SOUTHERN FINDS BUSINESS
PLAN
Gas Station, Convenience Store, Gift Shop
DECEMBER 5, 2014
RILEY GIRAUDIER
Executive Summary
Willow Bunch SK., the location of Southern Finds, is a gateway to various small towns and tourist
locations. To get to, or leave the area, one must pass through Willow Bunch; some visit the town for its
own tourist attractions as well. Southern Finds addresses the area’s need for more shopping venues,
proper venues to purchase the work and goods of local artisans, and the need of better coffee, baked
goods, and lunch options available at more convenient hours.
Business Overview
Southern Finds is a multi-functional business offering gas and convenience store items as well as a gift
shop and café to meet the current needs addressed above. As time and money are at a premium, having
these products available nearby means not having to drive nearly 1.5 hours, costing gas and time, and
encouraging tourists coming through to stay in the town a little longer than they might otherwise.
Operations
Southern Finds is located on the #36 Highway which passes right through the town of Willow Bunch.
Suppliers include:











local artisans,
Lays
Pepsico
Buy Coffee Canada
Peak Time Canada
David Youngson & Associates
Millsap Fuel Distributors
GFS Foods
Mallard’s Distributing,
Southland Co-op
Costco
Human Resources
For the first year, there will only be one other person working at Southern Finds. I will work six days
each week with the employee working one day each week costing approximately 42,650 in wages and
benefits, as well as my own salary, in year one. The employee will most likely be another self-employed
individual or someone wishing to be semi-retired.
Marketing
Southern Finds’ main marketing will be done through:



Instagram
Facebook
Brochures
Average gross profit margins for each industry will be used in pricing products.
Financials



Southern Finds will require approximately $221,623 to start, 50% of which will be financed
through a 9% interest bank loan
Year 5 Owner’s Compensation is$85,006
It’s expected to be profitable by year 2 with an average annual profit of $28,625
Conclusions
While there is an unmet need in the area for a gift store and better food and café options, and the
business itself is proven to be economically feasible, the high level of risk and dependence on the
customer attendance and their dollar amount of purchases makes this business, at least at the location
described in this report, too risky for my personal preference and, therefore, I will not be moving
forward with this business.
Table of Contents
1.0
Industry Overview ............................................................................................................................. 6
2.0
Southern Finds .................................................................................................................................. 6
2.1
Mission Statement ........................................................................................................................ 6
2.2
Vision Statement ........................................................................................................................... 6
2.3
Goals and Objectives..................................................................................................................... 6
3.0 Operations .............................................................................................................................................. 6
3.1 Location and Property......................................................................................................................... 6
3.2 Floor Plan ............................................................................................................................................ 7
3.3 Typical Business Operations ............................................................................................................... 8
3.3.1 Daily Operations........................................................................................................................... 8
3.3.2 Weekly Operations....................................................................................................................... 9
3.3.3 Monthly Operations ..................................................................................................................... 9
3.3.4 Yearly Operations......................................................................................................................... 9
3.4 Capital Budget ..................................................................................................................................... 9
3.5 Cost of Goods Sold ............................................................................................................................ 10
3.6 Operating Expenses .......................................................................................................................... 11
3.7 Working Capital Planning .................................................................................................................. 11
3.7.1 Cash ................................................................................................................................................ 11
3.7.2 Accounts Receivables and Accounts Payables ............................................................................... 11
3.8.1 Inventory ........................................................................................................................................ 12
3.8.2 Supply Analysis............................................................................................................................... 12
3.8.2.1 Gifts ......................................................................................................................................... 12
3.8.2.2 Gas and Diesel ......................................................................................................................... 12
3.8.2.3 Automotive and Miscellaneous .............................................................................................. 13
3.8.2.4 Food ........................................................................................................................................ 13
3.8.2.5 Tobacco ................................................................................................................................... 13
3.8.2.6 Convenience............................................................................................................................ 13
4.0 Human Resources ................................................................................................................................. 13
4.1 Employee Job Description ................................................................................................................. 13
4.2 Manager Job Description .................................................................................................................. 14
4.3 Human Resources Cost ..................................................................................................................... 14
5.0 Marketing Plan ...................................................................................................................................... 14
5.1 Target Market ................................................................................................................................... 14
5.1.1 Visitors ....................................................................................................................................... 14
5.1.2 Locals.......................................................................................................................................... 15
5.3 Marketing Mix ................................................................................................................................... 15
5.3.1 Product ....................................................................................................................................... 15
5.3.2 Price ........................................................................................................................................... 16
5.3.4 Place .......................................................................................................................................... 16
5.3.3 Promotion .................................................................................................................................. 16
5.4 Marketing Expenses .......................................................................................................................... 17
5.5 Competitive Analysis ......................................................................................................................... 18
5.5.1 Stores from the surrounding area.............................................................................................. 18
5.5.2 Stores in the City ........................................................................................................................ 19
5.5.3 Online Shopping ......................................................................................................................... 19
6.0 Finance .................................................................................................................................................. 19
6.1 Capital Requirements........................................................................................................................ 19
6.2 Summary of Projected Income Statement........................................................................................ 19
6.3 Summary of Projected Balance Sheet ............................................................................................... 20
6.4 Risk Analysis ...................................................................................................................................... 20
6.4.1 Critical Variables ........................................................................................................................ 20
6.4.2 Contingency Plan........................................................................................................................ 21
6.5 Economic Forecast ............................................................................................................................ 21
6.6 Ratio Analysis .................................................................................................................................... 21
6.7 Break-Even Analysis .......................................................................................................................... 21
6.8 Net Present Value ............................................................................................................................. 22
6.9 Internal Rate of Return ..................................................................................................................... 22
6.10 Year Five Owner Compensation...................................................................................................... 22
7.0 Summary ............................................................................................................................................... 22
References .................................................................................................................................................. 24
Appendices 1: Photos ................................................................................................................................. 25
Appendices 2:.............................................................................................................................................. 26
Financials..................................................................................................................................................... 26
1.0 Industry Overview
Southern Finds operates in a variety of industries including: convenience store, gas station, and gift shop
industries. The combination of industries makes the business somewhat complex yet also makes it a
strong business, able to generate sales through economic downturns. The main driving factor of all of
these industries is the amount of disposable income available to the target market, given that the area is
largely employed by businesses such as coal mines, oil companies, and power plants and the cost of
living in a smaller centre is much lower than their counterparts living in a city; they have a very high level
of discretionary income. IBIS World also forecasts that per capita disposable income in Canada will
increase over the years from 2014-2019 by 0.5% each year (Diment, 2014).
The factors driving down revenue from gift stores in the city (department stores and online shopping) is
not as great an issue in more remote locations, such as Willow Bunch where shipping and access to
department stores is more difficult (Diment, 2014). The bigger problem will be forecasting population
growth and declines as this will have significant impacts on the business. IBIS World forecasts Gas
Stations and Convenience Store industry to grow at an annualized rate of 1% per year from 2014-2019
(Jeon, 2014).
2.0 Southern Finds
2.1 Mission Statement
To provide the community of Willow Bunch and all who visit with quality necessities and beautiful gifts.
2.2 Vision Statement
To be a destination for the citizens of Willow Bunch and surrounding communities to relax and shop.
2.3 Goals and Objectives
To divert 30% of the town and surrounding area’s gift shopping needs from the city to Southern Finds
due to our superior quality and unique products.
3.0 Operations
3.1 Location and Property
Southern Finds will be located at #18 Avenue B in Willow Bunch SK., just on the #36 Highway. It is
currently known as Route 36 Gas and Convenience. The reasons for this location are as follows:


Being located on the highway, tourists, those working at the mine, power plant, and other
places out of town pass by this location each day.
It’s across from the pub and restaurant/motel so it can easily be an added stop for those staying
at the motel or stopping in for a quick drink or meal.
This map shows where Willow Bunch is located and the various towns and sites that can only be
accessed by going through Willow Bunch or by rough back roads which are not known to everyone and
are of poorer quality than the main road.
The building is an optimal choice for this business because:






It is situated on a 19950sq. ft. lot allowing for other possible future sources of income to be
generated by the property
It is a large building (2,800sq ft. plus two bays at 21x23 and 17x23) which can house a variety of
goods
It includes all shelving, inventory, displays, registers, fridges, freezers, and other supplies and
equipment needed for the business
There is a gas and diesel bar which has been properly maintained and regularly inspected
It’s located on a large portion of land which could be later used or rented
It is currently run as a gas station and convenience store with a proven profitable track record
therefore current patrons will most likely continue to go to Southern Finds and there is little to
no additional renovations or set-up needed in order to begin operations
3.2 Floor Plan
The main part of the store will remain a convenience store with minimal changes to the floor plan. The
cement pad on the South side of the building will be extended slightly to create space for one or two
patio tables. The main changes will take place from the front counter back to the two bays which are
currently being used as a mechanic shop.
The wall directly behind the front counter will be taken out to make more room for beverage
preparations. The equipment and inventory related to the mechanic shop will either be sold by myself or
negotiated out of the cost of the inventory/building and left for the current owners to sell or take with
them. The main bay (21x23) will be used as the gift shop area while the rear bay will be left vacant with
the option to expand the gift shop into this bay should sales warrant more space.
Office
399 sq. ft.
Lunch
supplies
Inventory
Outdoor
seating
Bay 2
399sq.ft
inventory
Beverages, Food, & Confectionary
Office
Auto products
Food&Confectionary
Office
1400 sq. ft.
507 sq. ft.
Second floor
office/inventory
507 Sq. ft
washroom
Office
525 sq. ft.
Second Floor:
Office&Inventory
Up
Food& Confectionary
Text
Text
Drink
prep
Gift Shop
525Sq. ft.
Cashier/
drink prep
Body care
Maga
zine
Parking
Parking
Gas Island
Gas IslandGas Island
3.3 Typical Business Operations
Southern Find’s business hours will be Sunday-Wednesday 7am-8pm and Thursday-Saturday 7am-10pm.
These hours will not differ on most Statutory Holidays except for Christmas Day and New Year’s Day
when the business will be closed.
3.3.1 Daily Operations
6:30 am-7:00 am: I, the owner/manager will make sandwiches in the morning at my home and
bring them to Southern Finds, with higher quantities being made during the spring through to the end of
October to account for seeding, tourists, and harvest season. I will arrive everyday 30 minutes prior to
opening to arrange food items, set up the coffee/drink area.
7:00 am- 8/10:00 pm: During the day, tasks will vary from preparing beverages, pumping gas and
washing windshields, processing sales, keeping the store clean, and restocking the shelves. In the
evening before closing, gas and diesel levels will be checked, inventory will be checked and cash out and
the balancing of the debit terminal will be done. For the first month or so, I will come in on my day off to
train and observe the employee performing cash out and balancing the debit terminal until we are both
confident in his/her abilities.
3.3.2 Weekly Operations
Baked goods as well as the bannock for the sandwiches will be made at my home approximately once a
week and kept frozen at Southern Finds until needed. Soup will be made twice a week and sandwiches
will be prepared every morning before opening. I will prepare extra sandwiches the day before on days
that I have time off to ensure there are enough in stock for consumer demands and to maintain quality
control.
Products to be made are as follows:





Coffee creamer
Snack bars
Soup
Baking
Sandwiches
Orders for basic confectionary goods such as bottled drinks, chips, chocolate bars etc. will also be
received approximately every week/every other week.
3.3.3 Monthly Operations
Financial statements for the previous month will be reviewed at the beginning of each month. Food
waste will be reviewed as well. I will also make sure to have at least one discussion each month with my
employee to ensure that he/she is enjoying their job and to ask for feedback on how to improve the
business via their own insights and/or customer remarks; I will also provide this person with feedback on
their work at this time.
3.3.4 Yearly Operations
Financial reports and taxes will be processed by my mother who is an accountant and bookkeeper. After
analyzing the information and seeking advice from my accountant, I will create the budget for the next
year and make any needed adjustments to future financial and inventory plans.
3.4 Capital Budget
The initial costs for Southern Finds seems very high, however, the breakdown of costs, potential areas
for negotiation, and the proven ability to generate profit for a similar business in this location makes this
a good investment.
Included in the initial cost is the inventory for the mechanic shop and its equipment. Since I will not be
using the bays for such a purpose and the individual who owns the building previously rented the space
out to her brother who may be interested in using the equipment for his own purpose or have
connections with which to sell these items through, I believe I will be able to negotiate the price. Should
the seller be unwilling to negotiate the price, there are a number of mechanic shops, farmers, as well as
the mine and power plant that may be interested in purchasing these items at cost. Included in the price
are:




1997 tow truck
3 hoists
Digital wheel balancer
Tires and other mechanic-related supplies
Given that the current bays are only occasionally used, it has been deemed unprofitable to rent the area
out to other mechanics. Instead, the main bay will be used as the gift shop area. therefore total
renovations to the bay is estimated at $2000 to seal off the main garage door to ensure the bay stays
warm as well as basic cosmetic renovations. Given this statement, there have been no adjustments to
the financial statements reflecting any possible negotiation in price.
Schedule 5: Capital Budget
Land
Buildings
Furniture and Fixtures
Total
2015
45,000
80,000
28,500
153,500
Included in the $153,500 quote by the seller are the refrigeration systems, cash register, debit terminal,
coffee machine, shelving, and other fixtures.
3.5 Cost of Goods Sold
Cost of goods sold vary by category however the average cost of goods sold is 38% for a total of
$172,852 in the first year.
Products such as tobacco are heavily regulated which results in a very small profit margin of 8%. Gas
and diesel are also very difficult to differentiate based on price and result in an average profit margin of
1.3% (2014).
Gifts as well as auto and misc. items have a high average gross profit margin at 50% and 58%
respectively. Southern Finds’ food products are differentiated based on quality and convenience
therefore a 70% markup is justifiable.
Below is the forecasted total cost of goods sold for the next five years, please see the appendices for the
complete table of cost of goods sold for more information.
Year
Total Cost of Goods Sold
1
490,892
2
551,117
3
621,385
4
668,766
5
719,759
3.6 Operating Expenses
After wages, Southern Finds’ highest expenses are utilities and debt interest and the lowest is
accounting and legal. As the bank loan is paid down, the debt interest will lower therefore it can be
expected that expenses will lower drastically over the five years after 2019. Utilities expense was given
by the current owner of the building, an extra $300 has been added to account for the anticipated extra
light usage. I will be doing the majority of the accounting and legal operations so it will only cost $100
for Quickbooks. Below are the expenses discussed above, please see the appendices for the complete
list of forecasted operating expenses.
Accounting and Legal
Utilities
Debt Interest
Total Operating Expenses
100
21,600
9,900
101,584
103
22,140
9,563
113,494
105
22,694
9,195
111,415
108
23,261
8,795
110,001
110
23,842
8,358
109,274
3.7 Working Capital Planning
3.7.1 Cash
It will be important for this business to have very good relationships with suppliers as its location makes
it difficult to access new suppliers. To ensure good relationships, Southern Finds will keep a positive cash
balance to pay suppliers promptly. Since having a large cash balance is important for this business,
dividends will only be paid out when there is a cash balance in excess of $80,000.
Southern Finds will need approximately $77,740 in inventory to ensure the business is fully stocked and
able to meet consumer needs. The physical size of the business and cost of products such as fuel and
higher-end giftware results in high inventory costs.
Working Capital
Fuel Inventory
Inventory C Store & Gifts
Acc Pay
Total
1
25,000
52,740
18,407
96,148
2
25,625
59,211
20,585
105,421
3
26,266
66,760
23,123
116,149
4
26,922
71,851
24,841
123,614
5
27,595
77,329
26,690
131,614
3.7.2 Accounts Receivables and Accounts Payables
Southern Finds will not provide credit to customers therefore accounts receivables is not necessary.
Suppliers will be paid within their specified time-limits. Once a good relationship is built with suppliers,
negotiations will be made for monthly payments. Local artists will be paid up front, if they have more
expensive pieces or pieces they wish to showcase, payments will only be made after the item is sold on
commission.
3.8.1 Inventory
As part of the agreement in purchasing Route 36, I am required to purchase an estimated $100,000
dollars in inventory. This includes fuel, confectionary items, tobacco, and auto and misc. items.
Southern Finds has a lot of space for storage available on-site, given this fact, and that many of the items
sold don’t expire or have a long shelf life, bulk buying will be used for many products to reduce shipping
costs and capitalize on bulk purchase discounts. Automotive and miscellaneous items, tobacco, and gifts
will be ordered monthly. There is already a Lays and Pepsico truck that comes through Willow Bunch
every week therefore I will make weekly orders to reduce inventory space needed and ensure the right
products are in to satisfy customers. Food supplies with stable shelf lives will be purchased every other
month while the fresh items will be purchased weekly. Gas and Diesel will be purchased every other
month as well.
3.8.2 Supply Analysis
3.8.2.1 Gifts
Gift inventory will be sought through a few supply chains. These chains will include local artisans and
gifts wholesalers.
Products acquired through local artisans will either be purchased or sold on consignment based on the
perceived ability to sell each item made by my own discretion. Items such as unique art and furniture
which are high in cost, require a lot of thought by purchasers and are purchased less frequently will be
sold entirely on consignment. Clothing, which has short style life and carries high risk in terms of sizing
and taste will also be on consignment. Items such as soaps, body care, food items, and more classic
giftware will be purchased directly from artisans.
For wholesale gifts, Southern Finds will rely on the services of Peak Time Canada, and David Youngson &
Associates to supply inventory. These three distributors provide a variety of items that will allow
Southern Finds to best meet the wide and varying needs of its customers. Peak Time Canada offers
Canadian and outdoor themed items that are sure to please tourists and locals alike and are anticipated
to be very popular in the summer and winter months. David Youngson & Associates offer a large variety
of gift, home, and clothing items that are more high-end and will appeal to locals as an alternative to
travelling to the city to find such products. Managing three distributors may be difficult and if it is found
to be so, the number of distributors will be reduced as needed.
3.8.2.2 Gas and Diesel
Should I be unable to use the current fuel supplier for Route 36, gas and Diesel needs will be met by
Petro-Canada through Millsap fuel distributor of Saskatoon. Gas and diesel make up over 50% of
inventory costs totalling approximately $25,000. This estimate was calculated assuming there are two
tanks, on average half full, each with an approximate fuel capacity of 1,365L.
3.8.2.3 Automotive and Miscellaneous
Millsap fuel distributor will also supply other automotive inventory. These include oil, windshield washer
fluid, and small automotive related parts and necessities. David Youngson & Associates will also provide
other miscellaneous items.
3.8.2.4 Food
Southern Foods will use GFS Foods and the Southland CO-OP for ingredients to be used in our foods.
GFS currently delivers to the Bar and Restaurant which are right next to Southern Finds therefore the
cost of delivery will be much lower than if another food supplier were to be used. The Southland CO-OP
will be used on an as needed basis as well as for low quantity, fresh ingredients where it would be less
practical to order from GFS.
3.8.2.5 Tobacco
Given that this product accounts for only 4% of total sales, supplier sourcing is not of great concern,
should I be unable to use the same supplier currently used by Route 36 I have found another tobacco
supplier. Mallard’s Distributing (Manta, n.d.) of Saskatoon seems to be the only distributor of tobacco
products in Saskatchewan and will be used as a second choice.
3.8.2.6 Convenience
Southern Finds will rely on Route 36’s current convenience foods suppliers and new, suppliers for more
health-conscious convenience foods. Route 36’s current suppliers include Lays and Pepsico which will be
our chief suppliers for beverages and treats. Since the health food convenience items are a new option,
the majority of these items will be sourced through Costco using my current membership; should these
items prove to be popular, I will look at other direct suppliers. Coffee will be purchased through Buy
Coffee Canada which sells fair-trade coffee; there will be both coffee brewed and ready to drink as well
as coffee beans available for sale to consumers.
4.0 Human Resources
4.1 Employee Job Description
The employee will be required to perform these duties:






Operate cash register and debit terminal; be able to cash out these machines at the end of the
day as well
Keep store clean
Be friendly and be able to communicate well with the public
Stock shelves as needed
Pump gas and wash windshields
Prepare basic coffee and tea-based beverages
The employee will be trained on how to perform a variety of these tasks. It is required that he/she is
able to commit to at least one shift a week, be personable, and be able to lift up to 15lbs, in case
customer needs help with a heavy purchase or must unload shipments of inventory.
4.2 Manager Job Description
On top of the tasks listed above for the employee, the owner/manager (myself) will be required to do
the following:






Bake and cook
Create and update financial statements
Pay suppliers and service providers promptly
Place and receive orders for inventory
Promote business through various mediums including Facebook, Instagram and local papers
Training employee
Although many businesses train their employees to perform food preparation and sometimes even
basic advertising, I believe these two tasks to be very important for the business and that
consistency is key in both tasks, for that reason I plan on being the only person in charge of
performing these tasks.
4.3 Human Resources Cost
Human resources costs include the wage of the employee, his/her benefits, as well as my salary. In the
first year, my salary will be 30,000, the employee’s annual wage will be approximately $7,426, and
benefits will be $5,225. For the next four years these numbers will likely only increase with inflation, an
estimated 2.5% annually.
5.0 Marketing Plan
5.1 Target Market
5.1.1 Visitors






Passing through to purchase gas
Staying at the motel across the street or camping at the regional park
Maybe early risers (the restaurant opens at 8am; the pub at 11am)
Enjoy shopping and browsing
Seeking a quiet place to read or have a beverage
Wanting a quick lunch to take with them on their travels
Many visitors come to Willow Bunch to spend the summer golfing, to work shut-downs, for family
events, to see tourist attractions, or for other smaller events which take place in town. There aren’t
many activities around the town for tourists save for museum visits, golfing, and swimming; having a
place to do a little shopping and to have a good cup of coffee or tea outside would provide them
with another activity. There are individuals who sell products out of their homes or through
catalogues however they do not advertise at all and therefore visitors do not know of these
businesses.
5.1.2 Locals




On their way to work looking to get gas and a quick lunch
Wanting gift items; potentially wanting to support local artists/businesses, trying to watch gas
expense, short on time
Wanting a quick outing
Needing a basic automotive part
Many workers from north of Willow Bunch who work at the mine or power plant must leave their
towns before any businesses open, once they arrive in town they can fill up on gas and grab a quick
lunch. Southern Finds opens an hour before the first business in town opens, this means that
individuals must either be fully prepared the day before for their lunch needs and gas or stop in at
Southern Finds. The nearest gas station is about half an hour away and not conveniently located for
those who work at the mine (it would add about another ten minutes to their commute).
The nearest gift shops are half an hour away as well. As was discussed previously, many individuals
sell products from their homes or through catalogues however one must arrange a time to view
their goods or wait weeks for their purchase to come in. Neither scenario allows a buyer to just
browse and thus makes the purchase process less enjoyable; in the case of visiting the sellers’
house, most people simply don’t go for fear of not finding something they would like to purchase
but feel obligated to for having “inconvenienced” the seller.
5.3 Marketing Mix
5.3.1 Product
In order to ensure sufficient sales and meet the needs of locals and tourists, Southern Finds provides a
wide variety of goods. Aside from the basic convenience store and gas station items, Southern Finds sells
homemade lunch items and convenience food alternatives as well as local and wholesale gift items.
The food items are fresh, wholesome foods that can be eaten on-the-go and are available as early as
7am, before other businesses which also sell food products open. This is to meet the needs of those who
work out of town and must be at their work by as early as 8am meaning they have to leave by 7:20,
students who have to bus to other towns and need a lunch, and farmers who stop in town to grab some
necessities and don’t have time to have a sit-down meal.
The gift items will be a mix of local and wholesale items. By having local items available in a public space
tourists will be able to purchase items that they might not otherwise know are available and to allow
locals to browse and purchase these items at their own convenience. Wholesale items will include gift,
ornamental, and everyday items, both unique and classic pieces, which will appeal to both locals and
tourists. Having gift items available will entice tourists to stay in town longer. It will also make it easier
for locals to shop instead of having to plan an entire day, calculate in gas, meals, and, sometimes, hotel
stays just to buy a few items.
5.3.2 Price
The pricing strategy for Southern Finds is similar across all sections; it will not compete based on price
but only on quality and instead set prices to be on par with average gross profit margins in each given
product line. The target market population size, location of the business, and available substitutes make
it difficult to compete based on price. Gas and diesel prices will be dictated by current prices; given the
notoriously low profit margins of these products it would be unwise to try to differentiate from other
gas suppliers.
5.3.4 Place
Southern Finds is located right on Highway #36 and is across from the Stagecoach restaurant/motel, the
Jolly Giant pub and in front of the museum making it an ideal location. This location is ideal as visitors
coming through must slow to 50km/h and are already paying attention to the businesses located on the
highway. Visitors staying at the motel can also walk over to shop or have coffee.
5.3.3 Promotion
On either side of Willow Bunch there will be two large signs promoting Southern Finds and a sign with a
large metal dragonfly above it right outside of the business to attract customers. The dragonfly as well
as the name will hint to the public that there is more inside the business than a convenience store and
gas station, should they be unable to read the script below while driving. The colors and pattern were
chosen to show that the business offers something for everyone and is not directed specifically towards
a certain gender or age demographic with a classic pattern that isn’t specific to any one style or price
range.
Figure 1 Southern Finds Sign
There will also be printed brochures for Southern Finds that will be left in the rooms of the motel, at the
museum, the bar, the regional park, and the golf course to ensure visitors have adequate information
about the business which will further encourage them to stop in while in the area. The local businesses
will most likely oblige to having these brochures as none of these businesses are in direct competition
with Southern Finds.
Figure 2 Southern Finds Brochure
5.4 Marketing Expenses
The marketing expenses have been divided into three categories: one-time costs, on-going costs, and
time-only costs.
The two signs on either side of Willow Bunch, the sign located at Southern Finds, the small signs located
within the business to help direct customers, and the dragonfly all represent one-time costs. At most,
there may be some maintenance costs but they will be negligible (touch-up paint). While the signs are
located in the capital cost analysis, I believe that they are worth discussing here as well although their
estimated $5000 total cost will not be included in the marketing expenses. The dragonfly is estimated to
cost about $1000 as I have family members who are welders and are willing to donate their
craftsmanship as long as I cover the material costs.
The brochures will be an on-going cost, I estimate that after the first 5 years the amount that will need
to be produced will drop significantly as word of mouth replaces the need for the brochures. They will
cost an estimated $200 every year, this number is so low as they will be printed on regular quality paper,
be of simple design, and it is assumed that while many people will read the brochures, not all will be
taken or damaged and therefore can be re-used.
Facebook and Instagram, although free sources of marketing, will require time to update them and keep
in touch with followers. The amount of time will be negligible, perhaps a total of two hours a week,
however this does represent time spent away from other operations duties. I believe that these two
sources will provide invaluable marketing as people from the surrounding area strongly support good,
local businesses and their support will be visible to their friends and followers, enticing more people to
learn about Southern Finds.
5.5 Competitive Analysis
5.5.1 Stores from the surrounding area
The gift store section and the gas station section of Southern Finds each have four main competitors.
The gift store competitors are:




Floyd’s Variety Store (Willow Bunch)
Mom’s Florist & Boutique (Assiniboia)
Harvey’s (Assiniboia)
Bengough Drugstore & Boutique (Bengough)
While Floyd’s sells giftware items and is too located in Willow Bunch, the owner does not keep adequate
supply of items or items which are in demand; while it is a competitor, it is unlikely that they will put in
an effort to improve inventory. Mom’s Florist sells beautiful decorative items and flowers however it
appeals to only a select few, is 42km away (and even further away from Coronach and Rockglen
residents) and is priced slightly higher. Harvey’s sells small kitchen appliances which are popular gift
items as well as ‘redneck chic’ items, again, these items appeal to a select few and is located in
Assiniboia as well. Bengough drugstore sells a variety of items such as Matt&Nat purses, decorative
items and teas, its items are somewhat similar to what Southern Finds however it is even further away
than Assiniboia making it less convenient to shop.
Gas station competitors include:




Southland Co-op (Willow Bunch)
Assiniboia
Coronach
Rockglen
The Willow Bunch Co-op’s hours: Tuesday-Saturday 9:00-5:30, make it inconvenient for many people
and it is located off of the main highway making it less favourable for those passing through or whose
work hours make it difficult to get to the Co-op before it closes. Assiniboia (42km away), Coronach (36
km away), and Rockglen’s (48 km away) gas stations are convenient only to those who live in the
respective towns and if they plan ahead. Southern Finds’ coffee and homemade convenience options
will entice those travelling from Coronach, Rockglen, and Assiniboia to plan their fuel-ups so they can
purchase these items at the same time, stocking up for their homes or for road trips.
5.5.2 Stores in the City
While Southern Finds will be a substitute for having to drive to the city to purchase items such as good
coffee and gift items there may still be many who will continue to make the trip. Shopping in the city is
expensive, costing three hours in travel time just to arrive at the nearest city (Moose Jaw), gas money,
cost of eating out, as well as potential hotel costs and time taken from work. There will still be
individuals who travel to the city, those who can afford these extra costs, those who travel to the city for
special medical needs, etc. I am still confident that a large portion of the population will prefer to shop
locally for the sake of convenience, as a form of entertainment, and due to last minute shopping needs.
5.5.3 Online Shopping
Online shopping is a popular option for many especially with incentives such as free shipping and the
ability to shop for items from around the world. The main drawbacks to online shopping are:



Unfavourable for tactile individuals (needing to touch/try on items before purchasing)
Some stores don’t ship to Canada
Long shipping times
This form of shopping will remain attractive for many however, for these and the reasons cited in the
city shopping section, there will still be a favourable market for Southern Finds.
6.0 Finance
6.1 Capital Requirements
Southern Finds requires a large capital investment, $220,000 in the first year. Land, building, furniture
and fixtures will cost an estimated $153,500. The investment ratio for this business is 50-50; I plan to ask
for a $110,000 bank loan and invest $110,000 from my family and myself.
6.2 Summary of Projected Income Statement
Southern Finds’ projected income statement is based on the assumption that approximately 40
customers will visit the store each day spending an average of $40 each time. Given the location and
small local customer base, I’ve estimated the number of customers to increase as the business will be
offering two new products that Route 36 does not offer: gifts and food items. In year two we anticipate
15% customer increase as more people learn about Southern Finds and hear good reviews from their
friends and family who shop here. After year two, daily customers will increase by 10%, then 5% in year
four and five. These estimates are conservative however, due to the population size, it is wise to
underestimate these numbers.
Below is the projected net income for Southern Finds for the next five years as well as the average fiveyear profit, please see the appendices for the complete net income.
Year
Taxable Income
Income Taxes
Net Income
5-year average income
-
1
11,676
11,676
2
20,006
1,083
18,923
3
39,107
5,084
34,023
4
51,999
6,760
45,239
5
65,078
8,460
56,618
28,625
6.3 Summary of Projected Balance Sheet
Below is a summary of the projected balance sheet for Southern Finds. Total liabilities decreases
significantly as the bank loan is paid off. Increases in sales results in an increase in inventory needs
accounting for the increase in assets. Please see the appendices for the complete balance sheet.
Balance Sheet
Year
Total Assets
Total Liabilities
Total Equity
Total Liabilities and Equity
2015
222,985
124,661
98,324
222,985
2016
240,002
122,755
117,247
240,002
2017
272,111
120,841
151,270
272,111
2018
314,216
117,708
196,508
314,216
2019
315,502
114,268
201,234
315,502
6.4 Risk Analysis
6.4.1 Critical Variables
Two critical variables have been identified for Southern Finds: average number of customers per day
and average money spent per customer. In year one, Southern Finds’ average number of customers per
day is 40 with each spending an average of $40 per visit.
The spending per visit may seem steep however when considering the cost of goods (most people going
to fill up their gas spend at least $40; purchasing two drinks is approximately $6; soup and sandwich
combo will be $9) the likelihood of an average customer spending around $40 is reasonable. Important
things to consider are that people are becoming more health-conscious and more conscious of gas
prices. Should Southern Finds not adapt to the wants of customers it will be easy to lose their business.
As people become more careful of spending money on gas they will be more likely to patronize local
businesses for things such as gifts resulting in lower gas spending; the reverse is also true, if people are
less worried about gas prices they may spend more on gas and less on gifts and misc. offered.
An average of 40 customers per day in the first year will result in a loss which seems reasonable. It has
been estimated that the number of customers per day will grow to 46, 51, 53, and 56 in the coming
years. In order to break even, Southern Finds will need at least 45, 39, 37, 36, and 34 customers each
day over the next five years. The difference between the numbers of customers needed to break-even
compared to the number of customers needed to meet our forecasted profits is very small. This means
that Southern Finds will have to rely heavily on marketing and will be very sensitive to any population
changes.
6.4.2 Contingency Plan
Since Southern Finds is a small business operating in a very small town it is anticipated that, at best, it
will yield modest returns. The current owner has proven that the gas station and convenience portion of
the business is profitable however the giftware aspect is new and risky. Annual Giftware sales are
expected to be $54,033 in year three, accounting for approximately 7% of all sales at Southern Finds.
The sales will be closely watched to see which products are most profitable and which should be
discontinued to ensure neither money nor inventory space will be wasted. If by year three these sales
aren’t at least $43,226 or approximately 80% forecasted sales, new marketing will be used to encourage
more sales. At year four, if sales aren’t approximately $46,523 (80% of forecasted sales), the gift shop
portion of Southern Finds will be liquidated and the business will be sold as a gas station and
convenience store.
6.5 Economic Forecast
While calculating these finance and accounting figures, I have assumed that the inflation rate will be
2.5%. While the current business, Route 36, is profitable which the bank would look favourably upon,
the addition of the gift shop and homemade goods has not been proven to be profitable yet, this fact,
coupled with the location makes me believe that the bank will provide a loan with 9% interest. It will
take 15 years to pay off the bank loan.
6.6 Ratio Analysis
Following are key financial ratios for Southern Finds.
year
return on assets
return on equity
debt to equity ratio
cash flow to total debt
Average Gross Profit Margin
1
2
-0.05
-0.12
1.27
0.09
38%
3
0.08
0.16
1.05
0.43
38%
4
0.13
0.22
0.80
0.56
38%
5
0.14
0.23
0.60
0.65
38%
0.18
0.28
0.57
0.76
38%
6.7 Break-Even Analysis
In the first year, Southern Finds anticipates to be operating at a loss. Despite marketing efforts, it will be
difficult to adequately market the business and it can be anticipated that many will wait to hear what
reviews their trusted friends and family members give the business.
For the next years, I’ve forecasted Southern Finds to be profitable. While these numbers are modest, it’s
important to note that in the first three years there is very little cushion between the anticipated
number of customers and the break-even number of customers. Not making these numbers will have
significant negative results on Southern Finds.
6.8 Net Present Value
Still using the assumptions made in section 6.2 where an average of 40 customers per day spending on
average $40 per visit with the number of customers increasing over the next five years by 15%, 10% and
5% in both the fourth and fifth years, Southern Finds’ net present value has been calculated to be
$285,829.67.
6.9 Internal Rate of Return
Southern Finds’ internal rate of return is 30%.
6.10 Year Five Owner Compensation
I believe that a better indicator of success for this business is the year five owner compensation. This
figure includes both the dividends paid out as well as my salary for the fifth year which totals $85,006.
This number is expected to remain fairly stable over the course of the business. As part of the equity
investment was from family, the first dividends paid out, totalling $51,892 will be paid to my family to
reimburse them.
7.0 Summary
Looking at the base case scenario, Southern Finds has the ability to be a modestly successful business,
meeting the needs of the area for a store/ café similar to urban establishments but closer to home.
Many unmet needs and wants of all age groups and demographics in the area would be satisfied with
the unique products and its convenient location would make it accessible to even the busiest individual.
While the town needs a gift store, I believe that this business would be best operated out of someone’s
home rather than at the location suggested here. It would only take a slight decrease in customers per
day or their spending to cause the business to go under, leaving myself with an appealing and expensive
piece of real estate and its financial statements would only make it more difficult to sell. The small
population too makes it difficult to re-market the business to another target market (essentially there
are no other markets) and running the business simply as a gas station and convenience store is of no
interest to me. Morally speaking, I also would not feel comfortable selling tobacco products and most
convenience store food items.
Also, with current prices of crude oil continuing to fall, it is anticipated that many drilling operations will
be postponed or not even begin. Inhabitants of the Willow Bunch area currently working in the oil fields
may find themselves without work, decreasing their disposable income and increasing the likelihood
that they may move away from the area. I am personally happy that the area will not be developed for
the extraction of oil however individuals who moved to the area in anticipation of the oil drilling will
most likely leave, making it even less likely that the base case for customers per day will be met in this
plan.
References
(2014). Retrieved from
http://clients1.ibisworld.com.cyber.usask.ca/reports/ca/industry/currentperformance.aspx?indi
d=1062
Diment, D. (2014, August). Gift Shops and Card stores in Canada. IBIS World. Retrieved from
http://clients1.ibisworld.com.cyber.usask.ca/reports/ca/industry/ataglance.aspx?indid=1099
Jeon, H. (2014, July). Gas Stations With Convenience Stores in Canada. IBIS World. Retrieved from
http://clients1.ibisworld.com.cyber.usask.ca/reports/ca/industry/ataglance.aspx?indid=1062
Manta. (n.d.). Retrieved from http://www.manta.com/ic/mt6t2f7/ca/mallard-sdistributing?utm_expid=8278963225.OzEpm4oGQWOCALlDNoBDpg.0&utm_referrer=http%3A%2F%2Fwww.manta.com%2Fworld
%2FNorth%2BAmerica%2FCanada%2FSaskatchewan%2Ftobacco_and_tobacco_products-B80C2000%2F
Appendices 1: Photos
Figure 3Route 36 Gas Station
Figure 4 Inside Route 36
Appendices 2:
Financials