You currently have a “Designer Sock” business organized as a “Sole Proprietorship” in a storefront located next to a designer sneaker shop. You thought it was a good business decision to open next to the sneaker shop because you both appeal to the same audience and you could draw from their established customer base. The sneaker shop has been in this location for over 10 years. Based on your sound business research you decided to use your life’s saving of $19,578.40 to make your dream a reality. You procured a lease on the spot, a 1000 square foot storefront. The lease was a 1- year term at a rental rate of $1000 monthly. The deposit was hefty because you lacked commercial rental references and therefore it required a deposit of $3000. Hence, your initial rental start-up cost $4000. You recognized that the annual rental amount represented about 60% of your overall capital investment but you believed the loss would be offset by the reduced marketing needed from the draw on the sneaker store customers. Storefronts come with additional up front and monthly costs including lights, water and electricity for the store. The collective set up costs for utilities and deposits for those commercial services were an additional $1000.
Regarding inventory, you thought it best at the time to carry limited inventory. Your strategy for inventory was to purchase 2 of each styles of sock, one for display and one for sale. You set your computer to immediately reorder when a style was purchased. You purchased 1000 socks which included 500 different styles at 5.20 per pair wholesale. The total cost for start up inventory was $5,200.00. Your projection was to sell 1000 pairs of socks a month at $16.00 per pair which would generate $16,000 in revenue a month. Additionally, you had to purchase displays, a cash-register, a counter, setting, mirrors, a vacuum cleaner and cleaning supplies for the store. The total cost for the additional start-up items was $1200.
Since you elected to have a “Sole Proprietorship” you decided it would be more profitable to go it alone. You worked 12 hours a day Monday – Saturday and rested on Sunday. Since you have no employees, you do all of the work yourself. You order stock, stock shelves, arrange the socks on displays, answer calls, ship orders, book-keeping, help customers and clean the store daily. You conducted marketing campaigns via social media marketing and did flyers for the sneaker shops nearby.
You pioneered this unique sock concept as you had never even gone into a store that only sold socks. There was a lot of buzz about the idea on social media. Everyone agreed that you had an unique niche product and was hopeful for your success. There was a cost to advertise via social media. You reached 500 people for every $50 you invested. You see the need to reach at least 5000 people per month to become more profitable.
Your family was so proud of you that they helped with the “Grand Opening”. Your mother, father, sister and brother told everyone they knew about your success and insisted that they all join in on the opening celebration. The marketing for the opening celebration total $571 for the experience. You invited the mayor for a ribbon cutting ceremony and all the local businesses and residence. They were all very excited and promised to support your business.
You have been open now for 12 months and you are assessing your level of success and how you might better reach your targeted goals moving forward. You have now operated for a full calendar year and have been able to ascertain some patterns in your business. Your sells numbers reflect sells for the following months: Jan – 38, Feb – 76, March -114, April – 115, May – 176, June – 275, July – 589, Aug. – 700, Sept. – 115, Oct. – 115, Nov. – 700 and Dec. – 1000. You also noted that you have more sales request then inventory. You also documented that many customers wanted to purchase multiple pairs of the same item. It was also indicated that each customer purchased an average of 4 pairs of socks and a good percentage of them wanted to purchase additional unavailable items.
Your task is to provide a proposal to the prospective investor, “Show Me The Money, INC.”, giving supportable evidence of why it is financially prudent to invest capital in your existing business. You will demonstrate why your business model is the best business formation for your business type. You will provide a roadmap into the way you formed your company and why this formation was the best pathway with supportable evidence of its advantages and the disadvantages (ie. Sole proprietorship, Partnership, Limited Liability, Corporation) for profitability. [SLO=3]
Additionally, you will illustrate how you currently operate your business with regards to human resources and management styles. [SLO’s =1&10] You will also provide the investor with a written document describing your basic financial statements and show how they reflect the activity and financial condition of your business. Explain the banking and financial systems, including the securities markets, business financing, and basic concepts of accounting to indicate the investor your proficiency in business. [SLO’s =1,7&8]
Next, you will ensure that the investor is clear on your level of integrity in running your business and your stand on social responsibility, ethics and how they relate to business law. You will further describe the importance and effects of ethical practices in your business while demonstrating the ability to analyze business situations to identify ethical dilemmas and ethical lapses.
[SLO’s= 2&6] You will also Identify and explain the role and effect of government on your business and how it can impact profits. [SLO = 5] You will specify how your leadership and management by describing the relationship between social responsibility, ethics, and law in business in an effort to make clear you know the importance of application of each concept in running a business. You will also describe the importance and effects of the ethical practices in your business and how it enables you to analyze business situations and identify ethical dilemmas and ethical lapses. [SLO = 2,6&9]
It is important that the investor understands your inventory, management, marketing, and location decisions. You should also explain why you initially started your business with the existing formation, and whether based on your experience, it’s the most feasible way to continue operating under this framework. Identify and explain the domestic and international considerations for today’s business environment: social, economic, legal, ethical, technological, competitive, and international and whether it would be prudent for you to operate internationally. You will also Identify strengths, weaknesses, opportunities, and threats of information technology for your businesses. [SLO’s = 4 & 11] You will also give a line item break down of your start-up expenses, monthly revenue generations and monthly expenses and profits and losses. You will further outline your anticipated expansion in detail. You will specifically request capital from the investor. You will indicate whether your company is a product or service and whether any licensing is required. You will specify your management style and the number of employees currently employed and the intention of adding additional staff if applicable.
Finally, your proposal will make a specific capital request in a specific amount detailing how the capital will be used for improvements, expansion and ultimately for additional profits. You will paint a picture convincing the investor of how he would benefit from his investment. You will give a timeline for repayment of the investor’s capital and the amount and manner of distribution. Also, you will convince your investor that your company is socially responsible and operates on an ethical basis and why that is important. Explain to your investor perceived barriers to your success and methods to overcome any possible problems. Give step by step details of how much product you seek to purchase and or how many employees you need for growth and the management style you anticipate using.
The best proposal will have a clear demonstration of where, how and why you started your business and how its investment would look if you had the capital infusion, illustrated by chart, graphs and images and written support. It will clearly demonstrate how you would use the capital dollar for dollar. The best proposal will also reference verifiable business principles that support your success. It will also give proven ideas that will help to motivate the idea (ie. other companies that have proven success with your model idea.) It will use verifiable available resources including chapter readings, news articles, Texas Secretary of State, company profile, GAP & GAAS and financial accounting resource. All utilized resources must be referenced.
