The Great Outdoors 4 Less
- used
“used, but never abused camping
and outdoor gear”
Business Plan Prepared for Dave Clark
Prepared by:
Hi-Def Consulting Inc.
Steve Brassard
Lee Martin
Anju Mehta
Kassandra Mohr
Brent Smith
Mike Tornopolski
Table of Contents
1.0 Executive Summary ................................................................................................. 3
2.0 Marketing Plan ......................................................................................................... 4
2.1 The Market ........................................................................................................... 4
2.2 Product Mix ......................................................................................................... 4
2.3 Target Market and Customers .............................................................................. 6
2.4 Competition.......................................................................................................... 7
2.4.1 Big Box Stores .............................................................................................. 7
2.4.2 Internet Sites ................................................................................................. 7
2.4.3 Speciality Stores............................................................................................ 7
2.5 Pricing Policy ....................................................................................................... 8
2.6 Promotion and Advertising .................................................................................. 8
3.0 Operations Plan ...................................................................................................... 11
3.1 Day to Day Operations....................................................................................... 11
3.2 Product Attainment Strategy .............................................................................. 12
3.3 Information System ............................................................................................ 13
3.4 Store Location .................................................................................................... 14
3.5 Partnership with University ............................................................................... 14
3.6 Business Type .................................................................................................... 15
3.7 Insurance Protection........................................................................................... 15
3.8 Floor Plan ........................................................................................................... 15
3.9 Capital Budget ................................................................................................... 16
3.10 Working Capital Management ......................................................................... 17
3.10.1 Cash and Credit Management ................................................................... 17
3.10.2 Inventory Management ............................................................................. 17
3.10.3 Accounts Payable ...................................................................................... 18
4.0 Human Resources Plan .......................................................................................... 19
4.1 Job Descriptions: ................................................................................................ 19
4.2 Training Programs: ............................................................................................ 20
4.3 Planned New Positions: ..................................................................................... 20
4.4 Wages, Benefits, Management and Training Costs: .......................................... 21
4.5 Human resource strategy: .................................................................................. 21
5.0 Financial Plan......................................................................................................... 23
5.1 Financing Requirements .................................................................................... 23
5.2 Dividend Policy ................................................................................................. 23
5.3 Ratio Analysis .................................................................................................... 24
5.4 Sensitivity Analysis ........................................................................................... 25
5.5 Break-even Analysis .......................................................................................... 25
5.6 Rate of Return Analysis ..................................................................................... 26
5.7 Payback Analysis ............................................................................................... 26
6.0 Conclusion ............................................................................................................. 27
1.0 Executive Summary
The popularity of outdoor activities has seen significantly increased in recent years. With the
increased pace of everyday life, people are taking advantage of their time away from work to
get out of the city and enjoy the great camping and hiking activities in Manitoba. With the
increased cost of going on extended road trips, people are more and more looking for
opportunities to see the great outdoors without having to make long trips and Manitoba with
its abundance amount of lakes offers countless opportunities.
This is where “The Great Outdoors 4 Less” comes in. This business is going to sell new and
used outdoor equipment, supplies and clothing. By providing high-quality gently used goods,
the store will give people the opportunity to obtain high quality outdoor gear at a low price.
The store is going to open up the outdoors market to individuals who are unwilling to
purchase expensive camping gear for occasional camping and the discount oriented camper
who understands the quality brands of camping gear.
The focus areas of our strategy are as follows:

Strong relationships with camping and hiking clubs to ensure we have a loyal
customer base

Focus on providing strong customer service with knowledgeable management and
staff

Community involvement with children’s groups to increase our exposure and get
exposure to the family that enjoys regular outdoor activities
Based on our analysis “The Great Outdoors 4 Less” will earn positive net income and positive
cash flows from operations in year two and is a viable and exciting business opportunity.
“The Great Outdoors 4 Less” will provide an attractive internal rate of return which will
translate into healthy earnings to equity investors.
Significant opportunity exists for “The Great Outdoors 4 Less” and our consulting group has
created a detailed business plan to help this novel idea succeed into a profitable and growing
company.
2.0 Marketing Plan
2.1 The Market
According to Statistics Canada, 16.7% of Canadian households purchased camping and
outdoor gear in 2005. Furthermore, the 2006 annual Survey of Household Spending reported
that 5.8% of annual household incomes across Canada were spent on recreation. Although
there is current speculation of a recession, Statistics Canada has reported that discretionary
spending on items such as recreation has not decreased. It appears that the demand for
recreational goods continues to exist and will remain constant
Increased fuel costs continue to make air travel increasingly expensive for the average
consumer. Furthermore, vacations by car or other motor vehicle are becoming increasingly
expensive for the same reason. Therefore, it appears that consumers will generally be looking
for recreation opportunities close to home.
For these two factors, it is apparent that there is demand for camping and outdoor gear, and an
ideal market for “The Great Outdoors 4 Less” would be Winnipeg, Manitoba. The province
of Manitoba boasts over 100,000 lakes and over 300 campgrounds, thus providing several
recreational areas for single individuals and families of all ages and income levels. With the
vast array of camping area available, families will not have to travel far to vacation, and
camping in nearby areas will prove to be an inexpensive vacation.
Exhibit 16 shows that there are approximately 47,054 households in Winnipeg that would be
engaged in purchasing camping and outdoor gear.
2.2 Product Mix
Two thirds of the products offered by “The Great Outdoors 4 Less” will be used camping and
outdoor gear. The following is a list of items that will be sold to give an idea of what the
product mix would consist of:

Tents

Fishing gear, such as fishing poles and tackle boxes

Life jackets and other seasonal jackets

Backpacks

Canoes and kayaks

Wakeboards

Camping accessories, such as coolers, stoves, flashlights, kerosene lamps

Hiking boots

Mountain bikes

Hunting accessories
These goods will be purchased from sellers who approach “The Great Outdoors 4 Less” with
items that they wish to sell. Sellers will have two options: they can either leave the goods to
be sold on consignment and receive 60% of the selling price, or if they do not want to wait to
obtain payment, they can sell the goods to “The Great Outdoors 4 Less” for a negotiated
price. The negotiated price will average about 40% of the estimated sales price. Sellers will
be made aware of products in demand via website postings and marketing.
“The Great Outdoors 4 Less” will also offer a trade-in program, whereby sellers will be able
to bring in their used goods and trade them in for goods of equal value. This program will
rely heavily on the extensive knowledge of camping goods that Dave Clark has, as only goods
of equivalent value will be eligible for this program.
The list of products noted above is not exhaustive and will change depending on what is
available in the market to purchase from sellers and changing consumer tastes. For example,
as the trend towards winter camping gains more popularity in Manitoba, items such as
snowshoes and ice fishing gear will be obtained and sold.
Certain goods will be cleaned/dry-cleaned/sanitized before re-sale.
Goods that require
minimal re-work will be accepted, for example sewing up a hole in a tent. Goods that require
significant amounts of re-work will not be accepted for re-sale, however sellers can still leave
the goods in the state they are in with “The Great Outdoors 4 Less” if they want to sell them
in that condition on a consignment basis. The emphasis will be on accepting high to average
quality used goods that can be sold for a reasonable price because they are used. This will
give consumers an opportunity to experience good quality at a lower price than expected.
The remainder of the product mix (one-third) will comprise of new goods that “The Great
Outdoors 4 Less” will purchase from wholesalers located in Winnipeg.
Examples of
wholesalers in Winnipeg that will have the goods needed are: R.M.P. Athletic Limited,
Sippel Brian Limited, and Shanter Sportswear. The new products will be similar in type to
the used goods being sold to give consumers a choice between used and new versions of the
same type of product. However the new goods will be of low to average quality to keep
pricing within the store consistent for the desired target market.
All products will be distributed to buyers through a retail store that will be located in the East
Kildonan area of Winnipeg. As such, “The Great Outdoors 4 Less” will also be providing a
service as well as products because it will help to bring sellers and buyers together.
2.3 Target Market and Customers
The target market for “The Great Outdoors 4 Less” consists of the households earning low to
mid-range income and these customers are “bargain-hunters.” Furthermore, these individuals
are recreational campers, not enthusiasts. Therefore, they only camp once or twice per
summer and it wouldn’t make sense for them to invest in expensive camping and outdoor
gear. The store will also aim to target the individual who is trying camping or another
outdoor activity for the first time and does not wish to spend a lot of money on the activity all
at once
“The Great Outdoors 4 Less” aims to be a family-orientated store and will appeal to growing
families who value their recreational time, but need to live by a budget.
As children
frequently outgrow certain outdoor gear, parents will benefit by purchasing used gear that can
be easily sold next year again, and another item can be purchased. This business model will
generate repeat customers in this way.
Students will also be a part of the target market for “The Great Outdoors 4 Less,” as they have
limited disposal income, but have the time to try new activities, such as camping.
The store will also appeal to those families and individuals looking for a way to sell their
excess goods, but do not have the time to do so on their own.
Although not immediately after opening, but soon thereafter, “The Great Outdoors 4 Life”
will target hiking groups and other organizations such as the YMCA, Girl Guides, and Boy
Scouts. These groups routinely do outdoor group events, but need to keep their costs down so
as to increase participation and increase the resulting funding from the event. As such, “The
Great Outdoors 4 Less” will be able to provide these groups with the equipment they require
at a lower cost.
2.4 Competition
2.4.1 Big Box Stores
Big box stores such as Canadian Tire, Home Depot, and Wal-Mart all sell camping and
outdoor equipment of varying quality and price. All three of the examples mentioned are
located in Winnipeg and there are numerous locations of each. These stores target “everyone
and anyone.” As such, they will be a source of competition for “The Great Outdoors 4 Less.”
However, because “The Great Outdoors 4 Less” will offer used goods that are of mid to highquality, the price point for these products would be the same as a new product from a big box
store of lower quality. Therefore, the “bargain hunter” customers would still be more inclined
to visit “The Great Outdoors 4 Less.”
Furthermore, Dave Clark has a vast array of knowledge of outdoor and camping gear, so
individuals who are first-time campers will be able to receive personalized attention and
advice that will not be available in the big box stores.
2.4.2 Internet Sites
Electronic commerce services such as Ebay, Craig’s List, and Kijiji all sell used camping and
outdoor gear. A simple search on Ebay for camping and hiking gear resulted in 92,000 hits.
As such, the internet sites will pose to be the biggest source of competition for “The Great
Outdoors 4 Less” as the goods and associated price points will be similar.
As mentioned above, Dave Clark will provide personalized attention to customers and
provide advice, which would not be available when purchasing from an internet site.
Furthermore, “The Great Outdoors 4 Life” will provide a retail space where consumers can
actually physically view the items that they are hoping to purchase. As of late, internet sites
have come under scrutiny for the security that is provided to individuals who purchase with
credit cards over the internet. This uneasiness would not be felt by a customer purchasing
from the store and customers wishing to avoid the chances of fraud and identity theft would
most likely rather purchase from a physical store, such as “The Great Outdoors 4 Life.”
2.4.3 Speciality Stores
Certain specialty stores, such as Mountain Equipment Co-Op, have locations in Winnipeg and
these stores specialize in selling high-quality and custom outdoor and camping gear. As the
target market for these stores is individuals with high disposable income and outdoor
enthusiasts, they are not seen as direct competition for “The Great Outdoors 4 Less.”
2.5 Pricing Policy
Purchase price of goods to be sold in the store will be negotiated when sellers come in with
goods to sell. All goods within the store will be on a consignment basis or will have been
purchased from the seller, therefore products and their respective prices will vary within the
store. However, for demonstration purposes, the example of average pricing for a common
good can be estimated. The 4-man tent is a piece of camping equipment that is needed by the
majority of households.
At a big box store, a “Columbia Bugaboo Dome Tent” costs
$249.99. The market perception of Columbia is that of a high-quality, albeit expensive brand.
The exact same tent (used) is being sold on Ebay.ca for $87.10 USD. This is also with one
pole damaged, and the rainfly, remote control lights, and cup holders are missing. With an
average cost of $13.00 for shipping to Winnipeg, this used and damaged tent would cost a
consumer $100.10 (ignoring foreign exchange).
“The Great Outdoors 4 Less” would sell this type of tent for between $85 and $100 depending
on what price is negotiated with the seller.
As the internet sites are the most direct
competition for the store, the pricing must be similar. The advantages for the consumer are,
not having to pay for shipping, not having to wait for it to be delivered, and being able to
come into the store to see, touch and inspect the tent.
.
As one-third of the product mix will be new goods purchased from a wholesaler, the price
point for these goods will be comparable to the big box stores. As mentioned before, these
goods will be of low to mid-quality as to target the households in the low to mid-income
brackets. At a big box store, an “Escort Hexagonal Dome Tent, which can sleep 4 people,
similar to the Columbia tent described above, costs $69.99, and this is a low to mid-quality
brand. “The Great Outdoors 4 Less” would sell a similar quality product for a similar price.
2.6 Promotion and Advertising
The “Great Outdoors 4 Less” is expected to be opened in the East Kildonan area of Winnipeg
April 2009. Opening by April will allow the store to take advantage of the upcoming summer
season. Advertising will start in March 2009 with radio advertisements on radio stations that
are widely listened to in Winnipeg by members of our target market, such as Q94 and Hot
103. Advertisements will also be put in local newspapers, such as the Winnipeg Free Press
and flyers will be put up close to community centres in the nearby area.
As the store will be opened on April 1, 2009, it is estimated that the effect of the advertising
described above will help bring in goods that sellers are hoping to sell. Furthermore, it is
estimated by this time that Dave Clark will have received new goods to be sold in the store
from warehouses located in Winnipeg.
Mid-April, “The Great Outdoors 4 Less” will host the first annual “One Man’s Junk, One
Man’s Treasure.” This will be a garage sale type of event, whereby sellers will actually be
able to use the retail space to sell their goods. “The Great Outdoors 4 Less” will not receive a
portion of any of the sales during this event because the event will just be used to introduce
the store and the idea to sellers and buyers.
During September 2009, Dave Clark will begin to approach organizations, such as hiking
groups, YMCA, Girl Guides, and Boy Scouts. The purpose behind starting in September is
that the fall is usually when these organizations begin to accept registrations and plan their
activities. It is at this time that Dave Clark will be able to secure “The Great Outdoors 4
Less” as the first choice supplier of used camping and outdoor gear for these organizations for
the summer of 2010.
Radio and newspaper advertisement will begin heavily again during November 2009 for the
Christmas season. During January, February, and March 2010 advertisement on the radio and
in the newspapers will be sporadic and heavy advertisement will begin again in April 2010
and will continue throughout the summer season.
Television advertisement will begin on a local cable station in Winnipeg in 2010 for the
Christmas station.
“The Great Outdoors 4 Less” will be involved in small sponsorship of outdoor events as they
occur, such as the “Dragon Boat Race” in Winnipeg, which takes place in mid-July. This
event attracts families and single individuals from all different socio-economic standings,
therefore it will enable “The Great Outdoors 4 Less” to advertise to a wide-range of
individuals and show commitment to the community all at the same time.
Word-of-mouth will be a powerful marketing tool for this business. It is expected that as
sellers bring their items to the store to sell, they will generate “buzz” themselves, as they will
want their items to sell, especially if they were sold to the store on a consignment basis.
Television advertisements are not feasible for this current phase of growth. As such, “The
Great Outdoors 4 Less” will use non-conventional marketing. For example, “The Great
Outdoors 4 Less” will register itself at the Stu Clark Centre for Entrepreneurship at the
University of Manitoba. By doing this, students will be allowed to use the store as a case
study for certain marketing and capstone classes. This will not only provide possible business
and marketing advice, but it will also be a form of advertising. Furthermore, Dave Clark will
have access to documents and research that could help him run the business.
Recruiting co-op students, part-time, and seasonal help from the University of Manitoba’s
Faculty of Kinesiology and Recreational Studies will also help to “spread the word” about the
store, especially to individuals who are part of the target market.
Exhibit 1 shows an estimated time line for advertising and promotion. Exhibit 2 shows an
estimated marketing budget.
3.0 Operations Plan
3.1 Day to Day Operations
The nature of the business relies on both customers purchasing goods and individuals, teams
and organizations selling/dropping items off. Therefore, it is important for the business to be
open hours that are convenient for a large portion of the population.
“The Great Outdoors 4 Less” will operate seven days a week with the following operating
hours:

Monday and Tuesday 10AM to 6PM,

Wednesday to Friday 9AM to 9PM,

Saturday 10AM to 6PM; and

Sunday 12PM to 5PM.
Exhibit 3 shows the operating hours of the store and the expected hours of the three
employees for the beginning operating period.
The Business will be closed all stat holidays but will be open over the Christmas holiday
period on non-stat days.
Daily Activities
Dave
Full-Time Employee
Part-Time Employee
Welcome and Assist
Arrive and un-lock store
Arrive and un-lock store
Examine goods customers
Welcome and Assist
Welcome and Assist
bring in to sell
Customers
Customers
Make offers to customers to
Examine goods customers
Organize and re-stock
purchase items and possible
bring in to sell
shelves
Tend to minor repairs to
Organize and re-stock
Accept deliveries from
merchandise
shelves
suppliers
Accept deliveries from
Accept deliveries from
Update Information System
suppliers
suppliers
Deal with suppliers for new
Tend to minor repairs to
products
merchandise
Customers
negotiation
Reconcile Cash balance to
Close the store
sales and Daily Cash Reports
Deposit cash into bank
accounts
Close the store
Weekly Activities
Dave
Full-Time Employee
Approve Order From
Generate Order from
Suppliers
Suppliers
Pay Vendors
Scavenge Garage Sales, Flea
Part-Time Employee
Markets and Sidewalk Sales
Monthly Activities
Dave
Full-Time Employee
Attend Chamber of
Inventory Count and
Commerce Meeting
Reconciliation to System
Part-Time Employee
Involvement with University
and Business Community
Budgeting Adjustments
Prepare Financial Reporting
3.2 Product Attainment Strategy
As stated above in the marketing plan, the store expects to sell approximately two-thirds used
goods and one-third new goods. This means that the company is largely reliant on the
haphazard “vendors” coming in to sell merchandise to the store. It becomes absolutely crucial
to the success of the company that they are able to acquire these products in a consistent,
sufficient manner to supply products which will lead to successful operations.
The Store will put on the first annual “One Man’s Junk, One Man’s Treasure” event in April
2009 which is meant to inject a sufficient base of used goods on the shelves. Based on the
success of the event this can easily be turned into an annual tradition.
Going forward the company can anticipate receiving products from the following sources

Walk-In customers,

Organizations looking to upgrade; and

Garage Sales, Flea Markets, Thrift Shops etc.
Success in attaining products from these sources is crucial and will be a significant driver to
the organization’s success. A marketing plan has been set in place to ensure word of the store
spreads and these sources want to be involved with the “Great Outdoors 4 Less”.
3.3 Information System
As the company will be operating in multiple sub-segments selling several different types of
products in each segment with different selling terms (consignment, used, new) it is crucial
for the business to have an information system in place that tracks:

Description

Quantity

Ownership

Source

Type

Location in Store
There are inventory management/tracking systems that would be able to perform these tasks
easily. There are systems available for amounts between $99 and $2,000. Based on the
complexity of the operation and the need for the software to be compatible with common
accounting software, budgeting $500 will provide sufficient software.
Another important aspect for record keeping purposes will be a point of sale (POS) system
which will link directly into the inventory management system. While there is a large range of
costs for POS systems, there are basic systems available that will integrate with the inventory
management for approximately $1,500.
In addition to the inventory tracking software, basic accounting software such as Quickbooks
can be purchased for less $200 and would be compatible.
Other information technology initiatives will include a website with the focal points of

buying and selling used equipment,

advertising what is in demand,

upcoming events; and

recommendations for where to visit.
The cost of purchasing, implementing and maintaining a website can vary considerably but
for the scale of these operations will not be sizable.
3.4 Store Location
Winnipeg has available space throughout the city with average commercial rates in the range
of $8 to $12 per square foot per annum.
However, there are also many commercial spaces for up to 1,000 square feet that can be
rented out for less than the original budgeted amount of $2,000 per month.
For these reasons, there is considerable flexibility with regards to the potential location of the
store. The location needs to be located in a location prominent to traffic, that has ample
outside parking and is easily accessible. The store will be relying more on word of mouth and
cheap forms of advertising to attract customers as there is not sufficient room in the operating
budget, nor would it be effective to have wide scale advertising.
As the targeted customers are those who are not avid campers and those who are not willing
or in a financial position to spend large amounts on camping equipment, the store needs to be
in a location appropriate for this potential customer base. As such East Kildonan in Winnipeg
has been selected as it best suits the requirements of the store.
3.5 Partnership with University
An important component to a small business is that it obtains the services it needs to be
successful while keeping costs at low level in order to preserve cash flow. In many small
businesses there are issues with regards to the owner and employees not being able to devote
sufficient time to crucial functions. As time progresses and these functions continue to be
neglected, it has an adverse effect on the company. The main functions that pose difficulties
for small businesses are

Marketing

Accounting

Finance
There is a solution to this in the form of business development through the connections Dave
made during his time at the university. As a graduate of the Entrepreneurship program at the
University of Manitoba, he is familiar with the projects in industry component of the program
which sees local businesses bring issues to the program and has students assist in developing
plans to solve these real world issues. Generally the company provides the experience
opportunity and students provide their labour. What Dave will be able to use this for is
marketing initiatives to build and spread the company brand throughout North East Winnipeg
In a similar manner, he should be able to recruit volunteer accounting students and provide
them with learning opportunities in both accounting and finance issues for small businesses.
The overall workload that he has to provide would not be significant and with time this
individual could gain the part-time employment role within the company.
3.6 Business Type
The business can operate in one of two ways:

Sole proprietorship

Corporation
The main difference between the two is that a business operating as a corporation is a separate
legal entity which alters the way money can be taken from the business and extent of legal
liability. Based on the nature of the business a corporation is the best way to operate the
business. Furthermore, with Dave’s personal situation this will not detriment him from
shielding employment income with business losses as he will have sufficient tuition tax
credits to reduce taxes payable to zero. As the business will be breaking even after the first
year, this is only a consideration for the first year of operations.
3.7 Insurance Protection
Insurance is a necessity for the business because they will be

selling merchandise on behalf of individuals (consignment),

selling used goods to the general public that they are performing minor repairs on;
and

seeking financing and will need to be able to repay in the event of an unforeseen
circumstance.
The company will need to acquire general liability, business interruption, fire and water
insurance. A policy for the year for a company of this size and complexity will be less than
$2,500.
3.8 Floor Plan
“The Great Outdoors 4 Less” e store will be set-up by segregating the new and goods for each
category of products offered. The middle of the store will have an aisle separating the new
and used goods of each category. This is important to differentiate between the high-quality
used goods and the new, basic camping gear. Customers will easily know which goods are
used or new, but are always within a few feet of a similar good that is of different quality
levels and condition. Also, the floor plan includes an emphasis to have the bigger camping
items closer to the front of the store to improve the visibility of passing traffic. At the back of
the store, there will be fitting rooms for any customers that need to try on clothing and jackets
from the clothing section located at the back of the store. By keeping the clothes and fitting
rooms close to each other, it will be very convenient for customers to try items on which will
increase the likelihood a customer will purchase a product.
Another important consideration is the set-up of the back room for the store. The back room is
necessary to keep inventory for items that need to be bought in larger quantities from
suppliers. Inventory levels will be kept very low, but there will have to be some items kept in
stock because there will be limited space on the floor for large quantities of one item. Also,
the back room will have a repair table for any items that come in on consignment or trade-in
that only need minor repairs. Although the company will not be in the business of making
significant repairs to equipment small touch ups to a piece of equipment that will increase its
value and ability to sell will be done. Finally, the backroom will provide a work area for
management to do paperwork and keep track of some basic administrative functions (payroll,
accounting etc.).
Exhibit 4 shows the floor plan and Exhibit 5 shows the back room. Exhibit 6 shows the store
front.
3.9 Capital Budget
The capital budget is going to be limited in the beginning because the majority of the initial
investment will go into initial stock for the inventory. The reason is that the company will be
renting their premises in the beginning to reduce the initial investment. The only capital
investments will be leasehold improvements to the store to get the store in a presentable state
for our floor plan as mentioned previously. The important additions will be building fitting
rooms, hangers and racks for the storefront, shelving units for the back room and tables and
counters for the cashier desk.
After the purchase of these major items, there will be only minor repairs for the next few
years. Every year an evaluation will need to be conducted to see if any items need to be
replaced, but considering there will be routine maintenance of these items, it is our
expectation that the company will not have significant capital investments for at least three
years. At this point the company will need to refurbish items within the store; however, these
costs will be significantly less compared to the initial costs. This expenditure will be required
to keep the store looking new and clean.
See Exhibit 7 for the capital expenditure budget.
3.10 Working Capital Management
Another important requirement to the success of “The Great Outdoors 4 Less” is to have
effective management of working capital, specifically managing their inventory. The
following section will describe the important steps the company will be taking to manage its
working capital effectively.
3.10.1 Cash and Credit Management
It is very important to keep enough cash on site to keep the retail store operating on a day-today basis. There will be a consistent float of funds to be able to give change and conduct
routine transactions at the cash register.
At a retail store, available forms of payment are necessary to consider when determining
payment method options to customers. However, this must be balanced with the costs of
setting up particular options of payment. Credit cards charge a % of the transaction with the
range of charges being anywhere from 1 to 5%. i There should be a choice of one one credit
card provider at first. VISA is the most appropriate selection because it is the most used and
most held card in Canada.
The company’s credit policy will be very limited in the beginning because of the significant
effort to track the number of customers that will be coming in the store and the small $ value
of the transaction. There will be consideration to provide credit to hiking and camping groups
that establish a relationship with our company.
3.10.2 Inventory Management
This will be the most important consideration for managing the working capital of the
business. The first important item is to have a tracking system put in place to keep track of
new and used inventory levels. The reason for important tracking of new inventory is to
understand the slow moving items and fast moving items in the first few months of operation
to correctly purchase items from suppliers for the future.
For the used inventory, it is important to understand inventory levels so trade-ins for items
that you already have are not accepted. Accepting trade-ins can cause just as much of a cash
flow issue as purchasing too much new inventory. The company needs to have strict policies
in regards to trade-ins to inspect the inventory for any major flaws that would severely affect
the possible resale. After the trade-in has been fully inspected, the seller will be given 40% of
the merchandise’s expected sales price. In the early stages of the business, all trade-in
decisions will have to be approved by Dave. This will ensure that employees are not overpricing the item or are giving more than the 40% trade-in value.
Another item to consider for inventory management is in regards to consignment inventory.
Consignment inventory will provide the owner of the goods an opportunity to receive more
for their goods because the company is not going to buy the products from them, but are
instead going to let them use the store as a place to sell their goods. Customers will be offered
a higher % amount of the sale if it occurs, but the benefit to the company is that no cash will
have to be spent to acquire the inventory. An important consideration is whether or not the
item will be able to sell in the store. To mitigate this risk, the customer will sign a contract
stating that they will come and pick up the goods if the goods do not sell within 60 days. This
will ensure that the store is not cluttered with merchandise that does not provide sales.
3.10.3 Accounts Payable
The accounts payable balance will not be significant to the inventory levels because
approximately half of the inventory owned will be paid for up front through the purchase of
used equipment. The company will select one or two suppliers in each equipment group, so
that they can establish a relationship with the suppliers to get favorable credit terms and
discounts. Credit terms will be a secondary factor for the suppliers chosen because it will help
our cash conversion cycle from inventory purchased to sales made. It will important to
consider any early payment options with any suppliers because this will provide ability to
achieve higher margins on the items when they are sold. There will be an effective balancing
between the size of the discount received and the length of the net credit terms. In most cases,
discounts will be taken advantage of as long as there is room within the credit line and the
items being purchased are a strong selling item.
4.0 Human Resources Plan
“The Great Outdoors 4 Less” needs outgoing, highly motivated and dedicated individuals
who enjoy working in a fast-paced, team oriented environment. The store will have one
manager, Dave, who works 40 hours a week, one full-time employee working 40 hours a
week and a part-time employee working 20 hours per week. In addition, one seasonal fulltime employee will be hired from November – December and May – July each year to help
with the busy seasons.
See Exhibit #8 for the organizational chart.
4.1 Job Descriptions:
Basic requirements:
“The Great Outdoors 4 Less” is a customer service oriented business requiring all employees
to have excellent customer service skills and interpersonal/communication skills. Employees
will have to be interested in the outdoors and have flexible availability including weekends.
In addition, specific skills will be required for each position.
Store manager:

Extensive knowledge about the outdoors as well as the product mix.

Ability to analyze products and repair products if necessary

Strong problem solving ability and analytical skills

Excellent organization and time management skills

Leadership ability to achieve sales results and operational objectives

Flexibility to work weekends and evenings

Proficiency in MSOffice

Ability to operate computerized point of sale cash register and inventory management
system: including accurate entering of sales information and receiving of deliveries

Ability to train and motivate staff
Sales associates – full-time, part-time and seasonal:

Ability to generate sales

Ability to analyze products and repair products if necessary

Adherence to store policies including store opening and closing procedures and cash
protection procedures.

Proficiency in MSOffice and basic accounting knowledge

Ability to operate computerized point of sale cash register and inventory management
system: including accurate entering of sales information

Flexibility to work weekends and evenings

Proficiency in MSOffice
4.2 Training Programs:
Before the store opens in April 2009, Dave will attend approximately 3 weeks of outdoor
training programs to further develop the knowledge he needs in order to assist all customers
in finding their outdoor equipment needs. Dave will attend the National Outdoors Leadership
Program and participate in the 3 week camping, backpacking and outdoor education course.
After completion of this program Dave will also attend a two-day outdoor safety course to
ensure he knows the necessary camping and equipment to ensure outdoor activities and
recommendations he makes are safe for everyone.
Before store opening, a sporting goods retail seminar will be attended by Dave so that he is
knowledgeable in outdoor gear and able to judge the condition and value of used equipment
brought into the store. After store opening, Dave will attend various seminars and overnight
camping trips such as outdoor cooking as they are offered to continue to develop his skills and
knowledge. Dave will also require training on the point of sale system and accounting
software which will be provided by the IT support centers for each system. The sales
associates will mainly be trained by Dave since there are no formal training programs within
the company. Dave will transfer the knowledge learned in his training courses to his sales
associates as well as train them on the cash register and till. The full-time employee will also
be required to complete the sporting goods retail seminar to ensure he/she has sufficient
knowledge to judge the quality and value of used equipment brought into the store. In
addition all employees will be required to go on an overnight camping trip with Dave to
further educate them about the outdoors and camping.
4.3 Planned New Positions:
It is not anticipated that additional staff will be needed in the Winnipeg store as sales grow.
However, if demand increases and additional labor is needed, a partnership with the
University of Manitoba Co-operative Program will be initiated to obtain full-time employees
over peak demand times. Additional part-time and/or seasonal employees will be hired to
keep up with demand and quality customer service.
4.4 Wages, Benefits, Management and Training Costs:
A detailed breakdown of wage, benefit, management and training costs are included in
Exhibit 9. A summary of the expenses are as follows:
2009
2010
2011
2012
2013
Total Salaries
$55,690
$71,119
$87,852
$90,048
$92,299
Total Benefits
$3,667
$5,020
$6,470
$6,634
$6,802
Total Training Costs
$7,500
$2,000
$2,050
$2,101
$3,000
$66,857
$78,138
$96,371
$98,783
$102,101
Total Salary, Benefit
and
Training
Expense
4.5 Human resource strategy:
Since retail stores often experience high turnover and employees generally only last about 6
months in a retail position, the human resource strategy needs to address this issue. Dave will
be motivated by his equity interest in the company as well as his desire for additional salary
and the potential for dividends to be paid out beginning in 2010. There are also considerable
amounts of training expenditures in the first year of operations in order to give Dave the
skills, experiences and knowledge necessary to be successful in this business. Dave is an
essential component of this business because of his skills and knowledge and is a critical
employee, however he is also a substantial equity owner which mitigates the risk of him
leaving the company.
The full-time associate will be motivated by product discounts, flexible hours and competitive
wages that are higher than minimum wage.
Since the full-time associate wage is not
considerably high, there is risk that associates will not stay for an extended period of time and
the company will experience relatively high turnover. However, due to Dave’s extensive
knowledge and the reliance on Dave to train new employees, the costs of training a new fulltime employee will be relatively low, although the time it takes Dave to train employees has
to be considered and is factored in the weekly hour budgets.
The part-time employee will ideally be a university student interested in or currently enrolled
in recreational studies. They will require a relatively low amount of income per week and are
looking to work flexible shifts. Once again, although turnover will be high, the largest cost,
training expense will be minimal since Dave will train all employees. Seasonal employees
will typically be university students, high school students and other individuals looking to
earn additional funds throughout the holiday and summer season. In addition, all employees
will be given the opportunity to learn and gain knowledge about the outdoor experience as
well as the opportunity to obtain outdoor gear at discounts. All employees will report directly
to Dave.
5.0 Financial Plan
5.1 Financing Requirements
The total capital needed to open this Business will be $100,000. An additional equity
investment of $60,000 will be necessary. Dave is providing $30,000 of the initial equity.
“The Great Outdoors 4 Less” will be seeking an additional $30,000 of equity financing.
“The Great Outdoors 4 Less” will also be securing a 5 year loan from the Business
Development Bank of Canada in the amount of $ 40,000. This is confusing. What about other
banks. We’re looking for a term loan or operating line? Term seems unlikely and does not
effectively match our needs for short-term financing during awkward periods down the road
does it?
Dave will be looking to family members or friends to finance the project first. If there is no
financing available from these sources he will be looking for a silent partner in the form of an
angel investor or a venture capitalist (although Venture capitalists are rarely silent). Dave
will maintain control of the corporation by having either an operating agreement in place
giving all control decisions to him or by owning 50.1% of the equity.
The Equity investors can expect to see a 38 % return on investment as shown in exhibit 13.
The debt from the business development bank will bear interest at prime plus 3% due to the
increased risk of our operations and limited collateral. It is expected that the company will
have inventory of $50,000 that can be used as collateral for the purposes of the loan.
Financing requirements and return on investment:
Source of Financing
Amount
Return
on Investment
Business Development Bank of Canada
$40,000
8.5%
Dave’s Shares
$30,000
38%
Second Investor
$30,000
38%
5.2 Dividend Policy
Dave will be rewarded by “The Great Outdoors 4 Less” in two ways, by the salary he pulls in
and the dividends he receives.
Dave has agreed to take in a subsistence level salary in the first two years in order to get the
business off the ground. Dave will receive less than$25,000 in salary in these initial years.
Once “The Great Outdoors 4 Less” has become profitable Dave’s salary will increase to
approximately$50,000 to be in line with that of a typical retail manager in Winnipeg.
Due to cash shortage considerations “The Great Outdoors 4 Less” will not be paying a
dividend until the third year of operations. For years 3, 4, and 5 a dividend payment equal to
70% of operating cash flows is expected. This level is used to allow for debt repayments and
cash growth within the company. After year 5 the loan will be repaid and the dividend will
increase to 95% of operating cash flows.
If “The Great Outdoors 4 Less” decides to expand its business it will likely use internal
financing as its main source of funds. The dividend ratios will be altered at this time to
provide cash for the expansion.
5.3 Ratio Analysis
Debt to Equity Ratio – the initial debt to equity ratio will be 0.667 reflecting the $40,000 of
debt and $60,000 of equity. The loan is expected to be paid off within 5 years and the
company will then have a nil debt to equity ratio.
Gross Profit Margin – The gross profit margin is set at 48.75% (see Exhibit 10). This margin
will be obtained by taking all sales and promotions into effect. This does not take into
account consignment goods sales. On consignment goods a fee structure where “The Great
Outdoors 4 Less” charges a flat fee of 40% of the sales price. The customer will set their own
price and the income earned is a fee for us.
Net Profit Margin – The expected net profit margins for the next five years are listed in the
table below.
2009
2010
2011
2012
2013
(11%)
6%
6%
12%
16%
As illustrated in the table above, a negative net profit margin for the “The Great Outdoors 4
Less” for the first year of operations is expected. The net profit margins hit double digits in
2012 after costs level out and revenues continue to rise.
Labour Costs - Labour costs as a % of Sales is broken out in the following table.
2009
2010
2011
2012
2013
36%
28%
29%
26%
21%
Labour costs are going to be significant in the first year of operations due to the reduced sales
levels. Labour costs as a % of sales will eventually even out at around 21% of sales after
Dave’s salary is adjusted up to what a normal manager makes.
Inventory Turnover Ratio - Based on the size of the store, inventory worth up to $75,000 will
be carried at any given time. Owned inventory of $50,000 (new and used) and $25,000 of
consignment inventory will be carried. Approximately 1,500 items will be carried in the store
with an average value of about $50. Given the size of the store and the size of many of the
items this should be adequate stock on hand. With this $75,000 inventory level inventory
turnover ratios given expected sales will be as follows
2009
2010
2011
2012
2013
1.41 turns
2.31 turns
2.76 turns
3.23 turns
3.73 turns
258 days
158 days
132 days
113 days
98 days
Inventory holding time and costs will be higher in the initial years as the store needs to be
stocked with items for customers to choose from. As sales improve the inventory ratio will
improve. A 98 day turnover ratio beyond year 5 will be maintained.
5.4 Sensitivity Analysis
The key financial success measure will be the level of sales achieved. See Exhibit 14 for a
sensitivity analysis based on sales level. In the base case 50% of likely sales capacity is
received in year one moving up to 90% in year 5 as business reputation grows. The worst
case scenario is at 30% capacity increasing to 70% capacity. This would knock off $82,000
worth of sales in year one increasing to $120,000 in year 5. This would reduce net income by
$37,000 in year one increasing to $54,000 in year (based on a 45% gross margin). Given the
tight cash flow this would be a major issue but the likely case has been prepared with
conservative estimates.
5.5 Break-even Analysis
Refer to Exhibit 15 for analysis of break-even point. It is expected that the company will
have to sell 5,000 items in 2009 to break even rising to 6,500 items in 2013. Although breakeven is not met in year one it is expected that sales will be above break even in subsequent
years.
5.6 Rate of Return Analysis
It is expected that the “The Great Outdoors 4 Less” will generate an internal return of 38%.
This is based on the base case scenario and the assumptions in the income statement forecast.
As mentioned above, variances in the sales level will greatly affect the realized rate of return
for this business.
5.7 Payback Analysis
Payback analysis shows that investors will receive their initial investment back in 4.14 years,
with increasing returns after that point.
6.0 Conclusion
Based on our analysis of the business plan for “The Great Outdoors 4 Less”, a tremendous
opportunity exists in Winnipeg for this company. We have complied detailed marketing,
operations, human resource and financial plans in order to thoroughly analyze all aspects of
this business. Throughout our analysis, we have identified key strategies and operations
necessary for this company to be successful as well as significant risk factors and
vulnerabilities and ways to mitigate these risks. As with any start-up company cash from
equity or debt sources are required to finance operations until year two when net income and
cash flows from operations are positive.
“The Great Outdoors 4 Less” is an excellent
business opportunity for both Dave and an equity investor.