PRAD 393 | PROFESSOR RAGAS

MINI BUSINESS PLAN

Drew McManaman, Jacob Weichert
Marielle Sarkan , Braden Nauman

i.

Executive Summary
Subscription box companies have taken off the last three years. Yet, many of them are

based towards women. Some companies offer clothing towards men with outrageous prices.
Male college students cant afford these prices. Thats where VM Clothing specializes. VM
Clothing LLC. was founded in 2014. It is the solution for male college students that cant find
conveniently affordable clothing. VM Clothing is a subscription box company, which sends top
of the line clothing right to your door. Each customer will pay $30/month receiving 3 articles of
clothing each month.VM Clothing will offer one of a kind technology, that analyzes the customer
measurements.
VMs strategy is to emphasize the convenience and quality of our clothing and services.
Male college students will come home from a long day of class and find a sleek, slender box that
will allow them to dress for success. After receiving their clothing, they will also be able to ship
old clothes back to us in the same box. Thus, saving the boxes and donating clothes to a good
cause.
VMs marketing approach will take full advantage of social media. Twitter and Instagram
will be used for our major marketing campaigns. VM will also use Facebook for customer
feedback and Vine to show anyone can live comfortable in our clothing. Subscription Box
companies do not spend a lot of money on marketing because Word of Mouth is the most
important marketing for Box Start-ups.
Based on the size of our market, our sales projections for the first year are $395,000. The
salary and wages for each of the co-owners will be 80,000. Subscription companies have doubled
and tripled their second year and VM projects to triple in sales in our second year to 900,000

2) Product/ Service Description

i.

VM clothing is a subscription based service offering to ship clothing to customers for a

$30 minimum/monthly membership, which is significantly lower than our direct
competitors monthly subscriptions. VM clothing has an app and website that will have a
variety of clothes patrons can choose from, so that they have their own customized image;
once the clothing is selected the items will be shipped out. The service entails that each
month the patron will receive a care package filled with 3 articles of clothing. Not only
will you be able to purchase top of the line VM clothing, we also have other indie start-up
clothing brands we have interest in partnership with, and there will also be expert stylists
that will be able to help the guide consumer purchases if they are having a hard time
deciding what they want. As young adults and students expand their taste and interests,
VM clothing brand aims to make their shopping experience easier and less time
consuming for their fast-paced lives. Online subscription based services have become the
new trend of business ventures, with the growth being more than 2.5 times every year, so
we are jumping ahead of the crowd to establish our place in the market before others
catch on.

ii.

Our direct competitors are Five Four Clothing, which is one of the few online
subscription models for clothing, but their costs are $60 dollars per month. What sets us
apart from other subscription based clothing brands is that we have new technology that
will analyze the photos and take the measurements of the consumer, charitable

partnerships with Good Will, and our subscription cost is half of what our competitors
charge. The technology we will offer is an app that allows the consumer to take a photo of
them and submit it to the website, taking their measurements so during each web order the
consumer will not have to take their measurements and input them into the computer, thus
making it easier on our customers. The idea is to license this technology, because its
applications only begin with fashion. The technology will even use the photo to show the
client what they would look like in the piece of clothing. Our charitable partnership with
Goodwill is a way to give back to the community at large. We will offer discounts ranging
from $5-$10 per month if the consumers send back articles of clothing that will be
donated to the Goodwill foundation. VM clothing has a strong stance on social justice, so
it is our duty to help those in need. We understand the fast-paced lifestyle of people
working, especially college students, so that is why we made our clothing affordable for
them.
ii.

Target Market and Customers

i.

The target audience for this company is men ages 18-26, being young professionals who
are tech savvy because they are more likely to be accustomed to online ordering. The
target market for VM clothing is the mens clothing industry, since they are not a really
established market in the online sphere of shopping as much as women are. College
students and young professional are always on the move and busy with their fast-pace
lives so we want to accommodate them with our service. We also really want to appeal to
males that attend schools that are not located near high traffic areas. Last year a record
21.8 million students were expected to attend American colleges and universities. 9.3
million students were males. Also, more students are expected to attend full time than part

time. According to the National Association of College Stores Approximately 87% of

students say the price of products is an important factor in deciding which stores they
shop.

ii.

In many cases the closest store to a college campus is a Wal-Mart roughly 30 minutes
away, so we want to target the male students that do not have easy access to clothing
stores. We would also like to target parents of the male students. The parents of the
students could buy our memberships as gifts for their sons, instead of giving them a care
package full of food; they will be getting a care package they can use over and over again.
While we will begin our marketing for mens clothing lines until we have established a
subscriber base, down the line we would like to take the opportunity to branch out to the
larger audience including womens fashion.

iii. Marketing & Sales Discussion

i.

We would market to those in our demographics. We would target college males 18-26,
and new graduates who are still broke. We would go to state school with a diverse
student population and set up a booth. With the diversity of the school, people would go
back home across the country, and spread the word. Word of mouth is the most powerful
form of marketing; yet it costs next to nothing. Also, college towns have very little places
to shop, and that is a big convenience factor for the consumers. Finally, not a lot of men
enjoy shopping, nor picking out their own clothes. With that booth, we would hand out
coupon codes, and advertise with passing out fliers. Also, we would work with big sport
teams at those schools and dress them for press conferences, and other events; which
would be using product placement.

ii.

Another way that our product would be marketed would be developing a sense of social
responsibility. Today, younger generations chose what companies they want to support
based off if they give back to the community. Our brand would give back, and create jobs.
If our customers send back old clothes that they no longer need, we would donate them to
Goodwill. We chose Goodwill over Salvation Army because Salvation Army doesnt
support gay rights; which is an issue many younger generations support. Also, Goodwill
gives jobs to those who have disabilities. The consumer would be rewarded with $5 off
their next box, or free shipping.

iii. Social Media is becoming more powerful each day. We would utilize social media such as
Facebook, Twitter and Vine. There would be a hashtag for our company; which allows us
to see what others are saying about our brand. The hashtag would be
#Storewithoutthechore, and any feedback we would receive would allow us to enhance
our company. Also, there would be a Youtube channel for updates on the latest trends for
men. Also, we can do different tutorials from different stylists.
iv. The service is subscription based but we want to make it seem inclusive because everyone
wants to be a part of an important club. When new members receive their first box we
would include a letter welcoming them; along with a card that says VIM (Very Important
Man.) Also, there would be a referral program. Either for every friend that is referred, the
customer gets $5 off their next purchase.
v.

We would not need a lot of money for marketing because social media is free. We would
have to endorse the athletes and, we would pay expenses for visiting different state
schools. Hotel stays, booths, food and travel expenses would be the main marketing
expenses we would have to make.

iv. Management and Operations Discussion

i.

Drew McManaman is the CEO of VM Clothing. He is a male college student, just like the
target audience. Ever since he graduated high school his parents have expected him to pay
for himself. It seemed as though all of the awesome deals were always online, but he
never wanted to buy the clothing because he didnt know how it was going to fit. VM
clothing is the solution to this problem. He has worked in food services and Starbucks. He
knows customer service. Customer service is what makes the company. If the company
doesnt demonstrate good customer service, the company will not survive. He has also
helped run basketball tournaments with more than 500 teams involved. He knows how to
take control and lead. He knows how to follow the trends and fashion. Who would know
better than the guy that hangs out with his consumers on a daily basis.

ii.

Jacob Weichert is operations manager of VM Clothing. He is a college student, working

as a manager of DePauls recreation facility. On a daily basis Jake monitors the shift tasks
of each of his co-workers and deal with issues that arise in the facility. He is also in the
Public Relations and Advertising program at DePaul, so he has done many projects that
have tested his ability to assess brand strength. Jake has managerial skills for group
efforts, customer service skills helping patrons/customers with any issues that come up,
and a PR background that makes it easier to make conscious decisions about the brand.
He knows from experience that if he could get clothes that were likely to fit, online rather
than in store, Jake would have gladly taken the opportunity because he doesnt have the
time to get down to the store all the time for some new clothes.

iii. Braden Nauman is the head of the brand management and lead designer at VM Clothing.
He is a male college student as well. He plans to focus his abilities in production for VM

clothing. Using his knowledge of web services and digital design, he can play a vital role
in developing the necessary software for building the VM clothing platform. As a graphic
design minor, he can also use his skill set to provide product packaging and overall brand
identity for the VM clothing name. As an avid online shopper he is very interested in the
next big breakthrough that can provide a better consumer experience. The way many
social media sites have utilized up and coming clothing company ventures today is both
exciting and promising. Many of his friends have begun working for startup clothing
companies, and he feels that these contacts could be utilized within VM clothing.
iv. Marielle Sarkan is the head of the marketing and social media departments of VM
Clothing. She is a female college student majoring in Public Relations. Her strength is
creativity in Marketing; along with social media. Her knowledge of the market is a benefit
of knowing how to market our product. Having prior experience in running social media
for a local business, she would also be in charge of running all social media platforms.
Running the Youtube channel, and having an interest in fashion would make her in charge
of coming up with tutorials, and other fashion trends that would be showcased on the
channel.
v.

Form of Business Ownership

i.

VM clothing will start from scratch, because the aim of this venture is to create a service
that stands out from the competition as a new brand of retail. It will be hard to establish
our brand, but once we have accomplished that we will set ourselves apart from the
competition as a reliable service provider. We thought long and hard about what form of
ownership would be appropriate for us and came to the conclusion that an LLC would
provide both financial and legal protection. An LLC will work for our legal structure

because it combines the unique qualities of a sole-proprietorship/partnership and a

corporate structure. While we will all be in this endeavor together, we are all liable for a
set portion of our initial investment, keeping us protected in extreme circumstances.
vi. Estimated Startup Expenses and Financial Projections
i.

The startup costs start with us taking out a $30,000 loan from the bank so that we can help
cover basic living expenses and establishing our business. The reason we opted to take
this big of a loan out was that we wanted to prepare to create a completely new business
while also being able to pay bills in the mean time before sales pick up. After the initial
costs of starting the business, we will have some recurring expenses we need to cover,
like paying for the production and distribution of our products as people order them as
well as the advertising for our business. Our major start-up costs will have to buy or rent a
localized headquarters/base of operations, get a sign/logo to distinguish us from our
competitors, and we need to pay for the initial legal costs of setting up our LLC. Patents
can cost a lot of money so when we establish our company we will have to pay for
copyrights to our name and the technology we are going to use. Some costs that will be
continuous will be utility bills, food costs, rent (for our own homes and the building), and
wages. Some bills that will be infrequent but will pick up as we are recognized are the
marketing costs and purchase of various supplies around the office.

ii.

Our projected sales include 2.5 times growth every year because research we have done
shows that subscription based services grow exponentially every year after they are
created. In the analysis for revenue we predicted that within the first year we would make
roughly 1000 customers, based on the growth of our competitors who now have a
staggering 40,000 patrons after 2 years. Our predictions/forecast of the expected revenue

is not optimistic because we wanted to see what the worst case scenario would be if we
were met with many expenses along the way, but even that foretold that our business
would be successful after several years of hard work. The business is forecasted to grow
from an $80,000 profit to a $2,000,000 profit over the course of 3 years, under extreme
circumstances so that makes our chances very good. It will take some time, but if it goes
according to the forecasted revenue, we will make a successful business after a couple of
years.

iii.

Break-Even
Analysis

2014

Sales

2015

2016

2017

$395,000

$900,00
0

$2,250,000

$5,625,00

$21,840

$54,600

$136,500

$341,25

$120,000

$300,00
0

$750,000

$1,875,00

$10,000

$30,000

$50,000

$70,00

$925

$250

$250

$25

Less Variable Expenses

Materials
Labor
Variable overhead
Other
Contribution Margin
Contribution Margin Ratio

242,235

515,150

1,313,250

61.33%

57.24%

58.37%

$80,000

$120,00
0

$160,000

3,338,50

59.35

Fixed Expenses
Salaries and wages

$200,00

10

Employee benefits

$10,000

$30,000

$30,000

$30,00

Payroll taxes

$5,059

$10,722

$20,399

$30,10

Rent

$5,400

$5,450

$5,500

$5,55

Utilities

$1,500

$1,500

$1,500

$1,50

Repairs and maintenance

$1,000

$1,100

$1,200

$1,30

Insurance

$1,000

$1,500

$2,000

$2,50

Travel

$1,000

$2,000

$2,000

$2,00

Telephone

$1,080

$1,080

$1,080

$1,08

$23,160

$57,900

$144,750

$361,87

$1,000

$1,100

$1,200

$1,30

$12,600

$64,550

$179,500

$476,95

Marketing/promotion

$5,000

$20,000

$40,000

$80,00

Professional fees

$1,000

$1,000

$1,000

$1,00

Training and development

$1,000

$1,000

$1,000

$1,00

Bank charges

$6,794

$6,794

$6,794

$6,79

Depreciation

$1,000

$1,000

$1,000

$1,00

Interest Expense

$1,500

$1,500

$1,500

$1,50

$0

$0

$0

Postage
Office supplies
Advertising

Other
Total Fixed Expenses
Total Fixed Expenses Ratio
Break-Even Sales

159,093
40.28%
259,424

328,196
36.47%
573,379

Break-Even %

65.68%

63.71%

Operating Profit

83,142

186,954

600,423

1,205,44

26.69%

21.43

1,028,709

2,031,04

45.72%

36.11

712,827

2,133,05

0.
vii. References
i.

Market:
i.

In recent years, the market for subscription style start-ups has seen expansive rapid
growth. Due to the unspecific nature of potential niche categories within this market it
is difficult to determine a limit to its overall size. VM Clothing will operate under
both styles of commerce within the subscription market: Sample & Brand owned. VM

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will initially benefit by partnering with various local clothing brands, effectively
offering unique clothing options without the production expenses. Other reputable
subscription commerce companies such as Birchbox have doubled in size in as
quickly as six months. With this potential for expansion, VM will plan to develop its
own individual brand to encompass the full market. As the VM entity grows, the
ability to capture venture capitalist investors will become a viable option. For
comparison, recent subscription start-ups including BirchBox, BarkBox, and Dollar
Shave Club received investments of $11.9 million, $1.7 million, and $1 million. The
most important aspect for VM to consider throughout the initial stages of development
will be the commitment of their target market. The membership theme suggested by
VMs service is the main component of promoting recurring revenue. This is a factor
to emphasize as our budget is designed allotting for major expenses such as shipping
costs and packaging.
ii.

Technology :
i.

The technology featured within laser surveying has been around for some time,
although it has yet to break into the cellular application market. It has been rooted
within the everyday use of architects, surveyors, even the avid golfer who has
invested in a distance finder. In December 2013 a tech company IkeGPS began
development on an application that will function as a virtual measurement tool. The
application is designed to function on large-scale building structures, but we believe
that the technology could be reformatted for smaller measurements. In the case for
VM Clothing, a separate laser apparatus would be unnecessary because it would not
need to fire 200 yards to record a distance. This allows for several different methods

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of photo measurement based on data reference within the programs camera function.
Based on these assumptions, a standard reference could be created and used to
compare user sizing. From this, specific apparel items could be integrated and
evaluated for length, width, and overall fit.

Source:
http://www.gizmag.com/spike-laser-measurement-smartphone/30218/
http://www.huffingtonpost.com/2013/09/19/college-carepackages_n_3958721.html
http://www.inc.com/kristin-luna/the-subscription-box-model-goeslocal.html
http://business.financialpost.com/2014/02/03/need-recurring-revenuethink-subscription-boxes/?__lsa=5cea4edchttp://subscriptioncommerceinsider.com/subscription-commercemarket/
http://thecorpsec.files.wordpress.com/2012/03/llc-annual-costs-bystate2.pdf
https://www.trustedchoice.com/business-insurance/comparecoverage/cost/
http://www.entrepreneur.com/article/76418

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http://www.bizfilings.com/toolkit/sbg/startup/planning/planning-financialstatements.aspx
http://pando.com/2014/05/01/bootstrapped-profitable-five-four-clothingdumps-retail-finds-subscription-fashion-groove/
http://office.microsoft.com/en-us/templates/results.aspx?
qu=start+up&ex=1
http://www.uline.com/BL_413/Large-Side-Loaders
http://online.wsj.com/news/articles/SB123440697707875869
http://www.entrepreneur.com/article/54436

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