
Focused on classic styles that are the foundation of a wardrobe;
Sold in a setting that makes customers feel pampered and special;
Merchandized with fine scarves, jewelry, and body care items; and,
Supports women’s social venture through expenditure of wardrobe dollars.
Investment capital of $177,000 over the next 18 month (July 2003 to December 2004)
is required for launch capitalization. ABD is anticipating a $100,000 investment in
2003 which would allow for hiring dedicated staff, purchases of additional equipment,
implementation of the marketing plan, and the creation of an additional sample set for
the line. An additional $78,000 will be needed in 2004 to provide working capital and
additional marketing support.
The venture is estimating year 3 performance of 30.8% ROE on revenues of $708,000
and is planning a steady sales growth of 8-10% in year 4 and 5. The ABD
Collection’s contribution to the company’s annual revenues rises from 9% in 2003 to
54% in 2006.
April 2003
© 2003 Appalachian By Design, Inc.
Description of the Business
no. 4
DESCRIPTION OF THE BUSINESS
Company Mission
& Overview
Created by and for rural women, ABD’s mission is to create economic
opportunities for residents of rural Appalachia through sustainable selfemployment. Focusing on machine knitting, ABD links skilled rural artisans and
their quality products to major markets through an innovative training program,
niche marketing, and a distributed production network.
When ABD was founded in 1992, a
handloom industry did not exist in the
Appalachian region. In the last ten
years, through a combination of
marketing, technology, and distributed
manufacturing processes, ABD has
reinvented the cottage industry.
ABD’s innovative training program has
created the expertise and capacity in the region to produce high-quality handloomed products, including baby clothes, home accessories, and now high-end
women’s apparel. In order to insure an ongoing market for the knitters’ products,
it has developed a national marketing program to penetrate more affluent
markets. As a result, ABD has secured niche opportunities to sell boutique
apparel through trunk shows and at a luxury resort.
Over the past decade, ABD has built the critical mass of technical skills, human
capital, and systems for distributed manufacturing in a sparsely populated,
mountainous region of mid-Appalachia. The network of knitters now includes
over 60 micro-enterprises, operated from homes in the mountains of West
Virginia and southwestern Virginia. Approximately 95% of the knitters are
women and 60% are low-income.
Business
Highlights
Listed below are the reasons ABD believes ABD Collection is a strong
investment opportunity:

Proof of concept. In 2002, with limited resources, ABD developed and test
marketed a core collection of knit women’s separates and suits through its
retail shop at The Greenbrier, one of the country’s premier resorts, and
through three trunk shows. During this nine-month test period, the ABD
Collection garnered over $25,000 worth of sales. As a result of this success,
ABD is now working with The Greenbrier’s Social Director to offer byappointment trunk shows as part of the hotel’s targeted event schedule. For
example, in March, during a weekend billed as “Wonderful Women’s
Weekend”, 65 female guests viewed the ABD Collection as part of a custom
activity. ABD transacted $1,600 in sales in four hours and plans to build on
this experience and expand its marketing to other spas and resorts that hold
similar programs. ABD also intends to build sales through trunk shows,
hosted by existing customers and facilitated by a trained ABD Collection
April 2003
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Description of the Business
no. 5
wardrobe consultant.

Seasoned management. ABD has an experienced and committed
management team, complemented by a strong Board of Directors to provide
institutional oversight and to successfully guide the venture. Management
includes:
-
Diane Browning, President, has 20 years experience in community and
economic development in mid-Appalachia. During these years, she earned
the West Virginia Partnership for Progress Award, a Benedum
Foundation Fellowship, and the SBA’s Mid-Atlantic Women’s Business
Advocate Award.
-
Jonathan Harrison, CFO, has seven years experience working with social
enterprises, with a focus on improving cash flow and increasing long-term
earnings.

Established, high-quality product line.
The line, created by ABD’s expert
designer/trainer’s 18 years of experience,
consists of a refined selection of dresses,
slacks, skirts and tops created to suit a wide
range of body types. All of the pieces are knit
in an 80% lightweight wool and 20% rayon
yarn. This yarn is widely used in luxury knit
lines because of its year-round weight,
elasticity, and easy care. This material maintains its shape, resists wrinkles
and travels well.

Industry viability. Market size for high-end luxury knitwear is estimated
between $700 million and $800 million a year. Women’s knit suits have
earned a reputation as smart dressing for professional women. This reputation
can be attributed to St. John Knits, the industry leader with forty years of
astute design and market penetration. ABD plans to capitalize on this
established demand with a different approach. It will market the line as madeto-measure, allowing the customer personal fit and the ability to personalize
their purchases through color and button selection. Market trends show an
upswing in this made-to-measure trend.2 Internally the just-in-time
manufacturing of the line reduces both inventory and the working capital
requirements below the requirements of traditional apparel companies.
2
Wall Street Journal, November 8, 2002
April 2003
© 2003 Appalachian By Design, Inc.
Description of the Business
no. 6
Beneficiaries
Social Benefits
ABD uses the production of high-end knitwear to provide training, technology
and an entrepreneurial outlet to its direct beneficiaries, the knitter. Survey
profiles, formed through recent interviews of 43 members of the network reveal
the following characteristics:3

Low-income (60% report household income at or below the Department of
Health and Human Services poverty guidelines of $18,100 for a family of
four);

95% are women;

All live in rural communities (towns under 15,000);

Most are married with one or more dependents, including children, parents,
and/or a disabled spouse; and

75% are engaged in self-employment on a part-time basis, an average of 20
hours per week, which represents a critical part of family income. However,
for the 25% of the knitters who work full-time at their business, their
earnings are the primary source of income.

Provides home-based work to low-income women in isolated rural
Appalachia, increasing self-sufficiency and independence. It is widely
recognized that the economy in Appalachia is re-structuring, with fewer highwage, unionized mining and manufacturing jobs and more low-paid, part-time
service-sector employment. Wal-Mart is now the region’s largest employer.
ABD is an example
of what can happen
when the goal of
cottage industry is
not isolation and
exploitation but
access and
independence.
Utne Reader
May-June 1995
ABD has boosted the standard of living of
people in rural areas where decent jobs are
scarce. ABD works with people who want
to start home-based businesses because
they can no longer access sustainable jobs
in their communities and/or because they
want to be home to take care of family
members. West Virginia has the lowest
rate of participation of women in the
workforce.4 Unlike some cottage industries, ABD sets its rate well above the
minimum wage – currently, at $7.00 per hour. Most of ABD’s experienced
knitters reported earning $7.50 to $12.00 per hour. Furthermore, the knitters
participate directly in setting the rate and other policies that affect their
income. The successful launch of the ABD Collection will further increase
these wages.
Surveys conducted in February & March 2003 for data collection for “Performance Monitoring Tool for Social Businesses”; copy of
instrument in supporting documents.
4 Geographic Profile of Employment and Unemployment, 2000 Bureau of Labor Statistics
3
April 2003
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Description of the Business
no. 7

Offers a “place-based” work option. Most employment opportunities
available in Appalachia involve long commutes and are not sufficient to cover
child care costs. ABD enables women to work from their homes. In research
conducted from 1994 to 2001 by Dr. Ann Oberhauser, Associate Professor at
West Virginia University, knitters identified three reasons for wanting to
start home-based machine knitting businesses – family responsibilities,
barriers to wage employment, and the loss of sustainable jobs in their
communities.5 One knitter gave voice to this when talking about selfemployment versus a job: “… it was such a long way to travel for a small amount
of pay, bad weather…now, I’m home with the kids and if the kids are at school and
they get sick, I can still go the school and handle it. When the kids need something, I
can stop the knitting and take care of that and then go back to the knitting… it’s like
it’s all meshed together.”

Reduces isolation by creating a network of mutual support. ABD has
changed the way home-based knitting works for rural women. For example,
ABD has encouraged the use of telecommunications to streamline the work
distribution process, while facilitating communication and connection. ABD
distributes low-cost or free computers to those who do not have them, and
provides one-on-one training. More than 80% of ABD knitters now
communicate via e-mail, an impressive accomplishment in a state that is
ranked 48th in the country in online access.6
Further, by organizing area teams, using a peer-to-peer training program, and
hosting an Annual Meeting, ABD helps to decrease the isolation of homebased workers. A central focus has been to build a culture of participation in
which knitters have input at every decision level. A vital part of this culture is
the Steering Committee of knitter leaders who meet quarterly to troubleshoot
and create knitter policies.

Creates opportunities for career advancement. ABD classifies its knitters
in three categories: apprentice, experienced and lead. The introduction of the
ABD Collection has created a definitive upward career track that awards
experienced and skilled knitters with higher earnings. As the ABD Collection
was developed, five of the most skilled knitters and two employees were
trained on the technical requirements of the apparel. Their base hourly rate
increased to $12.00 per hour, a 70% increase in their earnings. Three more
knitters are in the process of advancing to this master level.

Provides an incubator for women to cultivate entrepreneurial spirit and
start new ventures through training and access to equipment. Currently,
32 knitters who have participated in ABD trainings now market their services
and products independently, to galleries, craft fairs, design firms and knitting
seminars. ABD’s economic network established the support systems for
5
6
See enclosed “Summary of Research Collaboration”
Wall Street Journal, May 9, 2000
April 2003
© 2003 Appalachian By Design, Inc.
Description of the Business
no. 8
people to explore other opportunities. Some women have advanced to become
knitting trainers and business trainers, which pay a higher wage. Some have
become knitting equipment dealers and yarn dealers. Knitters have formed
their own clusters and market their services to design companies, contributing
further to the region’s reputation as a resource for machine knitting.

Promotes the Appalachian region and refines its image through a highquality product. Through its focus on high-quality products and attendant
marketing, ABD is shifting the typically poor image of Appalachia to what is
at the region’s core – great beauty, self-sufficiency, and a strong sense of place.
Company History
ABD was founded in the spring of 1992 by Diane Browning, President, and was
incorporated in the State of West Virginia in 1994.
At the time, Ms. Browning was working for Women and Employment (now The
Center for Economic Options), a non-profit, community-based organization that
supports business development for rural women. Ms. Browning organized eight
women to respond to an opportunity in the handloom knitwear market. The
initial effort proved to be successful and, within two years, 20 women were
involved in a budding home-based industry.
Key
Accomplishments
ABD currently has nine full-time and three part-time employees. To date, ABD
has accomplished the following milestones:
1992
Secured contract with Espirit to knit 800 sweaters.
Built sales solely through contract orders for the next five years.
1993
Created training program and curriculum.
1994
Incorporated in the State of West Virginia.
1995
Established Finishing and Distribution Center7 and hired finishing
staff.
Renovated former Sears retail store into Finishing and Distribution
Center and moved operation.8
7
During its start-up years, ABD served primarily as a broker for knitting contracts. Knitting and shipments to
customers were organized around two lead knitters, one who had a knitting store in Garrett County, MD, and
another who worked from her home in Spencer, WV. Knitters knitted the sweaters, hand sewn the seams, buttons,
and labels and returned the sweaters to these “production centers.” In response to price pressure from customers
and to exert more control over the processes, ABD set up its own finishing and distribution center.
8This
approach of centralizing some of the functions of the manufacturing process for efficiency of scale is unique
to the knitting cottage industry in the U.S. and the United Kingdom. It reduces the cost of the hand-loomed
sweater, in effect making the home-based knitter more efficient. It also allows ABD to aggregate knitter
production and enter larger markets than individual knitters would be able to on their own.
April 2003
© 2003 Appalachian By Design, Inc.
Description of the Business
no. 9
1996
Enhanced training program by giving trainees knitting machines to
take home during the training period.
Created machine lease program, allowing knitters to lease knitting
machines at a nominal cost until they are able to purchase equipment;
generally a $1,200 investment.
1997
Introduced wholesale line to offset the seasonality and unpredictability
of contract work.
Incorporated a manufacturing software system into operations. This
system runs a material requisition planning (MRP) program, creates
bills of materials and work orders, and tracks inventory levels.
1999
Shifted training program to one-on-one training with peer trainers,
decentralizing the training function to the wider network and
establishing natural mentor relations.
2000
Opened retail store at The Greenbrier’s Art Colony.
2002
Re-branded the wholesale line to Appalachian Baby Design as a result
of the baby line’s growth to 80% of wholesale sales. This change
enabled ABD to concentrate design efforts in one category and better
direct marketing dollars.
Designed and tested the ABD Collection, generating over $25,000 in
sales during a nine-month test period, with limited resources.
Present
Appalachian Baby Design line sells through 150 retail accounts.
ABD Collection is offered at The Greenbrier with plans to expand
marketing to trunk shows and other resorts.
The knitter network includes over 60 micro-enterprises, operated from
homes in the mountains of West Virginia and southwestern Virginia.
Products
The ABD Collection is a knit suit and separates line that is knit from a luxury
yarn. Twenty-one styles of jackets, dresses, tops, skirts, and slacks in a selection
of six classic colors are manufactured on a made-to-order basis. Additions and
edits of the design, yarn colors, buttons and trims will be made each Spring and
Fall.
Sizing is based on European sizing 0 to 5, casting away the U.S. sizing stereotype
that many women abhor, especially as their sizes increase. Exceptional selections
of buttons are sourced, including semi-precious stones, handmade European glass,
vintage glass, and European blazed buttons. These choices enable women to add a
personal detail.
Because the garments are made-to-measure, created using a steam-blocking
April 2003
© 2003 Appalachian By Design, Inc.
Description of the Business
no. 10
process, and personalized with accessories, they serve women who want to look
good, appreciate fine workmanship, and are pleased that their wardrobe dollars
are going to a women’s social enterprise.
Services
ABD provides the following services to its knitters:

Technical knitting apprenticeship program. ABD created its own
technical knitting apprenticeship program. Knitters are trained on an asneeded basis as the demand for additional product increases. Course work is
followed by roughly one year of on-the-job learning, supported by ABD staff
and experienced peer trainers within the network, who have been trained in
adult learning techniques. Follow-up training
is a key component of the training program and
includes:
-
Order Specific and Advanced training;
-
Professional grant program;
-
Mentor program; and,
-
Telephone and drop-in assistance (available
during the ABD business hours).
Further, ABD has developed its own training curriculum and books. ABD
owns the publishing rights to the training books used in its technical knitting
apprenticeship program. The curriculum includes:

-
Introduction to Machine Knitting. A 16-hour technical course taught over
a two- week period, during which time the trainees have knitting
machines in their homes to practice on and with which to experience
home-based work. The courses are taught by knitter-trainers one-onone, or in small groups.
-
Production Knitting. A 16-hour course teaching “best practices” used in
knitting businesses and by ABD. The course includes “order-specific”
training on an item that trainees can choose to produce for an ABD
customer.
-
The Business of Knitting. A four-hour business basics course that provides
information about legal issues, taxes, record-keeping and time
management. This course is taught by either an ABD staff member or
peer knitter.
Machine lease program. For a nominal rate, a knitter can lease a machine
to see if the occupation fits her lifestyle.

April 2003
Computer training. During the last six years, ABD has provided low© 2003 Appalachian By Design, Inc.
Description of the Business
no. 11
priced or free computers to its knitters. As a result of these efforts, a
majority of ABD’s knitters have on-line access. ABD is also currently
working with a technology consultant to develop an on-line resource and
chat room to strengthen the group knowledge base.

Knitter retirement program. In May 2003, ABD will launch a knitter
retirement program styled after Individual Development Accounts, an
innovative national initiative to promote economic independence. After five
hours of financial training by a certified financial planner, women who are
eligible (worked with the company for a year) will receive assistance setting
up a retirement account. If they meet their savings goal each quarter, ABD
will match the savings 2:1 for three years. This provides an incentive to
develop a long-term savings habit, as well as to bolster their savings.
Target Customer
Value Proposition
Business
Objectives
April 2003
The key demographics of ABD Collection’s target
customers include:

Professional women who desire classic styles;

Women between the ages of 40 and 70 years
who travel to resorts;

Women who know the styles and silhouettes
that suit them, and purchase clothing based on
what they know works for their body type; and,

Women who want to support a social purpose
enterprise.
The key benefits of the ABD Collection to female consumers include:

Made to fit widely different bodies and lifestyles;

Focused on classic styles that are the foundation of a wardrobe;

Sold in a setting that makes customers feel pampered and special;

Merchandized with fine scarves, jewelry, and body care items; and,

Supports women’s social venture through expenditure of wardrobe dollars.
As outlined in the financial plan, ABD’s business objectives are the following:

Projected revenues of the ABD Collection near $300,000 in 2004, rising
consistently each year to approximately $1 million in sales in 2006;

This venture’s growth will raise lead knitter salaries from $7.00 to $12.00 per
© 2003 Appalachian By Design, Inc.
Description of the Business
no. 12
hour, create the equivalent of 26 full-time jobs, and increase ABD’s in-house
employment base from ten to 20;
9See

The Collection will deliver an average net margin of 13.4% of sales over the
next five years;

The creation of the ABD Collection, a social purpose venture, will require
over 119,000 labor hours during the next five years. Because of the labor
intensity of machine knitting, over 75% of the cost of sales is in labor. This
translates into livable wage jobs for women who live in high unemployment,
where there are few job opportunities, and most importantly, few positions
that pay near livable wages;

The ABD Collection will support nearly five “full-time equivalent” workers in
its first year, with over 26 FTE’s supported in Year Five of the program; and

Many of the women in the production network choose to knit part-time in
order to manage other responsibilities in their lives, yet their income is a
crucial part of the family income.9 Year Five projections show the production
pool will include over 50 trained production workers at an average of 20 hours
per week, adding an additional $11,000 in gross income to each household per
year. The median household income for a family of four in the GreenbrierMonroe and Pocahontas County Area is $27,500 per year; the additional
income will represent a 30% increase.
Relocating gender and rural economic strategies, Oberhauser, Environment and Planning A, 2002.
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Description of the Business
no. 13
INDUSTRY AND MARKET ANALYSIS
Industry
Overview &
Market Size
Women’s knit suits are a sub-segment of the $184 billion apparel industry with
women’s apparel sales constituting more than half of all industry sales.10 The
industry is projected to grow by 10.6% rate by 2004.11
The ABD Collection is operating within two sub-segments of this market:
knitwear and direct sales.

Knitwear. ABD approximates that the market size for high-end luxury
knitwear is between $700 million and $800 million per year. Estimations
drawn from industry data show the following market shares for the high-end
market:
Market Share
15%
St John Knits
45%
40%

Major Private Labels
(Liz Claiborne, Jones
NY
Cottage Designers
(French Rags, Maria
Ficcalora)
Direct sales. A sub-segment of the women’s apparel market uses direct sales
through a network of wardrobe consultants who share their expertise on
color, fabric, style, fit, and the use of accessories. The direct sales segment is
estimated at $18 billion annually in the United States.12
Market
Competition
ABD considers the following companies to be its primary competitors within
the knitwear market sub-segment:
 St. John Knits. St. John Knits, based in Irvine, California, is the major
company in women’s knitwear, with over $300 million in sales. Since
1962, St. John Knits has produced Chanel-like knit suits and has built a
loyal following, especially with women ages 50 years and older. St.
John Knits sells under the labels St. John, St. John Sport, and Marie
Gray through 29 of their own stores, 10 outlet stores, three St. John
Retail Industry, February 22, 2000.
Euromonitor: September 2000 and January 2000.
12 Associated Press, “In-home trunk shows peddle find fashions direct”, January 30, 1998.
10
11
April 2003
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Industry & Market
Analysis
no. 14
Home stores, and a company website. They also have in-store
boutiques in Nordstrom, Saks Fifth Avenue, and Neiman Marcus, which
account for 46% of their collective sales. The women’s shop at The
Greenbrier carries St. John knitwear, and ABD estimates sales of the
line there to be approximately $1 million per annum. Vestar/Gray
Investors LLC, a partnership between the Gray family, the founders,
and Vestar Capital Partners, owns 93% of the company. The following
are their vital statistics:
St. John Knits International, Inc.
 EMPLOYEES: 5,225
 ANNUAL EMPLOYEE GROWTH: 4.19%
SALES:
 2001 SALES ($mil.)- 365.92
 1YR SALESGROWTH- 8.76%
INCOME-STATEMENT:
 2001 NET INC. ($mil.)- 25.88
 1YR NET INC. GROWTH- 8.68%
 French Rags. Based in Los Angeles and privately-owned by knitwear
designer Brenda French, French Rags is another apparel company
specializing in knits. Their sales are estimated at approximately $10
million annually.
ABD has included French Rags as a major competitor due to the
similarity of their product line and marketing strategy. Instead of
selling through traditional retail channels, French Rags employs a
multi-level marketing strategy: trained wardrobe consultants based all
around the U.S. host trunk shows in their homes or at hotel suites twice
a year. They send invitations to clients, with whom they set up
individual appointments for viewing the collection and fittings.
Regarding their production, French Rags switched from hand-loomed
to factory machines that produce knit fabric, which is considered less
tailored than full fashioning on a knitting bed, but allows for greater
volume. A profile of French Rags’ switch to this technology was
published by Inc. Magazine and is included in the supporting materials.
 Maria Ficalora Knitwear Ltd. New York City-based knitwear designer
Maria Ficalora produces an eponymous line of tailored knit separates,
which she also markets directly through trunk shows held in cities,
primarily on the East Coast. She currently uses a network of ChineseAmerican knitters based in Queens, New York. In the winter of 2001, Ms.
Ficalora and her husband opened a retail shop on the Upper East Side of
Manhattan, with annual revenues estimated at $3 million.
 Other knitwear designers. Other knitwear design competitors in the
April 2003
© 2003 Appalachian By Design, Inc.
Industry & Market
Analysis
no. 15
mid-sized company category include Helen Hsu Designs, a New York
knitwear designer with annual sales of $6 million, Dunollie Looms, New
York City, and Nancy Pederson, West Palm Beach, Florida.

Direct sales. Within the direct sales sub-segment, the following three
companies dominate the in-home trunk show market for women: 13
 Doncaster. Based in Rutherfordton, N.C. and started in 1931, Donacaster
markets a designer bridge line. They report sales at approximately $50
million, through over 3,000 sales agents. The average price of a
Donacaster outfit is between $300 and $450.
 Carlisle. Based in New York City and started in 1991, Carlisle reports
sales at $65 million with 800 sales agents. A typical suit sells for $700.
 Worth. Based in New York City and started in 1991, Worth has
estimated annual sales of $30 million, through a network of 400 wardrobe
consultants.
 French Rags. Profiled in the knitwear competition section, also operates
within the direct sales segment.
Market Trends
ABD believes that the following trends are impacting the evolution of the
women’s knitwear industry:

Growing trend in custom-made clothing. The Wall St. Journal has reported
that the sales of made-to-measure suits are growing.14 Hartmarx Corp. says
their sales in this category now account for 25% of its business, compared with
20% in recent years; Saks has reported a record level of made-to-measure
sales; and Brooks Brothers is now offering this service. As Business Week
reported in its recent article on the subject, “Customization not only expands
markets but also allows businesses to charge more.”15

Growth in planned apparel purchases. According to the latest Cotton Inc.
Lifestyle Monitor™, fewer women are making impulse buys; in 2001, planned
apparel purchases grew 5% to 56.9%, while impulse buys dropped 5.5% to
40.5% of shoppers. Attending a trunk show, the marketing vehicle for the
ABD Collection, versus browsing a store requires planning.

Women have less time for shopping. Due to an increase in working
women, women have less spare time. Women are now 48% of the labor force,
with employment in professional occupations increasing the fastest.16 As a
Business Week, June 13, 1997.
Wall Street Journal, November 8, 2002
15 Business Week, December 2, 2002, p.68, 4p., 3c
16 Profile of Employment and Unemployment, 2000 Bureau of Labor Statistics
13
14
April 2003
© 2003 Appalachian By Design, Inc.
Industry & Market
Analysis
no. 16
veteran Carlisle consultant reported, “a lot of my clients are businesswomen.
They need to look good and professional all the time, but they don’t have
much time to spend at the stores.”17 By planning ABD Collection shows and
presentations in relaxed settings, such as in a home or at a resort, where there
is little of the pressure of daily life, the environment will be more conducive to
sales.

Increase in guest occupancy at resorts and spas. Unlike other direct
sellers, the ABD Collection is targeting the resort and spa guest, an industry
that is expected to have “sustained growth for leisure travelers”18 in the
coming years.
Pricing
Strategy
The pricing strategy for the ABD Collection was developed based on an analysis
of cost of production and competitors pricing. Consideration was given to both
signaling quality and gaining market share. Pricing was placed below market
leaders in order to more readily gain market share.
Because the product is custom-made and hand-knit rather than a ready-to-wear
commercial machine knit, it can command a higher price point. ABD used
keystone benchmarking within the product line to ensure a minimum gross
margin of 60% on the product. Below are some examples of price comparisons
within the knitwear marketplace:
ABD
Collection
Carlisle
French
Rags
St. John
Dress
Slacks
$275
$365
$295
$595
Jacket
$450
$500
$475
$1,250
Dress
$475
$174
$325
$990
17
San Diego Metropolitan Magazine, “A Custom Clothing Option” Melissa Jacobs, September 1998
18
Yesawich, Pepperdine & Brown Special Report 2002, Orlanda, Florida, November 2002
April 2003
© 2003 Appalachian By Design, Inc.
Industry & Market
Analysis
no. 17
MARKETING PLAN
Sales
Strategy
Overview
ABD’s sales strategy is to sell the product at retail prices through trunk shows at
resorts and special events instead of through traditional wholesale channels. ABD’s
emphasis is on a one-on-one intimate shopping experience and service designed to
cultivate a loyal customer base.
ABD is pursuing a sales strategy with targeted U.S. resorts and spas. A strong
relationship with the primary event decision maker is essential to establishing and
maintaining entrée to these venues. At The Greenbrier, ABD has established
relationships with its Social Director and Retail Manager.
Distribution
Channels
ABD will sell the ABD Collection directly to end customers at retail prices to realize
the full price, instead of wholesale distribution through retail outlets.

Resorts. ABD’s primary marketing strategy for The Collection is retailing the
line at resorts. ABD’s retail store at The Greenbrier will be the flagship for the
new line, and will serve as the laboratory for displaying new designs, obtaining
customer feedback and training sales staff. Because of the made-to-order
business model, ABD expects to develop a clientele whose measurements are
kept on file, making it convenient to order additional garments in different styles
or colors. The strategy is to nurture a loyal customer base and cultivate a strong
re-order business.
A trunk show is set up in a resort room and features samples of each design in every
size offered – currently 90 pieces – on racks and mannequins. Accessories, such as
jewelry, scarves, and pocketbooks that have been specially selected to coordinate
with the line and which are currently available in the retail shop will be shown and
merchandised in the room. A trained wardrobe consultant staffs the event and
appointments are made for individuals to view the line and try on different styles.
Special attention is given to creating a relaxed environment with good music,
drinks, fruit and pastries so that the experience is memorable19. Each customer
receives individual attention regarding her coloration, the clothing requirements of
her lifestyle, and the image she wants to project.
 Recent initiatives. ABD held a trunk show at a The Greenbrier event entitled,
“Wonderful Women’s Weekend,” which was marketed as a relaxing and
informative package of programs of interest to women. The program
included financial planning, elder care issues, makeovers, cooking
demonstrations, and spa events. The ABD Collection occupied a room in the
Conference Center and scheduled four hours of appointments. Sales netted
$1,600 during those four hours, and measurements were taken for women
who asked the wardrobe consultant to contact them directly when they
returned home.
19
Drawing from The Experience Economy, Gilmore and Pine, Harvard Business School, 1999
April 2003
© 2003 Appalachian By Design, Inc.
Marketing Plan
no. 18

Resort concept expansion. Building on its experience and contacts at The
Greenbrier, ABD plans to work with event planners and in-house hotel meeting
planners. Resorts are ideal locations for shopping because they offer a “captive
audience”; guests are secluded on resort property, are generally in a relaxed mood
and, with less of their typical daily demands, have more leisure time.
ABD’s focus will be female-oriented events, either based on professional
affiliations, such as bar associations, or gatherings based on services provided,
such as a women’s spa get-away weekend. The hotel industry delineates these
hotel guests as either conference or social guests. ABD sales staff is in the
process of scheduling resort events in 2003 and has made preliminary contact
with staff at the following resorts:

Homestead Resort, Hot Spring Virginia;

Glade Springs Resort, Daniels, West Virginia;

The Atlantic Club, New Jersey (an existing wholesale customer); and,

The Golden Door, California.
As part of women wellness packages at resorts, this concept is also being discussed
with a spa consultant who has relationships with Grove Park Inn, Ashville, NC;
Kingsmill, Williamsburg, VA; The Equinox, Vermont; Canyon Ranch, the
Berkshires, Massachusetts; and Kohler Water Spas, Kohler, Wisconsin. It is
anticipated that this consultant will be hired to assist the Sales Manager during
Phase Two of ABD Collection’s growth plan.

Off-resort trunk shows. The second distribution channel is to stage trunk
shows presenting ABD’s wholesale line, Appalachian Baby Design, in cities
where sales staff currently travels for trade shows. These cities include New
York, Atlanta, Dallas, and Seattle. A hotel suite will be the venue so the line can
be displayed and sales staff can make appointments for viewing. This will spread
the expense of a stay in a city between the two marketing programs. Women
working in the gift market trade, such as sales representatives and show room
managers, who spend money and effort on dressing appropriately for their jobs
working with the public, are part of the target market.
The following are the initial steps taken in the off-resort trunk channel:
 New York Gift Show. During the February 2003 New York Gift Show, the
ABD Collection sample set was exhibited in a hotel suite. Six women out of
the 30 invited made appointments, resulting in $5,400 in sales. ABD sales
staff found that the women who came were rushed, and many who were
invited couldn’t arrange their work/home schedule so they could attend.
The plan is to continue to test this avenue in the cities where the wholesale
tradeshows are held, but reevaluate after the test period.
April 2003
© 2003 Appalachian By Design, Inc.
Marketing Plan
no. 19
 Home presentation. In November 2002, the ABD Collection was presented in a
home outside of Washington, D.C. Six women attended and net sales were
$5,200.

Sample sales. Twice a year, ABD plans to sell its samples and design prototypes in
a sample sale to the women in the community. New, fresh samples are then
produced for the sales program, enabling us to recover the cost of the sample and
produce a fresh group for sales events. It also allows local women to access special
clothing at marked-down prices while building community awareness of ABD’s
venture and mission.
Projected
Growth
The following is ABD’s projection of the growth of each sales channel:
Sales Channel*
2004
2005
Resort
60%
60%
Off-Resort
30%
27%
Re-order
10%
13%
Total
100%
100%
2006
56%
27%
17%
100%
*Average % of sales for each sales channel.
As the chart above illustrates, ABD is projecting that as its brand matures, there will be
an increase in special orders and re-orders and a decrease in the trunk show and resort
channels. Based on the test trunk shows (November 8 & 9, 2002 in Washington, D.C.
and February 9, 10 & 11, 2003) and retail sales, the following are conversion and
reorder projections:
Sales
Incentives

Average sale (one jacket and separate – skirt, slacks, or top): $850.00

Average number of potential customers per trunk show: 25

Conversion rate based on test marketing: 50%

Re-order rate (based on test phase): 33%

Resort staff. Resort employees directly involved with booking and promoting the
ABD Collection trunk shows are given a custom-made suit of their choice. During
the test phase, this gift has built strong buy-in.

Off-resort events. For off-resort events, ABD offers women who bring two friends
or more a 15% discount of the purchase of an ABD Collection piece.

Wardrobe consultants. Currently, wardrobe consultants are paid a day rate, plus
a 5% commission, for sales at the trunk shows. The salesperson handles all followup order management so the customer has one primary contact throughout the
transaction. As sales increase, only commissions will be paid, which ABD
anticipates to be a high and strong incentive to build long-term relationships with
the ABD Collection customer.
April 2003
© 2003 Appalachian By Design, Inc.
Marketing Plan
no. 20
Systems &
Tools
Listed below is an explanation of ABD’s sales systems and tools:

Sales systems. Customer account management software is to be integrated into
ABD’s sales system to create an effective and easy-to-manage database of ABD
Collection customers that will include each customer’s essential measurement
information, as well as birthday, anniversary, and notable comments. To insure
privacy of personal information, sections of the customer field will only be accessible
to authorized sales staff.

Sales tools. A leading regional graphic artist was hired to develop a visual identity
system for the line, including hangtag, label, show invitations, swatch cards, and
line/price sheet. These items are included in the Supporting Documents.

Sales training. Growth in sales is directly related to growth in wardrobe
consultants. A key duty of the Sales Manager is to expand the sales training and
support systems for wardrobe consultants. Along with regular on-site training,
before each trunk show event, the consultant will be updated with internal sales
reports on best sellers, industry trend reports, press kits, postcards, and trunk show
invitations.
Marketing
Strategy
The ABD Collection is positioned as classic silhouettes that are made expressly to fit
the customer. To date, ABD has initiated the following marketing activities designed
to target affluent and professional women:

Direct mail. ABD has designed a custom invitation that can be sent to customers,
or placed in a resort’s program packet, as it has done at The Greenbrier. Regular
reminders of line extensions, color changes and special events will be part of a direct
mailing schedule. Once ABD’s customer database is fully activated, targeted
mailings will be timed around the individual’s special occasions, such as birthdays
and anniversaries.

Public and media relations. ABD has succeeded in attracting positive media
attention in both trade and consumer publications for its wholesale line by
maintaining a wide network of trade contacts. In the second phase of its growth
strategy, ABD plans to hire a public relations firm to develop public and media
relations and generate targeted coverage of its product line and venture.

Company website. ABD’s company website is located at www.abdinc.org. The
website will be upgraded to include a page on the ABD Collection which will feature
new designs, new colors, trunk show schedules, and resort events. To build a sense
of exclusivity and highlight the Collection’s made-to-order specificity, customers
will be given an access code to enter the site.

Word of mouth recognition. ABD is committed to meeting and exceeding
customer expectations to attract new customers through word of mouth
advertising, which has increasingly been the most effective marketing strategy to
break through an overly crowded marketplace. ABD plans to focus on developing
April 2003
© 2003 Appalachian By Design, Inc.
Marketing Plan
no. 21
influential customers that can build positive word of mouth brand cache by: putting
the product in early-adopters’ hands, reducing the price barrier, and listening.20
Since the crucial element of this strategy is the quality inherent in the product,
special emphasis is placed on getting every order right, developing a strong quality
control system (see “Operations”), and enhancing the purchase with special touches,
such as providing a complimentary garment bag with each order.
ABD plans to focus on developing influential customers that can build positive word
of mouth referrals. This strategy has been followed during the test market phase
by:
20
-
Encouraging interested customers to try on the product with a money-back
guarantee;
-
Offering an introductory rate, reducing possible price barriers; and,
-
Asking customers to fill out a questionnaire on the product, service, and their
buying habits (see “Support Documents”).
The Anatomy of Buzz, How to Create Word of Mouth Marketing, Emanuel Rosen, Doubleday, 2000.
April 2003
© 2003 Appalachian By Design, Inc.
Marketing Plan
no. 22
MANAGEMENT PLAN
Management
Overview
ABD currently has nine full-time and three part-time employees. Diane
Browning, the founder, has served as President since inception in 1992, bringing
over 20 years of experience in market and economic development in Appalachia.
To compensate for a sparse rural labor pool, management has reached out across
the country to recruit a diverse mix of design, finance, sales, and legal talent. The
mix of rooted staff and talented consultants is the dynamic that has readied the
enterprise for growth.
To support Ms. Browning, ABD intends to recruit additional dedicated staff as it
moves the venture into its second phase of growth. These positions include:
- Director of Sales;
- Production Manager;
- Two Finishing Technicians; and,
- Two additional Wardrobe Consultants.
Organizational
Overview
The chart below illustrates ABD’s organizational overview:
Governing Board
President
CFO
Executive Assistant
Finance, Fundraising,
Reporting
Training & Network
Development
Network Relations, Recruitment,
Training, Telecom.
Bookkeeper
Knitters
Production Manager
Sales & Marketing
Purchasing, Inventory Mgt.,
Shipping
Finishing Center
Staff
ABD
Collection
Appalachian
Baby Design
(direct sales via
trunk shows)
(wholesale
marketing)
Retail Shop
(Venue for both lines)
Management
ABD’s senior management is composed of the following individuals:
Name
Title
Expertise
April 2003
Diane Browning
Founder, President & Director
Over 20 years experience in community and economic
development in Appalachia.
© 2003 Appalachian By Design, Inc.
Management Plan
no. 23
Accomplishments
& Experience
Education
Name
Title
Expertise
Accomplishments
& Experience
Education
Name
Title
Expertise
Accomplishments
& Experience
Education
Established
Design
Relationships


Oversees ABD’s development as a social enterprise.
Earned the West Virginia Partnership for Progress
Award, a Benedum Foundation Fellowship, and the Small
Business Association’s Mid-Atlantic Women’s Business
Advocate Award.
 Served as Community Development Specialist at Women
and Employment (now The Center for Economic Options), a
non-profit, community-based organization that supports
business development for rural women.
B.A. Political Science, Trinity College, Burlington, VT
Jonathan Harrison
CFO, per contract with Alt. Consulting
Seven years of business management experience in the social
enterprise field, with a focus on improving cash flow and
increasing long-term earnings.
 Created ABD Collection’s initial financial model,
established financial reporting systems, and monitors
progress.
 Founded a non-profit economic development organization
founded in 1998 that has grown to a staff of 12 employees,
with an operating budget of over $800,000 annually.
B.A. Marketing and Communications, State University of
New York at Albany.
MBA, Yale School of Management
Yevette Shafer
Production & Training Manager for the ABD Collection
Over 10 years experience in the knitting industry. Started at
ABD as a knitter in 1993. Extensive industry training
throughout the U.S., including two week-long seminars on
knitwear CAD training and a certified course at North
Carolina State’s Textile Department.
 Learned the pattern construction of the ABD garments, as
well as how to best teach these techniques.
 Worked at Kellwood Company as Quality Control
Manager for the last four of an 18 year career with the
company.
Currently enrolled in a bachelors program at the Community
College.
ABD has established relationships with design consultants from diverse
backgrounds, allowing the Company to draw on different strengths and skills. The
design team plans quarterly reviews of designs, customer feedback and trends.
The following individuals comprise ABD’s design team:
April 2003
© 2003 Appalachian By Design, Inc.
Management Plan
no. 24
Knitters
Name
Expertise
David Miles
18 years of custom knit service and knitting seminar
experience. Assisted with developing each style in the ABD
Collection launch and trained ABD staff and knitters in the
production of the line.
Name
Expertise
Michelle Woodfred
Knitwear designer trained at the Pratt Institute and worked
many years as a knitwear designer for Calvin Klein. Lead
designer on Appalachian Baby Design and adds a fresh,
feminine, West Coast perspective to the designs of the ABD
Collection.
Name
Expertise
Lynda Grose
Currently a design consultant with companies such as Patagonia
and Aid to Artisans and former knitwear designer with Espirit
Considered ABD’s founding designer, who convinced Esprit to
work with a group of West Virginia knitters in 1992.
Name
Expertise
Margaret Wood
20 years of design and product development experience in the
USA, Europe and the Far East. From 1982-1993, owned a
design consultancy in New York City, developing knitted
textile designs for a variety of clients including retailers,
catalogs, yarn manufacturers, trend services and designers
such as Donna Karan, Calvin Klein and Ralph Lauren.
ABD currently contracts with 24 knitters and nine hand-finishers. Depending on
their level of expertise and their income goals, knitters produce between 10 to 14
units per week. In peak periods, high producers create 15 to 20 units per week.
ABD is fortunate to have excess capacity of trained knitters who can take up
production slack to keep percentages high during peak periods.
When projecting capacity, ABD classifies its knitters as:
-
Apprentice (less than one year experience and produce ten to fourteen units
per week);
-
Experienced (produce five to ten units per week); and,
-
Lead (produce ten or more units per week).
Currently, of ABD’s 24 core knitters, three are lead, sixteen are experienced, and
five are apprentices.
April 2003
© 2003 Appalachian By Design, Inc.
Management Plan
no. 25
Through the Appalachian Baby Design line, ABD contract work, and now
through the ABD Collection, a knitter can start with a beginner level project and
gradually increase her skills through products that require more technical skill
and sophisticated equipment. Certain customer designs are well suited to
apprentices, while experienced knitters, who are the most technically proficient,
produce more complex patterns. Work is distributed first to lead knitters since
they produce the most product. This important group serves as a model for
apprentices and those considering entering the trade.
Sales Team
To date, David Miles, one of ABD’s design and training consultants, has given two
wardrobe consultants over 40 hours of sales and measurement training for the
ABD Collection. A training video was produced as a refresher for them and an
introduction for future staff. A minimum of 40 hours training is planned for each
additional wardrobe consultant.
One of ABD’s sales employees has 18 years experience selling Mary Kay
Cosmetics. The Mary Kay sales philosophy and training program is considered the
world’s gold standard of personal selling. With her help, ABD’s sales program has,
and will continue to, draw on Mary Kay’s successful direct sales techniques.
Board of
Directors
ABD’s Board members bring a high degree of commitment and combined talent to
the organization. The feasibility and development of the ABD Collection has been
an agenda item for every meeting during the last two years and its growth closely
monitored.
Currently, ABD’s Board of Directors is comprised of the following five
individuals, in addition to Ms. Browning, who serves ex-officio, as President.
Name
Current Position
Expertise
April 2003
Monica Appleby
Director, New Enterprises Fund.
Directs an organization that supports the development of
micro-enterprises through lending and other programs.
Played a formative role in developing “Virginia Home
Knitters” which encompasses ABD network members from
southwestern Virginia.
© 2003 Appalachian By Design, Inc.
Management Plan
no. 26
Name
Current Position
Expertise
Monnie Bare
Visual Merchandiser & Retail Manager, The Greenbrier.
Guided ABD’s development of its retail shop, as well as
designed its booth and a button line for Appalachian Baby
Design. Experience in both the arts and management.
Name
Current Position
Expertise
Beth Ferrier
Attorney at Law, Sowash, Carson & Ferrier, L.P.A.
17 years experience practicing non-profit and business law.
Name
Current Position
Expertise
Karen Jacobson, Board Secretary & Treasurer
Deputy Director, Randolph County Housing in Elkins, WV.
Worked for six years as ABD’s Vice President of
Development and Finance, responsible for developing the
training program and raising over $2 million in grants and
loans to finance the organization’s growth. Also wrote the
first feasibility study on ABD.
Name
Current Position
John Walters
Director, The Lightstone Community Development Corporation
Loan Fund, a West Virginia Small Business Development
Center and U.S. Small Business Administration certified microlender.
Previously ran his own entrepreneurial ventures, including 12
years running a family-owned manufacturing company.
Expertise
April 2003
© 2003 Appalachian By Design, Inc.
Management Plan
no. 27
OPERATIONS PLAN
Facilities

Location. The ABD Collection will be marketed and finished from its
headquarters located in Lewisburg, West Virginia. Lewisburg is located in the
southeastern part of the state, off of I-64 (running E/W) and 40 miles from I81 (the nearest N/S corridor). In July 1996, ABD moved to its present facility,
located in an old Sears retail building, which was renovated to meet ABD's
specifications.
ABD’s knitters work from their homes in the mountains and valleys of West
Virginia, Virginia and Kentucky. The majority of the knitters are organized
into area teams; however, a few live too far to travel easily to area meetings and
trainings. They work with ABD by phone, email, mail, and UPS, and receive
occasional home visits from ABD trainers. The below map illustrates the
various location of ABD’s knitters:
Production
Capacity
The facility includes a 900 square foot administrative suite, with a 400 square foot
conference room used for training and meetings, and a 2,200 square foot area for
in-house production, finishing and shipping of product and inventory storage. The
finishing center houses raw materials inventory, finished goods inventory, steam
tables, washer, dryer, and a design studio with computerized knitting machines
and a CAD program. ABD currently has five linking machines from Hong Kong.
ABD’s training programs will be essential to increasing production capacity over
the next four years. ABD plans to increase production capacity through the
following three initiatives:
April 2003
© 2003 Appalachian By Design, Inc.
Operations Plan
no. 28

Recruiting more knitters through its
"Introduction to Production Knitting"
course;

Helping apprentices to become
experienced knitters through orders and
order-specific training; and,

Increasing the skills and efficiency rates of
experienced knitters through its
Apprentice Program.
The table below illustrates ABD’s projected production capacity:
Projected Company-wide Production
Capacity Knitters/Units
KNITTERS
2004
Lead Knitters (10 per wk)
Experienced (8 per wk)
Apprentice (4 per wk)
Total Knitters
Total Annual Production Capacity – Units
Knitter
Training
2005
2006
8
22
20
50
16,800
10
25
25
60
20,000
6
18
10
34
12,200
ABD has a rigorous, mandatory training program that consists of:

One-on-one peer training program. In 1999, ABD shifted its knitting
training program to one-on-one sessions with peer trainers, most of whom
learned to knit through ABD and have been trained in adult learning
techniques. In the past, there was a delay until a class of six formed.
Decentralizing this training function from ABD to the wider network of knitters
has helped facilitate the training and has enabled ABD’s knitters to receive
training more quickly. ABD will use this peer train-the-trainer system to
expand the ABD Collection.

Skill upgrade class and training video. Regularly scheduled ABD-led skill
upgrade classes will also be part of ongoing training. In the spring of 2002,
ABD also produced an ABD Collection training video for reference for trained
knitters and as an introduction to the line for new knitters.
April 2003
© 2003 Appalachian By Design, Inc.
Operations Plan
no. 29
Purchasing &
Suppliers
ABD currently uses three major suppliers for the high-end yarns used in the
collections: Dytex Yarns, Haverhill, MA; Bonnie Triola Yarns, Eire, NY (letter of
support included), and Silk City Yarns, Patterson, NJ. ABD has long-standing
relationships with all of these vendors and each is committed to the business
partnership.
ABD’s major button suppliers are Blue Moon Button in San Mateo, CA and
Renaissance Button in San Francisco, CA. ABD purchases its other finishing items,
such as labels, in the United States and abroad, if unavailable domestically.
Quality
Control
Producing quality products is one of ABD’s core values. For many years, ABD staff
and the Knitters’ Steering Committee worked with a quality specialist, Grant Stewart,
from the Center for Entrepreneurial Studies and Development at West Virginia
University. Grant assisted in developing quality standards, worked to create the first
"Train the Trainers" session, and held team training with the Steering Committee.
The ABD Collection uses a three-phase inspection program to insure the highest
quality of production. After knitters have completed and inspected their part of the
production, the pieces are inspected again prior to any finishing activities, such as
blocking, linking and tagging. The product is inspected once more before being
packaged and shipped to the customer. A key hire in the second phase of ABD’s
growth strategy will be a production manager who will be recruited specifically for
his or her expertise in managing a first-rate quality control program.
Technology
April 2003
In March 2002, ABD’s new manufacturing software, Oak Street by Industrious
Software Solutions, went on-line. Once the system is fully integrated into the
operation, ABD plans to incorporate bar coding into the manufacturing and
distribution processes.
© 2003 Appalachian By Design, Inc.
Operations Plan
no. 30
Process Flow
The following chart outlines ABD’s process flow:
Cu s tom e r
Orde r
Cus tom er
Cu s tom e r
Re c e ip t
Ge ne ra te
S a le s
Orde r
ABD
& S ales
ABD
Dis tribution
Knitter
Production
S toc k &
S u p p ly
S ys te m
Ac q u ire
Ra w
Ma te ria l
Ge ne ra te
Pu rc ha s e
Orde r &
Re c e ive
Ma te ria l &
Com m e nc e
Knitting
ABD
Finis hing
S hip
Knitte d
Goods to
ABD
Finis h?
Accounting
Finis h
Ye s
Ins p e c t
No
Pa c k,
S hip &
Invoic e
S hip p ing
Work is completed to order according to specifications provided by ABD’s trained
wardrobe consultants. Custom orders are filled within four to six weeks of an order
placement. The following steps take place upon receiving a sales order:

ABD staff notifies the knitters by calling or emailing knitters directly;

ABD issues a work order and raw materials (yarn) to the knitter with delivery due
dates. The yarn is sent via UPS to the knitters who live outside of the Lewisburg
area; local knitters come to ABD’s office and pick it up.

Depending on the design, knitters may complete an entire garment, or knit only
pieces of the garment, which are then finished in ABD’s finishing center.

Knitters are responsible for self-inspection, repair, adding tags identifying their
work, and shipping or hand delivering the product to ABD according to the work
orders and in time to allow for shipping to the customer on time. They are also
responsible for the cost of shipping the product back to ABD.
To monitor process flow, a manufacturing valuation report is prepared and reviewed
weekly, including the units and dollar value of: raw material on hand; work orders;
work in process; finished product; weekly shipments; and sales orders pending.
Growth
Strategy
April 2003
ABD will undertake a formal and systematic approach to expanding its business.
ABD’s expansion strategy will be executed in three operational phases, the first of
which has been completed.
© 2003 Appalachian By Design, Inc.
Operations Plan
no. 31


Phase 1 / Proof of Concept / January 2002 to December 2002.
-
Designed core product line. In 2002, ABD designed its core made-to-measure
knitwear line.
-
Established operations. Developed production capacity for test market and
trained knitters.
-
Tested market. Tested new knitwear line through The Greenbrier retail
store for nine months. During this time, ABD also hosted two trunk shows.
ABD succeeded in launching the product line without increasing expenses
or staff.
Phase 2 / Rollout / January 2003 to December 2004.
ABD is in the process of raising capital to complete the following:

Additional
Opportunities
-
Expand management, board of directors, and staff. ABD intends to hire a
Director of Sales, Production Manager, and two additional finishing center
staff. ABD also intends to expand its knitter recruitment through regional
job fairs, as well as recruit two additional wardrobe consultants and
additional members to its Board of Directors.
-
Enhance sales and marketing. In order to increase brand awareness, ABD
intends to hire a public relations agency, develop a sales system and training
program for its wardrobe consultants, and enhance its customer relations
program.
-
Improve operations. ABD intends to redesign the Finishing Center in an
effort to increase productivity.
Phase 3 / Increase Production Capacity / January 2005 and Beyond.
-
Increase staff. ABD intends to hire a Creative Design Director, increase
finishing staff to six employees, and further increase knitting staff.
-
Enhance operations. ABD plans to re-evaluate its organizational structure,
expand its production facilities, and qualify for ISO certification.
Following the execution of its core strategy, ABD may seek to pursue the following
additional growth opportunities:

Consulting. Develop a consulting business that provides assistance to rural
economic groups, using its flexible manufacturing systems model.

Brand extension. Guide the development of other products that can be
merchandised with the ABD Collection, such as jewelry and accessories.
April 2003
© 2003 Appalachian By Design, Inc.
Operations Plan
no. 32
FINANCIAL PLAN
Financial
Plan
Overview
ABD has chosen to show the ABD Collection (the “venture”) as a stand-alone entity in
anticipation of spinning it off in Year Five into a separate for-profit subsidiary organization
of ABD. Projections illustrate how the ABD Collection operates as a business in general
and in comparison to industry averages and trends.
The minimal start-up capital to date has been raised in conjunction with ABD and
estimates year-end cash position of $33,750 on test market sales of $40,000. In 2003, the
venture is positioning itself for investment opportunities; ABD thus has presented threeyear financial statements for the years 2004 to 2006. Realistic return on assets, sales, and
equity are forecast for the first year, with more aggressive performance hurdles cleared in
years 2005 and 2006.
Sources &
Uses of
Capital
The venture requires approximately $177,000 over the next 18 months (July 2003 to
December 31, 2004) for post-start up capitalization. ABD is anticipating a $100,000
investment (paid-in-capital) in 2003 which would allow for purchases of additional
equipment, implementation of the marketing plan, and the creation of an additional sample
set for the line. An additional $78,074 will be needed in 2004 to provide working capital
and additional marketing support.
The below chart illustrates the breakdown of sources and uses of funds.
Sources and Uses of Capital
Sources of Capital
$
Yale Business Plan Competition
Other Social Investors
$
Total
$
100,000
77,074
177,074
Sales Director Annual Salary
Production Manager (Annual Salary
Equipment Purchases
Working Capital
Sample Sets
Marketing Expenses year 2004
Total
$
$
$
$
$
$
$
32,000
45,000
12,274
40,000
18,000
30,800
177,074
Uses of Capital
Projected
Financial
Performance
April 2003
The financial performance of the venture is conservatively estimated on a real-case scenario
given tight economic times. ABD is planning for a real-case scenario cash flow including
higher inventory, longer than average for retail turnover on accounts receivable, and a
comfortable SG&A percentage of revenues. ABD is estimating the following performance
for the venture over the first three years:
© 2003 Appalachian By Design, Inc.
Financial Plan
no. 33
ABD Collection
Revenue (grant and income)
Gross Margin
SG & A
Depreciation
Operating Income
Return on:
Assets
Equity
Balance
Sheet
Projections

2004
2005
2006
299,466
460,717
708,796
58.0%
55.0%
1.7%
1.3%
59.0%
49.0%
3.5%
6.5%
59.0%
43.4%
2.3%
13.3%
2.02%
2.20%
13.32%
14.23%
29.25%
30.81%
Equipment. ABD’s forecasts the venture will require a relatively small amount of
start-up capital designated for equipment to begin operations. As outlined below, an
estimate of $12,274 in year 2003 purchases will retrofit and redesign the finishing
center with upgraded equipment to more efficiently process the line. The bulk of the
capital requirements will be for selling expenses related to the marketing program of
the venture. The stand-alone venture does not anticipate taking on outstanding debt
to purchase equipment. The following outlines the estimated capital expenditures from
2003 to 2006:
 Total value of equipment in-house plus new equipment purchases in 2003 will be
$28,076;
 Capital expenditures for equipment will total $12,274 in 2003;
 Equipment expenditures for Year 2004 are estimated at $25,000;
 Equipment purchases for Years 2005 and 2006 are estimated at $10,000 each year.

Other balance sheet assumptions:
 Trade payables and receivables are calculated at 21 and 27 days, respectively.
Receivables should be stronger due to prepayment and use of credit cards on most
payments;
 Cash is forecasted at 35% of total assets in Year One due to heavy paid-in-capital
not used up in Year One. In future years beyond start-up, cash percentage of assets
decreases to 16% of assets.
 Investments of $33,086 will be made to ABD, the parent organization of the
venture, as indicating contribution to the program and training expenses of the
organization;
 Inventory is held constant at 30% of Cost of Goods Sold (COGS) in keeping with
industry averages for knitwear;
 Other current assets include remainders on sample sets;
 Other assets include the value of trademarks, goodwill, contracts, and licensing;
and
 Paid-in-capital recognizes venture philanthropy as equity (see sources of capital on
page 34.
April 2003
© 2003 Appalachian By Design, Inc.
Financial Plan
no. 34
ABD Collection
Balance S heet
Ca s h / Exc e s s S e c u ritie s
Inve s tm e nts -ABD
Tra de Re c e iva b le s
Gra nt Re c e iva b le s
Inve ntory
Othe r Cu rre nt As s e ts
Total Current As s ets
YE 2003
YE 2005
YE 2006
3 3 ,9 7 5
6 8 ,9 3 6
4 4 ,6 5 9
1 3 ,0 0 0
2 2 ,3 7 9
2 9 ,0 0 0
5 0 ,2 4 7
3 3 ,0 8 6
3 2 ,0 0 0
1 8 ,0 0 0
5 ,0 0 0
69,975
4 0 ,0 0 0
5 ,2 1 9
136,534
4 5 ,0 0 0
6 ,4 0 0
125,059
7 2 ,0 0 0
7 ,4 0 0
194 ,733
Be ginning Gros s P P & E
Ca p ita l Exp e nditu re s
Adj. to re tire de p r. a s s e ts
Le s s a c c u m . de p re c ia tion
Net P P & E
13181
1 2 ,2 7 4
2 ,6 2 1
2 8 ,0 7 6
2 8 ,0 7 6
2 5 ,0 0 0
-8 7 8
-7 8
5 2 ,1 2 0
5 2 ,1 2 0
1 0 ,0 0 0
2 2 ,8 8 3
-1 ,2 3 8
8 3 ,7 6 6
8 3 ,7 6 6
1 0 ,0 0 0
2 2 ,8 8 3
-4 ,6 7 0
1 1 1 ,9 7 9
Othe r As s e ts
Total Net Fixed as s ets
1 8 ,9 4 9
4 7,025
8 ,0 0 0
60,120
1 7 ,0 0 0
100,766
1 5 ,0 0 0
126,979
117,000
196,654
225,824
321,711
7 ,0 0 0
1 0 ,0 0 0
1 7 ,0 0 0
1 7 ,0 0 0
7 ,4 0 0
8 ,0 0 0
1 5 ,4 0 0
1 5 ,4 0 0
8 ,2 0 0
6 ,3 0 3
1 4 ,5 0 3
1 4 ,5 0 3
9 ,5 0 0
6 ,7 7 8
1 6 ,2 7 8
1 6 ,2 7 8
4 ,9 3 6
4 ,9 3 6
4 ,3 8 2
1 3 1 ,4 7 6
1 5 5 ,6 7 2
1 7 ,0 0 0
1 5 ,4 0 0
1 4 ,5 0 3
1 6 ,2 7 8
Pa id in Ca p ita l
Re ta ine d Ea rnings
Ne t inc om e
Total Equity
1 0 0 ,0 0 0
1 7 7 ,2 7 4
1 0 0 ,0 0 0
3 ,9 7 6
1 8 1 ,2 5 0
1 7 7 ,2 7 4
3 ,9 7 6
3 0 ,0 7 2
2 1 1 ,3 2 2
1 7 7 ,2 7 4
3 4 ,0 4 8
9 4 ,1 1 1
3 0 5 ,4 3 3
Total Liabilities and Equity
117,000
196,650
225,825
321,711
Total As s ets
Liabilities & Equity
Ac c ou nts p a ya b le
Othe r c u rre nt lia b ilitie s
Cu rre nt Op e ra ting Lia b ilitie s
Total Current Liabilities
De fe rre d Inc om e Ta xe s
Othe r
Total LT Liabilities
Total Liabilites
April 2003
YE 2004
© 2003 Appalachian By Design, Inc.
1 ,1 2 3
Financial Plan
no. 35
Income
Statement
The company is estimating sales of $299,466 in 2004. This represents sales of 1,000 units,
with a gross margin of 58.2%. Approximately 75% of the COGS are in labor, with 25% in
material purchases. There is a detailed explanation of the revenue assumptions in the
Supporting Documents. The sales forecasts include the following projections:

Revenue growth is very healthy with a 35% increase in sales over the first five fiscal
years ending December 31, 2007; and

Gross profit will stay constant in Year One at 58% and will increase by 1% in Year
Two and remain constant.
The following table is a snapshot of the venture’s projected income statement for years
2004 to 2006:
ABD Collection
S tatement of Activites
S ales Revenue
YE 2004
YE 2005
YE 2006
Total S ales Revenue
Cos t of S ales
2 9 9 ,4 6 6
1 2 5 ,7 7 6
4 6 0 ,7 1 7
1 8 8 ,8 9 4
7 0 8 ,7 9 6
2 9 0 ,6 0 6
Gros s Profit
S G & A expens e
Adm in S alary and Benefits
Com m is s ions Pa id
Ma rke ting Exp e ns e s
Op e ra ting Exp e ns e s
Total S G&A
1 7 3 ,6 9 0
2 7 1 ,8 2 3
4 1 8 ,1 9 0
93968
29947
30800
10000
1 6 4 ,7 1 5
115843
69108
25800
15000
2 2 5 ,7 5 1
160325
106319
25800
15000
3 0 7 ,4 4 4
Depreciation
5 ,0 0 0
1 6 ,0 0 0
1 6 ,6 3 4
Operating Incom e
3 ,9 7 6
3 0 ,0 7 2
9 4 ,1 1 1

Expenses. Expenses are divided into marketing, administrative salaries, and other
operating costs. ABD forecasts annual marketing expenses of $30,800. A marketing
budget outlining planned expenditures for Years 2004 to 2006 is included in the
Supporting Documents. SG &A will start at 55% of revenues throughout the start-up
period and will decrease within the first three years as a percentage of sales to 50%, due
to scale economies and lower recruiting costs for the management team.
Administrative costs for the venture will be allocated across the program using shared
resources from ABD in some cases. A production manager and sales director will be
added to the staff at the end of 2003. The product Manager’s salary is allocated at 80%.
The sales Director’s salary is at 100%, but does not include commissions. Commissions
are structured as commission plus expenses in year one of 10% plus expenses. In year
2005, the structure moves to 15% straight commission with expenses carried by the
wardrobe consultants as the brand develops cache and recognition. A chart outlining the
venture’s management and personnel expenses is included in the Supporting Documents.
April 2003
© 2003 Appalachian By Design, Inc.
Financial Plan
no. 36
Working
Capital &
Cash Flow
The following tables include projections that indicate that both working capital and cash
flow for the venture will be strong in Year One, with some decrease in liquidity in Year
Three as a result of purchases of capital equipment. ABD plans to increase capital
expenditures and the short-term line-of-credit during this first three-year period. ABD has
developed its own network of knitters, unlike other designers who rely on developing
outside contract sources.
2004
2005
2006
Working Capital
Cash / Excess Securities
Projected Cash for Operations
Excess Market Securities
Current Assets
Current Liabilities
Working Capital
Cash Flow
68,936
23,858
45,078
44,664
36,705
7,960
50,252
56,469
136,534
15,400
121,134
125,064
14,503
110,561
194,738
16,278
178,460
2004
2005
2006
CASH FROM OPERATING ACTIVITIES:
Net Earnings (Loss)
Plus Depreciation
Minus Change in:
Trade Receivables
Inventory
Other Current Assets
Plus Change in:
Accounts payable
Other current liabilities
Current L-T projected debt
3,981
5,000
30,072
16,000
94,111
16,634
9,379
22,000
219
6,621
5,000
1,181
3,000
27,000
1,000
400
-2,000
800
-1,697
1,300
475
-33,198
-4,718
16,847
Minus Change in:
Capital Expenditures
Other Assets
25,000
-10,949
10,000
9,000
10,000
-2,000
Net Cash From Investing
14,051
19,000
8,000
4,936
-554
1,123
-4,382
82,210
34,961
33,975
68,936
-554
-24,272
68,936
44,664
-3,259
5,588
44,664
50,252
Net Cash From Operating
CASH FROM INVESTING ACTIVITIES:
CASH FROM FINANCING ACTIVITIES:
Plus Change in:
Paid in Capital
Deferred Income Taxes
Other
Net Cash From Financing
Net Increase/Decrease of Cash
Cash Beginning of Period
Cash-End of Period
77,274
See “Supporting Documents” for additional financial projections and assumptions.
April 2003
© 2003 Appalachian By Design, Inc.
Financial Plan
no. 37
RISK ASSESSMENT AND CONTINGENCY PLAN
Sensitivity
Analysis
A sensitivity analysis was conducted on the current financial projections with a
20% sensitivity to test the soundness of the financial project. Results of the
analysis show:

A 20% shortfall in revenues in years one through three will result in the
organization being undercapitalized at the end of Year Three by $17,888, and
ABD will have to carry this negative cash position in the line-of-credit it will
establish for $75,000. This line-of-credit will carry the organization into 2007.
The venture will have had net revenue loss of only $15,000 compared to the real
case scenario and will change hiring plans to lower dependency on design director
as full time employee.

This analysis kept operating expenses and margins constant during the period
and lowered isolated sales as a factor. In reality, margins would not erode as
quickly as have been forecasted in the sensitivity analysis.

A 20% underestimation of sales will result in an increase in net revenues of
$293,796. This will force the organization to evaluate its sales and marketing
plan and make adjustments to its staffing base to fulfill the highest order of
customer service.
Please see the cash flow spreadsheet in for contingency planning on a worst-case
scenario of 20% shortfall of sales projections in the Supporting Documents section.
Other major risks, with accompanying mitigation plan, include:

New entrant in an established market. As with any new apparel brand, a
determined effort must be made to gain market and mind share. The niche
marketing focus of personal selling at resorts, where there is a relaxed and captive
target customer, sets the venture apart from other entrants into the sector.

There has been a long held perception of Appalachia as a disadvantaged
region that is at variance with exclusive product line. Because the region is
isolated geographically, sparsely populated and home to a traditional culture, it is
not widely viewed as a source for luxury goods. Yet ABD has built its reputation
on exceptional design, using the finest quality yarns, employing state of the art
technology and instilling a culture of first-rate quality through its training
program. The affluent target market for Appalachian Baby Design, and now the
ABD Collection, demands nothing less and ABD works hard to satisfy that
customer. In the process, the company is recasting perceptions of the region and
its artisans.

Ability to maintain quality while scaling enterprise. There is a recognized
risk of losing quality and missing delivery schedules as sales grow. Internally,
ABD will draw from the processes and controls that it developed as the wholesale
line grew. A key hire in the launch phase is a production manager, who will be
recruited specifically for quality control and inventory control experience.
Regarding expansion of production capacity, ABD has developed a time-tested
training program to recruit and train more knitters, and since that is its core
mission, it is eager to expand.
April 2003
© 2003 Appalachian By Design, Inc.
Financial Plan
no. 38

Potential for low margins and high operating costs. ABD plans to mitigate
this risk by rigorous benchmarking of costs with the goal of maintaining 60%
margin in the first three years.

Potential difficulty recruiting capable staff. Because of the rural labor pool, it
can be difficult to attract the needed talent to grow the business. ABD’s plan
budgets competitive salaries to attract strong skill sets. The venture is
specifically targeting talented salespersons working at The Greenbrier who want
to exit the difficult work hours of the hospitality industry, as well as experienced
production managers working at local manufacturing facilities that are currently
downsizing.
April 2003
© 2003 Appalachian By Design, Inc.
Financial Plan
no. 39
SUPPORTING DOCUMENTS
Supporting
Literature




ABD Collection
Materials

Evaluation
Instrument


ABD Press Packet 


Letters of Support 




Management &
Director Resumes





Consultant
Resumes

Financial
Documentation

April 2003

Oberhauser, Relocating Gender and Rural Economic Strategies, Environment
and Planning, 2002 (Academic Case Study of Appalachian By Design’s
Economic Network Development)
Plotkin, Riches from Rags, Inc. Magazine, March 1995. (Article on knitwear
manufacturer French Rags).
Shirk & Wadia God, Family and an Electric Knitting Machine, Chapter 8,
Kitchen Table Entrepreneurs, Ms. Foundation Publication, 2002.
Wadia & Holley Accessing Lucrative Markets, Collaborative Fund for
Women’s Economic Development, Ms. Foundation, 2001 (case study of ABD’s
Marketing Program).
ABD envelope with invitation, brochure, hang tag.
ABD Collection buyer questionnaire.
Performance Monitoring Tool for Social Businesses, FIELD, The Aspen
Institute.
Appalachian Baby Design line sheet.
Media Coverage.
Catalog and Magazine Placement.
Andrea Levere, Vice President, Corporation for Enterprise Development
Raymond Daffner, Program Manager, Appalachian Regional Commission
Anna Wadia, Ms. Foundation
Bonnie Triola, Yarn Supplier
Donald Parker, Vice President, BB&T Bank
Diane Lynch Browning
Karen C. Jacobson
Jonathan A. Harrison
Yevette M. Shafer
Beth B. Ferrier
David H. Miles
Michele Woodford
Financial Projections and Assumptions
© 2003 Appalachian By Design, Inc.
Supporting Documents
no. 40