Martha Designs
Introduction
Martha Designs is a home based business started by Martha Millwork in 1970s. Currently,
Martha Designs is thinking of expanding its operations.
Clothing manufacturing is a competitive industry with high mark-ups. There are wellestablished brands available in market. There is a lot of buyer power and stiff competition from
garments manufactured in Asian countries due to their low raw material and labor costs.
However, clothing consumers are willing to pay higher prices for premium quality products.
Martha Designs produce high quality products to high-end segment in the clothing consumer
market.
Presently, Martha Designs manufactures high quality and fashionable coats for men and
women. These coats are made from canvas, denim, and from Hudson’s Bay and Pendleton
wool blankets. Current Martha Design’s effort is limited to fashion shows, displays at events,
some newspaper advertising, and a brochure. Each year Martha attends several fashion shows
in Alberta, Montana, North Dakota, and Saskatchewan. Current advertising is limited to
increase general awareness of the Martha brand.
The proposed business plan outlines the details of expanding Martha Design to increase Martha
Design’s overall sales revenue, marketing activities, operational capabilities and financial
outcomes.
Mission and objectives for Martha Designs
In order to focus organizational efforts to achieve their set objectives, the organization need
clear mission statement and objectives. For this end, a mission statement was prepared for
Martha Designs to achieve its overall objectives.
Mission Statement:
“The main target of business would be customer satisfaction - to provide highest possible
quality to buyers at the lowest possible costs. Martha’s Designs manufacturing philosophy is
the belief that it takes only one mistake to ruin company’s years of hard-work and reputation.”
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Proposed Name:
Miyo Fashions
A new brand name was created for Martha Designs. Miyo Fashions. Miyo is a Cree word which
means good, well, beautiful and valuable. It is our view that this new name is unique and would
not create any confusion in the market with other existing Martha names. We incorporated
fashions instead of designs, as Martha’s current operation includes both design and production
of high end coats.
Marketing Plan
Past performance
Martha’s Designs had its roots as a home based hobby in the 1970s. It has grown into what
could be described as a successful cottage industry. The Company’s annual sales are currently
$30,000 while net profit is $5,000 (16.7% of gross sales). Martha designs and sells a unique line
of women’s and men’s coats. They are currently selling for between 300 and 600 dollars. Her
sales have been attained primarily from Alberta, Saskatchewan, and North Dakota; however
additional sales have been made across North America and Europe. Marketing efforts up until
now have consisted of fashion shows, displays at specific events, and local newspapers. Martha
organizes annual fashion shows in Alberta, Saskatchewan, North Dakota, and Montana to
generate awareness and interest in her products. She also attends and displays product at
several exhibitions, rodeos, and athletic events.
The Current Market
The clothing industry is characterized as quite labour intensive, but also requires few highly
trained skills. The industry is also not capital intensive, and therefore, most countries are
involved in the industry to some extent. The Canadian apparel industry was impacted
significantly by the removal of protectionist policies including country specific import quotas.
These restrictive policies have been removed through FTA, NAFTA, and GATT. Research by the
Government of Canada found that although the industry was initially impacted, it has adapted
and rebounded. While imports have increased, Canadian exports and total shipments are also
increasing.
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According to Statistics Canada, Canadians spend approximately 5.0% of their disposable income
on clothing. It is a large industry in Canada accounting for manufacturing shipments of 6.9
billion in 1997, a 4.4% increase over 1996 with women’s apparel accounting for 35% of the
market ($2.4 billion 1998). Men’s clothing is the second largest sector. These trends have
continued through to 2008. Statistics Canada reports that from 1994 to 2004 the after tax
income of Canadian families, two people and more, increased by 13.65%. The western cities
such as Vancouver, Calgary, Edmonton and Saskatoon have experienced above average
increases in levels of affluence. From January of 2005 to November of 2007 retail sales from
Canadian clothing and accessory stores increased from $1.77 billion per month to $2.10 billion
per month. (Stats Canada)
The majority of the Canadian manufacturers (approx 2000) are small with less than 50
employees and the majority of the manufacturing (60%) is located in Quebec. The majority of
the design houses are located in Toronto. Manitoba and British Columbia also have a small
clothing manufacturing sector. The largest export markets for Canadian clothing exports are
United States, Germany, United Kingdom, Japan and Russia. The Canadian clothing retail
industry is made up what can be classed as major brand name retailers and independents.
Independents tend to be much smaller in terms of staff and sales and are generally individually
owned. The following tables list the number of independents, currently operating and selling
exclusively women’s and men’s clothing, in a select number of western Canadian cities
(Table 1). Additional tables indicate total population numbers in the cities (Table 2), provinces
(Table 3), states in the United States of America (Table 4) and counties (Table 5) considered for
Martha’s potential market.
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City
Number of Independents
Regina
15
Saskatoon
18
Winnipeg
22
Edmonton
48
Calgary
57
Kelowna
28
Vancouver
78
Victoria
32
Table 1: City and number of independents in each selected Western Canadian cities
City
Population
Regina
199,000
Saskatoon
235,800
Winnipeg
706,900
Edmonton
1,034,900
Calgary
1,079,310
Kelowna
165,221
Vancouver
2,208300
Victoria
334,700
Table 2: City and approximate populations in each city as of 2006; Source Stat Can
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Province
Population
BC
3,072,900
AB
2,463,900
SK
958,600
MB
998,100
ON
8,877,400
QB
5,364,300
NB
525,700
NS
651,100
Table 3: Canadian Provinces and approximate populations as of 2006; Source Stat Can
City
State
City Pop
State Pop
Billings
MT
129,352
975,816
MT )
ND
95,800
Grand Forks
ND
97,500
Minneapolis
MN
2,968,806
5,197,621
Denver
CO
2,359,994
4,861,515
Sioux Falls
SD
143,396
775,933
Missoula
Bismarck
94,700
635,867
Table 4: Selected mid-west northern cities and states with population in the United States of
America; Source US Census 2007
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International State
Population
Germany
82,400,996
United Kingdom
60,776,238
Netherlands
16,570,613
Table 5: Selected Western European countries and populations; Source CIA WORLD Fact Book
2007
Current Canadian market conditions could be characterized as a competitive industry; a global
industry with lowering of barriers. This Canadian industry is characterized by small firms with
rising exports and import demand, and a domestic population of increasing disposal income.
Research has shown that the level of disposable income in the US has historically been higher
than that of Canada. The US consumer may have lost some buying power due to the
unfavorable (for US citizens) exchange rates; however, the US consumers still retains greater
disposable income than that of the Canadian consumer. The US also remains Canada’s largest
trading partner.
The Competition
In the clothing industry global competition is intense. China has the lead for total export value,
followed by the European Union and Hong Kong. Chinese clothing imports make up 60% of the
total clothing imports into Canada. Despite the long delivery distance, they have significant a
competitive advantage in terms of labor costs. Chinese respond quickly to fashion trends and
consistently produce a wide array of high volume clothing products at very competitive prices.
They are not, to any extent, in the specialty or high end Canadian markets for men or women’s
clothing.
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The US and Europe as well as Canadian manufactures’ are the major suppliers of the more
upscale Canadian clothing markets. The US is Canada’s largest trading partner, and under
NAFTA clothing articles do not face import duties. The Americans are very efficient
manufactures and the similarity of the Canadian and American markets simplifies marketing for
them. They market the same lines that sell well in the US, and do not design and market
specialty lines for the Canadian markets. Europe traditionally has been the source of upscale
clothing for men as well as women. Imports from the UK, France, and Italy are most often
found on the racks in upper end stores. They are high quality, cutting edge fashion and
expensive. The EU has significantly higher labour costs than the US, Canada and China. The US
and EU are the traditional export markets for Canadian clothing. The Euro is much stronger
than the Canadian dollar therefore Canadian products, with the diminished barriers to trade,
are competitively priced relative to European products.
There is also competition from the retailers offering domestically manufactured products for
the Canadian market. The Canadian apparel manufacturing sector has been slower in taking
full advantage of the available technologies. This created labour costs to remain higher as most
of the Canadian manufacturing structure was composed of small firms, and do not have the
ability to take advantage of economies of scale.
From a pure cost perspective China is the strongest competitor in the general clothing market.
However, Martha is not competing in the general clothing market. She is narrowly focused on
an area not specifically targeted by the Chinese. The US and Europeans likewise compete in
areas outside of Martha’s focus: the European in more high end expensive areas and the US in
more generic mass marketed areas.
Martha can not compete against the imports in terms of price; however she has the advantage
in the uniqueness of her product. A significant threat comes for our own Canadian
manufactures. They know the home market and are small enough to respond to a new
entrant’s initiative. However, the majority of Canadian manufacturing is focused on the export
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market and the majority of Canadian manufacturing is concentrated in Quebec; far removed
from western Canada and Grenfel Saskatchewan. She will, however, experience direct
competition for Hudson Bay blanket coats from the HBC Signature Line. Martha has the
advantage of knowing her product, knowing her western customers, and has low cost per unit
of production inherent in her location and production arrangements.
Product / Service
Martha Millwork designs and sells a line of women’s and men’s coats. She specializes in
designing and creating high quality and fashionable coats made from canvas, denim, and
Hudson Bay Company (HBC) and Pendleton wool blankets – all natural fiber materials. Her
designs are unique and constantly modified and renewed on an ongoing basis. She often uses
trims of her own design to differentiate her product further. Her products are constructed of
high quality materials and crafted to high quality standards. The result is a line of coats that is
unique, comfortable, sophisticated, original and modern. Her coats are selling for between
$300 and $600. In her words the product is a blend of fashion, function and also very
importantly, tradition.
The durable high quality Pendleton Blanket of Pendleton Oregon utilizes authentic aboriginal
designs and symbolizes, like the HBC blanket, a unique period in American / Native history. The
Hudson Bay Company point blanket is a unique part of Canadian history that is recognizable by
Canadians and around the world.
The line includes:
HBC Blanket coats
Wool
Pendleton Blanket coats
Wool
Other western motif/style overcoats
Wool
Western unique designer casual
Denim
Western unique designer casual
Canvas
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Martha’s vision is be a niche player, to create a unique high quality clothing product that
embellishes the spirit and image of western Canada and US, while aspiring to deliver the best
value in this niche market to the Canadian and International customer. The line is entirely
designed and made in Canada, and is envisioned to be urban western wear. The line has
western flair yet is sophisticated enough to appeal to the urbanite, the rural dweller, and
anyone with an appreciation for western Canadian and American history. The product is original
and modern, yet tugs at the spirit of not only the HBC history but also of the western Canadian
and American heritage in general. The product will occupy a niche market: an urban western
style market that is currently not well served by the conventional western wear designers. Her
products fill a need that allows the customer to feel well dressed yet maintain a distinctive
western heritage image. It is Martha’s intention that each coat represents a particular value for
each customer. A value that is inherent in:
o The authentic design
o The originality
o The relative exclusivity
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o The high quality construction
o The high quality material
o The all natural fiber construction (wool and cotton)
o The Made in Canada aspect – proudly Canadian
o The western flair and sophistication
o The piece of Canadian and American history
As part of Martha’s marketing strategy, each HBC and Pendleton blanket coat sold shall have an
attached informational card. The card shall explain the creation of the coat, the significance and
history of the design and construction materials, along with a history of Miyo Fashions. The HBC
and Pendleton coats shall state that they are partially constructed from their respective
blankets. The card will also state that the coat is constructed of all natural fibers and every
effort has been made to minimize the environmental impact incurred during the construction
and packaging of this product. Each of these coats shall also have, in addition to the standard
sewn-in tag, a tag that states that the design/style combination is a limited production article.
This tag shall list a serial number and a number indicating the full number of this particular
design that was created. The higher end canvas and denim coats shall also be serialized.
The Customers and Target Market
Martha has already done market research in some respects. She has been crafting and selling
coats since the 1970s. She had $30,000 in sales in the past year. Sales have primarily come
from Alberta, Saskatchewan, North Dakota, and Montana, and increasingly from other areas of
Canada and Europe. Her customers include people of the middle and upper middle class who
live in a climate that requires the product, who value exclusivity and originality, and have an
appreciation for historical culture. Initially, these customers shall be from Western Canada
followed by the northern US States, Ontario, and finally targeted countries in Europe.
These customers have the required purchasing power and place value on attaining a high
quality, original, relatively exclusive product. The perception of value emanates from either the
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customer’s identification (in the case of the HBC and Pendleton coats) with the historical
significance, or on the fact that the product is a western designed, Canadian made, quality
product, or from a combination of all. The demand for product is linked to the heritage design
attributes and general modern western motif. The product is not temporary fad, as the style is
based on a long lasting image and cultural identification that is continually being updated.
Demand of course will be greater where there is a need for heavy outerwear; however the
denim and canvas coats are suitable for milder climates.
Preliminary international market research indicates that particular parts of Europe have an
affinity for early Canadian and US/Native culture. Some countries such a Germany are well
versed in North American history. The UK of course has a historical connection with the HBC.
The Netherlands also has a special connection with Canada stemming from past events. We
believe that these particular circumstances taken together with the relative levels of affluence
are advantageous for penetration into Europe at later stages of our business plan. We also
envision slight modifications for the European market including changes in cut, sizing and
labeling. For the US market the Pendleton coats are expected to be the sales leader.
Martha’s marketing plan includes a phased expansion approach with each step providing the
resources for the next. As the Company has limited capital and experience, Martha plans an
orderly movement into markets and marketing strategies, thereby gaining experience, contacts,
and cash flow to better control risks for the next step. The market segments and target
populations have been identified in previous section and are as follows:

Men and women between the ages of 25 and 65 residing in the western Canadian
provinces, the northern US states, and eventually Europe.
Martha will have low production levels initially and low capital reserves. These facts dictate a
phased expansion strategy starting with her home province Saskatchewan, where she has
already built contacts and sales. This would be followed by Manitoba. Competition is likely to
be more manageable in these provinces, and they would provide a base of experience, contacts
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and sales revenue for further expansion west. Next, will be an ordered expansion into Alberta,
BC, the Northern US states, Ontario, and Europe. The greatest potential for revenue should
come from Alberta and the US states. Market appeal for the product is expected to be lower in
BC and Ontario.
The product positioning has been reiterated throughout this plan. Martha is offering a niche
market product differentiated by high value, exclusivity, cultural connections and its unique,
continually updated blend of traditional and contemporary style. Martha’s Designs will be a
niche player and not compete against the large domestic manufacturers or the large importers.
She will face some competition from the HBC Signature series and some US manufacturers
offering Pendleton coats. Her low cost production as well as innovation styling and design
strategy will compensate for the anticipated competition.
Sales and Profit Objectives
1. Maintain an overall 40% gross profit margin
2. Attain a 20% return on equity
3. 300,000 of gross revenue by year 3
Pricing Policy
Martha intends to follow a flexible pricing policy. She will use a market-based premium
approach given the differentiated nature of her product. However, she also realizes that until a
greater market demand is generated and she has established distribution channels, she will
need to be flexible. She may have to operate initially on a more cost-based approach while in
the demand building stage. At some point she will begin the transfer to a more market based
approach as customers begin to perceive the value in her product offering. However, it must
be noted that once she sells to retailers, she has lost price setting capability - the retailer will
sell for what the market will bear.
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Promotion
In order to move from a hobby / cottage industry with $30,000 per year in sales to a
commercial operation promotion is essential. Martha’s promotional objectives include:
o
o
o
o
o
o
build brand awareness
educate and develop interest in the line
build marketing and sales networks
increase direct sales
establish independent store sales
establish internet sales
The promotional strategy will be mixed approach using a variety of methods as the proposed
phased expansion takes place. The program shall be dynamic, flexible, and modified on the
basis of feedback, as revenues allow for, and new areas are penetrated. The program may
compose a mixture of the following media and methods:
Personal
Attendance of fashion shows
Displays at special events such as cultural fairs, exhibitions, stampedes,
Displays at trade shows
Direct selling to independent stores
Paper media
Local newspaper advertizing
Targeted magazines such as Up, Western Fashion, Western Living
Brochures
Business cards
Internet
Creation of Miyo Fashions web site
Internet Directory Listings
Internet linkages from Directories
Canadian Fashion Federation Listing
Canadian Apparel Foundation Listing
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The promotional activities will take place on three fronts:
1. Direct selling consisting of what Martha has already been doing but also using a
sample line to direct sell to the independent retailers.
2. Internet selling. A major initiative will be through use of the internet. Initially
Martha’s web site will be for advertizing and awareness with capability to email
or phone for orders. Later it will be linked to various Fashion Directories, be
search engineered, and have the capability for on-line purchases.
3. Using agents to sell her line into retailers. This is expected to be used in the later
stages of expansion, but efforts may be made at early stages to engage agents
for use on a more regional level.
The marketing plan will follow outline below:
Year 1
Promotional initiative to enter and penetrate the following markets:
Saskatchewan and Manitoba - concentrating on the major cities
Develop a web site to offer online sales by email and phone-in ordering
Increase personal selling through attendance, shows and direct selling to retailers
Year 2
Enter the Edmonton, Calgary, Kelowna and Vancouver markets
Further develop web site through directory listings and linkages.
Develop on-line ordering and payment system
Begin using sales with agents to increase penetration of independent stores
Year 3
Build on the sales already occurring in the US states by using an agent to sell to retailers
Enter Ontario, and Montreal
Year 4
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Engage STEP to facilitate sales into Europe
Develop the web language options to include Dutch and German
Additional initiatives into Europe - see below
Market penetration in Europe:
Martha may not have a lot of free cash to hire an agent in Europe. However, Europe is a very
attractive option for Martha. The world today is flat. The internet has made the world a global
village and this gives her cheaper options for the initial stages.
Initially, she should approach the Saskatchewan Trade and Export Partnership (STEP). The STEP
possesses contacts with the embassies/consulates of Canada, all over the world. This initial
contact with STEP would allow Martha to receive contact information (phone and e-mail) of
high-end garment stores in Amsterdam, Rotterdam, Paris, Frankfurt, Hamburg, Munich,
Geneva, Stockholm, Oslo, Helsinki, Copenhagen, Luxemburg, Brussels, Vienna. Approximately
$400 STEP membership will provide this information. She also has the option of having her
product payments insured by the Saskatchewan Economic Development Corporation (SEDC).
She should first focus on countries that have a lot of tourists coming from all over the world
(“Made in Canada” tag carries a lot of goodwill and positive image in mind of consumers from
all over the world). She should avoid cities that have a very powerful presence of their own in
terms of fashion and garment design (ex- London and Milan). The cheaper and cost-effective
initial strategy that we are proposing does not allow her to focus on all the European cities at
the same time.
Martha should approach the International Students Offices at the University of Saskatchewan
and at the University of Regina. From here, she can easily get access to the contact information
for the different countries’ student associations. Then, she should target student groups who
travel to their home countries via Europe. Almost all of the flights to Asia and Africa have
stopovers in Europe. Martha should focus on certain countries’ students (for example, students
from India). These travelers, when they travel back to their home countries, are allowed one
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free stop-over by the airlines. The key is that the student should take the flight with airlines of
a country to have a stopover in that country. For example, if they want a free stopover (even
for a large number of days) in Germany, they should board a Lufthansa flight. Martha can offer
three days’ living expenses (approx. $ 100/day – incl. boarding and lodging) if the student is
willing to carry a sample of finished coats and coat construction materials.
Before we finalize a student (after informally interviewing a few of them), we should already
have had done the process of contacting the stores in certain European cities. We mean, send
them electronically the pictures (taken for many angles), specifications, product descriptions,
etc. So, the role of the student is just to take the sample(s) and show them to the store
managers.
Alternatively, Martha may make use of agents to facilitate European expansion. Currently she is
selling into Europe and expects to continue these sales. However, she is also cognizant of the
many changes that may develop over time. In four years, she will begin concentrating on
Europe and at that time determine the best strategy or strategies to utilize.
Channels of Distribution
As stated in the previous sections, Martha will sell her product using three methods which
entail two distribution systems: She will direct sell to independent retailers, on a one to one
basis as a result of personal marketing, and through the internet. She will also at some point
engage the use of agents to sell to retailers. The use of agents involves a trade off. They will
impact Martha’s revenues; however the potential for market penetration is much greater.
Direct one to one sales interest through attendance of events is also costly, however necessary
at least in the early stages to build market awareness. The most efficient method is through the
internet. It has the potential to reach numerous customers at very little cost.
The Opportunity
Martha is selling into a market, which in the early stages of operation, encompasses all of
western Canada and the northern US States. Total population for this area is listed in Tables 1
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to 4. The European market increases this number substantially. The number of stores per
region was determined based on population of the cities and province/state is listed in Table 6.
Region
Western Canada
Number of Stores
(MB, SK, AB, BC)
7.5
Northern US States (ND, SD, CO, MN, MT)
12.5
Sub total
20.0
add Toronto and Montreal
6.0
Total
26.0
Table 6: Number of stores in each region with in Canada and the United States of America
(Toronto and Montreal cities were put in as one region)
The coat line is unique, differentiated and of high value. She is a low cost producer selling into a
large market area. However, Martha’s niche product and will not have general widespread
appeal. It is expected demand will be greatest in the west for reasons already mentioned, but
her product should also have some demand in the east as well as Europe. Also, Canada has a
global reputation as a technologically well developed country that produces high quality
exports. Based on these and previously mentioned reasons, we come up with gross revenue
projects for year 2008 to 2013, and are shown in Table 7.
Year
2008
2009
2010
2012
2013
Quantity of sales
250
271
295
321
349
Gross Revenue
108,769 149,924
204,924
262,822
325,393
Table 7: Quantity of sales and gross revenue projections for year 2008 to 2013
A detailed marketing plan budget is shown below.
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Marketing Expenses
Samples
Vehicle expenses
Gas expenses
Telephone
Website development
Website maintenance
Trade Shows
Travel to stores
Sales/Marketing Agent
Displays
Brochures
Business Cards
Web directory listings
Data Base Marketing
Fashion shows
Business Organization Memberships
Magazine Add placements
Total Marketing expense
Marketing Expense (% of Gross Revenue)
2008
$0
$200
$200
$100
$2,500
$500
$4,000
$4,000
$200
$300
$100
$1,200
$0
$2,000
$500
$3,000
2009
691
200
200
100
2,500
2010
708
205
205
103
2011
2,177
210
210
205
2012
2,231
215
215
310
2013
2,287
221
221
418
$500
4,100
4,100
525
4,308
4,308
2,970
538
4,415
4,415
3,132
323
1,261
331
113
1,292
2,154
538
3,231
22,590
9%
2,208
552
3,311
23,454
7%
300
100
-
1,200
513
4,203
4,203
2,760
300
315
105
1,230
2,000
500
3,000
17,591
16%
2,050
513
3,075
17,065
11%
2,101
525
3,152
22,208
11%
4,000
4,000
308
Summary
A SWOT analysis (strengths, weaknesses, opportunities and threats) revealing the following
strengths and weaknesses of Martha’s Designs as well as the external threats and opportunities
faced by the business.
Strengths
 Martha has a cost advantage in that at this stage she has very little fixed costs.
 The town of Wolseley has initiated a plan to offer sewing services to Martha in a newly
established plant
 Low staff requirements.
 Trained labor available
 Demonstrated demand for product over a wide geographic area.
 Multiple distribution channels
 Flexibility of design changes to maintain relative exclusivity
 Unique product
Weaknesses
 Low quantity of sales
 Competition for the HBC Signature series and others
 Narrow product line
 Little capital
 Little experience in running a commercial enterprise
 Location of manufacturing not ideal
 Difficulty and cost of limited production runs to maintain image
 Marketing over a large geographic area
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Opportunities
 Expand and increase product line
 Opening of dedicated Miyo Fashions stores in major centers
Threats

Failure to generate sufficient cash for the expansion program

Competition response – entrant of a new direct competitors
Millwood Designs from a marketing perspective has a unique product with a demonstrated
demand. The Company faces challenges in terms of limited capital and experience, but
Martha’s mitigating strategy of controlled stepped expansion and reliance on individual and
institutional experts when needed may compensate for these limitations. The orderly, whenyou-can-afford-it approach, also offers an exit strategy or opportunities to modify the strategy
at various critical points.
Operations Plan
Operational organization
Ms. Martha Millwork will be owner and manager. Martha will directly supervise Wolseley
operations. The town of Grenfel will manage the operations, while Martha will provide
specifications, process requirements and details on final quality of finished coats (Figure 1).
Martha will reserve the right to refuse payments for works produced below specifications. A
part/full time assistant will order raw materials, cut fabrics, delivery of cut materials, and does
the quality inspections of finished coats.
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Martha Millwork
(Owner/Manager)
Wolseley
Operation
Grenfel Operation
Figure 1: An organizational plan for both operations in Wolseley and Grenfel
Work flow operations
Matha’s work flow operations involve several steps. Those can be devided in to two parts. One
part involves ordering of fabric materials (as specified by Martha), cut according to the design
and send the cut pieces to the Woslely and Grenfel operations. The other part involves
receiving finished coats from the two operations, quality inspection and shipping to stores and
customers. Also, uncut/cut fabric and finished product inventory management is part of the
operations. Martha will have her assistant trained to manage most of these operations. A
schematic representation of the steps involving in operation activities are shown in Figure 2.
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$
$
Suppliers
$
To Wolsley
and Grenfel
Operations
Purchasing Receiving
Inventory
Manufacturing
Receiving
Finished
Products
Quality Assurance
Inventory
Distribution
Sales
Figure 2: Steps ordering fabric materials to selling and distribution in a operational flow chart.
Operational Space and Design
About 600 square foot (double car garage) space from existing Martha’s property space will be
utilized to centrally manage Martha’s operations. One quarter of this space is allocated as an
office, another quarters of total space for design and cloth cutting area, and the rest to store
ordered raw materials and finished inventory. An exterior view of the Martha’s central
operational facility is shown in Figure 3 and a detailed floor plan is presented in Figure 4.
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Martha Designs
Figure 3: An exterior view of Martha’s existing property; this property will house all central
operational activities proposed in the business plan
2'-6"
82'-0"
2'-6"
Design and
Fabric Cutting Area
Office
2'-6"
54'-0"
2'-6"
2'-6"
15'-0"
$
2'-6"
82'-0"
Finished Goods Area
2'-6"
2'-6"
Figure 4: A detailed floor plan of Martha’s central operational facility (the lengths are not on
scale).
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Martha Designs
Human Resources:
For HR, Martha will have one part time staff for the first two years. Then this position will be
converted to a full time position in year three. Martha will need this extra person mainly to help
in operational activities described in the operations plan, while Martha herself will be heavily
involved in general management and marketing functions. It is anticipated that sales will be
expanded during the year 2 and 3. A full time position is justified to accommodate the
increased work loads with increased market expansions.
The part/full time employee’s needed skills will be in fabric cutting, computer, and inventory
management, and shipping and receiving capabilities. She/he would be given a short training in
processing internet orders and in quality control. Since the internet orders are not going to be
that much of significant activity during first two years, it is expected this employee can assist in
general administration functions. The wage would be $26,000 in the year one of employment
with normal rate of increase in the subsequent years.
Along with this full-time employee, the company would use services of international students
travelling to Asia/Africa via one of the targeted 14 European cities. This person would be paid a
total $500/per trip as an allowance to make 4-5 days stopover in Europe and show the product
samples to store owners in Europe.
For manufacturing – the company would use the contracting services of the town of Wolseley.
However, in the year one, Martha would do mostly designing and part of fabric cutting.
A schematic diagram is shown in Figure 5 for human resource managements
Owner/Director:
Martha Millwork
Part-Time
Seamstresses:
(2)
Part/Full-Time
Assistant
(1)
Manufacturing Staff,
Wolseley:
per piece
Figure 5: Martha’s organizational chart for human resource management.
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Martha Designs
Job Descriptions:
Owner/Director:
Martha will have the responsibility in all areas of her business. Initially, she would be
responsible for maintaining status quo in her manufacturing process. However, it is expected
that Martha will have increase her marketing efforts to distribute her products in to the market
place.

Manufacturing: One of the strengths of Martha Design’s is her ability to create
different designs. Therefore, it is expected that she continue to do this activity.
However, after establishing presence of Martha products in few cities, she should hire
an assistant (it is suggested during the year one) to help in functions described
previously.
Cutter/Support: This person will do the cutting the raw material for sewing. However,
with basic training, she/he would be responsible for checking the quality of stitching done
by the staff at the Wolseley facility. This person would also be trained to process online
orders, inventory management and shipping/receiving.
Part-Time Sales Staff: Starting from year 4, Martha would hire students from international
students unions of different Asian and African countries at the University of Regina and
University of Saskatchewan. Each selected student would target one European city at a
time and they would be provided with an allowance of $500 for 4-5 days stay in a particular
European city. This would be the only cost as they are allowed free stop-over by the airlines
they choose to travel to their home country. These students would carry Martha samples
to the already shortlisted and contacted high end stores in that particular European city.
Contracted Manufacturing Staff: Martha’s Design would use the manufacturing facilities
offered by the town of Wolseley.
Part-Time Seamstresses: The business association with these two part-time staff should be
continued.
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Martha Designs
Financials:
To meet the required initial capital, a total of $120,000 of financing will be required. Due to
projected earnings, bank financing is not an option. Martha may take re-mortgage of her
existing house for 80,000 and add her and her partner’s personal savings of 40,000. The Bank
has taken a collateral position in Martha’s house, which was mortgage free (Table 8).
Capital Requirements:
Form
Amount ($)
Debt
0
Equity
120,000
Total
120,000
Table 8: debt and equity financing for Martha Designs
Summary of Projected Income Statement
Table 9 provides a summary of the key values in Income Statement over the 5 year period.
Year
2008
2009
2010
2011
2012
Revenue
108,769
149,924
204,453
262,822
325,393
Net Income
(20,520)
(4,525)
(6,796)
12,250
31,093
The net income is not projected to be positive until year four when sales revenues have
increased to the extent so as to cover costs. The major costs include salaries and marketing.
Promotional costs are relatively high in the first few years ranging from 16% of gross revenue in
2008 to 7% in 2012. The decision was taken to pay Martha a wage of 35,000 per year rather
than have her take dividends out of the Company. This decision, although based in good
business practices, does put the Company in a negative earnings position for the first three
years.
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Martha Designs
Summary of Projected Balance Sheet
6.5
Risk Analysis / Sensitivity Analysis
60000
50000
40000
For the Year
ended December
31
30000
20000
10000
0
-10000
-20000
-30000
Income Before
Taxes +10%
Margin
1
2
3
4
5
6
Income Before
Taxes Base
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Martha Designs
50000
40000
30000
For the Year ended
December 31
20000
Income Before Taxes
Base GR+10%
10000
Income Before Taxes
Base GR
0
1
2
3
4
5
6
-10000
Income Before Taxes
Base GR -10%
-20000
-30000
60,000
50,000
40,000
30,000
Income Before Taxes
+10% sales
20,000
10,000
Income Before Taxes Base
-
Income Before Taxes 10% sales
(10,000)
1
2
3
4
5
6
(20,000)
(30,000)
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Martha Designs
Critical Variables
There are two main critical variables for the company. These would be quantity of sales, both
direct and store sales, and the mark-up related to sales price. Growth rates had a negligible
effect upon our profit results.
Dividend Policy
As Martha is the sole owner and she is drawing a salary from the Company, it is not planned at
this time to offer a dividend over the projected 5 year period. The retained earning shall remain
in the Company for finance purposes. The policy will be revisited at the end of the five year
period.
Economic Forecasts
The five year projection has been made using an inflation rate of 2.5%. This rate has been used
to derive all dependent variables. This estimate has been based on the historical data available
for the Canadian situation.
Ratio Analysis
2008
2009
2010
2011
2012
38.7% 39.1%
39.4%
39.6%
39.7%
Profitability Ratios
Gross Profit Margin
Net Profit Margin
-18.9%
-3.0%
-3.3%
4.7%
9.6%
Return on Total Assets -19.9%
-4.6%
-7.3%
11.6%
22.7%
Return on Equity
-4.6%
-7.4%
11.8%
23.0%
-19.9%
The gross profit margin is maintained at approximately 40% throughout the 5 years. The
almost identical ROA as compared to the ROE is reflective of the Company’s lack of debt and
lack of operating assets. A 23% return on equity for a Company without any leverage is quite
respectable; however this does not occur until year four. Research indicates that many small
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Martha Designs
clothing manufacturing firms operate at net profit margins between 3% and 8%: Martha is a t
4.7% in 2011, increasing to 9.6 in 2012.
Note: The leverage ratios were not included because without debt financing, the Company is
not leveraged.
Likewise the liquidity ratios (current ratio) were not a useful measure because the
company does not have accounts payable.
Break-Even Analysis
Year ended Dec 31
2008
2009
2010
2011
2012
BE Sales Revenue
129,289
154,448
211,249
248,151
288,155
Actual sales Revenue
108,769
149,924
204,453
262,822
325,393
350000
300000
250000
200000
Year ended Dec 31
150000
BE Sales Revenue
Actual sales Revenue
100000
50000
0
1
2
3
4
5
6
Summary of Financials
The business plan analysis has determined that Martha can have marginally viable business
with specific conditions and expectations understood. The business, under the forecasted sales
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Martha Designs
revenue, will not generate positive net income until year four. Conservative estimates were
used for the quantity of sales. An increase in sales may be possible through increased
promotion; however, the promotional expenditure level is already at 16% of gross revenue in
year one and 11% in year two.
The financial model has demonstrated that Martha can expect positive net income in year four
while paying herself a wage of 35,000 per year. Martha’s wage in effect was at 5000 per year in
the cottage industry stage; under this model she could be earning 35,000 per year and
potentially taking dividends in year four.
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