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The Formation of New Business, Business Plan Example

Pages: 1

Words: 1110

Business Plan

The formation of new business is often experienced in Dubai on a daily business.  Designer clothes are expensive and our aim is to be able to reach all groups of people who come from different cultural backgrounds and have different tastes on clothes. The potential customers are tourists and the local consumers in Dubai. It is important to find the best location that will be able to reach out to all potential customers. We saw it best to open our store down the street because of the presence of so many people passing by. Moreover, similar shops are a good location to reach customers because they have gained popularity among the tourists and locals in Dubai. As such, the similar shops will be a good place to both sell and do marketing because they have the trust of potential and existing customers.

Consequently, the choice of customers to shop from one store spills over to moving to another shop because they have been attracted by the goods in the store. The other factor we considered in determining the physical location of our store is the pricing of the products. The range is between $10 and $100 therefore, the store will be located between downtown and outside. This is because the price range does not allow us to locate our store in upscale markets. However, in future we intend to have stores in upscale to cater for the needs of those people who are in another class level. Ariel Apparel is different from other businesses dealing with clothes in Dubai because we intend to reach the low and middle class presence. This is attainable by buying the clothes directly from Chinese manufactures.

Keivan Moeini and Weiyi Yin intend to use marketing strategies that are current and that allow Ariel Apparel to easily target tourists and locals within the target market. The strategies in question include the traditional print advertisement and the Internet where ads are placed on search engines. The local radio is a good advertising tool because the locals listen to it on a daily basis and are able to get information and share with other people. The other area of advertising is the use of modern technology that encompasses the social media. Internet proliferation is a good avenue that facilitates sharing of data and communication. This entails things like Twitter, Facebook, Pinterest, and Instagram among other avenues. This site mostly reaches young people and it is cheap to maintain and host plus other factors that enable the business work on a low budget and save.

By developing Ariel’s online website, the owners will be able to showcase their services to a wide range of customers and will include relevant contact and pricing information. Promotion is an important aspect that needs to be considered because it will culminate down to the growth of the business. Therefore, we need to have a platform that incorporates all potential and existing customers’ needs and tastes. Attraction of new customers is essential for nay business and for Ariel, since our target is tourists, we intend to create and print flyers. Thereafter, liaise with hotel personnel and administration to give us permission to have them on reception desks of hotels and even in the rooms. This will create a good avenue for reaching tourists and therefore, they will have a glance of the variety of the products we have in our stores as they relax in the hotel and strategize on the places they will visit.

Distribution strategy

Ariel Apparel’s main income source will be selling clothes in Dubai to locals and tourists. Moreover, we intend to accommodate the needs of other wholesale stores who do not want to get their products from China. We will be able to supply to these stores at an average price that puts into account discounts and wholesale prices. Dubai is an international trade of big hub between the Middle East and Eastern Europe. Therefore, it has a lot of customers who would want to take advantage of the price range of buying clothes at wholesale prices for their businesses. Competitive pricing is something we at Ariel Apparel are willing to offer and thus, this would make them think twice on spending more time and money to China and buy their own clothes. The tenant is also given gratitude by Ariel of leaving the store to them for use is a tradition that is aimed to serve the key money concept strategy. The location of our business does not require key money for now, but in the next 5 years, changes will occur in terms of the city’s expansion. In addition, Dubai managed to win the victory of the recent World expo 2020 and this is an opportunity for us to have a nice return on investment. This will only happen if we decide to move the store to another location.

Financial analysis (3-year financial projection)

The financial projections of Ariel will consider salary, inventory, sales and marketing. The figures presented are just an assumption made on how the business will progress when the given amounts are ploughed into the business. From the information, it is evident that we will need to invest in our own building because the rent is taking much of the profits made. Therefore, it is essential to consider ways and means of ploughing back the profits because it will make the business have another form of invest that brings income to us. It is also evident that the interest rate of the business is bound to grow, which shows signs of the business growing. This is a good show that the business is bound to expand and a large target market is going to be reached over a period of three years.

General Assumptions  
  Year 1 Year 2 Year 3
Plan month 1 2 3
Current Interest Rate 7.96% 10.26% 7.96%
Long-term Interest Rate 8.00% 8.00% 8.00%
Tax Rate 30.00% 20.00% 20.00%
Other 0 0 0

 

Break-even Analysis  
Monthly Revenue Break-even $34,501
Assumptions:  
Average Percent Variable Cost 40%
Estimated Monthly Fixed Cost $20,740

Pro Forma Profit and Loss

  Year 1 Year 2 Year 3
Sales $100,000 $185,260 $296,090
Direct Cost of Sales $56,500 $89,675 $120,589

 

Other Production Expenses $0 $0 $0
Total Cost of Sales $56,500 $89,675 $120,589
Gross Margin $56,500 $89,675 $120,589
Gross Margin % 50.00% 50.00% 50.00%
Expenses      
Sales and Marketing $20,550 $20,225 $20,120
Rent $15,000 $18,000 $20,000
Salary $2,500 $3,500 $4,500
Other $1,000 $1,500 $2,000
Total Operating Expenses $39,050 $43,225 $46,620
Profit Before Interest and Taxes $50,275 $55,502 $51,283
Interest Expense $1,491 $1,175 $845
Taxes Incurred $21,100 $32,416 $47,405
Net Profit $69, 234 $95,637 $125,265
Net Profit/Sales 6.32% 14,25% 23.03%

 

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