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Indische Guitars

January 5, 2016

Contents
Executive Summary.................................................................................................... 3
The Company................................................................................................................ 3
Corporate Plan.............................................................................................................. 3
Introduction................................................................................................................ 4
Industry......................................................................................................................... 4
Mission Statement........................................................................................................ 5
Goals & Objectives........................................................................................................ 5
Store Hours................................................................................................................... 6
Location........................................................................................................................ 6
Floor Plan...................................................................................................................... 7
Business Cycles............................................................................................................ 8
Average Business Day............................................................................................... 8
Average Business Week............................................................................................. 9
Average Business Month............................................................................................ 9
Average Fiscal Year.................................................................................................... 9
Supply Analysis........................................................................................................ 10
Capital Budget............................................................................................................ 10
Table 1 Capital Cost Expenditures............................................................................ 10
Operating Expenses.................................................................................................... 11
Table 2 Monthly Operating Expenditures...............................................................12
General Manager........................................................................................................ 12
Sales & Repair Staf.................................................................................................... 13
Scheduling.................................................................................................................. 13
Labour Costs............................................................................................................... 13
Table 3 Labour Cost Projections............................................................................. 14
Training....................................................................................................................... 14
Products & Services.................................................................................................... 15
Pricing......................................................................................................................... 15
Promotions.................................................................................................................. 16
Place........................................................................................................................... 16
Positioning, Targeting & Segmentation.......................................................................16
Specific Market Analysis............................................................................................. 17
Marketing Strategy..................................................................................................... 17
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Selling & Advertising................................................................................................... 18

Table 4 - Marketing Budget......................................................................................... 19
Financial Structure...................................................................................................... 20
Owner Compensation.................................................................................................. 20
Sensitivity Analysis..................................................................................................... 20
Financial Analysis........................................................................................................ 20
Conclusion.................................................................................................................. 21
NOTES...................................................................................................................... 25

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Executive Summary
The Company
This new guitar production unit aims to penetrate the Kolkata/India music and guitar
market by ofering new styles of guitars to hungry guitarists at competitive and
afordable prices. Being incorporated, this company will look to attract guitarists of all
sorts of ages and genres that are seeking a way to aford good quality guitars and their
coveted sounds.

Corporate Plan
Our goal is to supply the city/country with a guitar-specialized production unit that
provides uniquely produced guitars that are of exquisite look and sound to customers
looking to aford them. We want to have our workshop in place by second-quarter of
2016 in the location around suburbs of Kolkata. We would currently be the only highquality electric guitar manufacturer in the city, so it is important that we start with a
proper goal in mind.
The goal in the first couple of years is to remain feasible and operate with a positive
cash flow to sustain growth in the subsequent years. We will use diferent advertising
and promotional mediums to reach the desired target markets in the city. If the first few
years prove successful, then the company could look into expanding outside of just
guitar inventory and obviously shifting into other instrument inventories as well.
Financially, the business must provide the owners/managers with an income that is
greater than what their opportunity cost could be in doing what they are currently
doing. It must be worth the risk to them that there is solid chance of greater income in
this business. The strong predictions and financial models look favorable when
accompanied by sales and marketing experience.
The following is a plan that explains everything necessary to the business including
operations, marketing and key financial plans. It serves as a proposal to the business
and whether it is something worth pursuing. Financial models will be attached in
spreadsheet form to go along with this report.

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Introduction
Industry
The musical instrument industry in Kolkata covers a vast amount of area including
wind, brass, percussion and string instruments as well as their respective accessories
and sound equipment requirements. The guitar industry specifically narrows focus to
electric and acoustic guitars, guitar amplifiers, pedals and respective accessories
(strings, picks, cables and sheet music). Industry research done by us shows that
musical instrument retailers achieved a third consecutive quarter of sales growth in the
first quarter of 2015. This growth is being driven by guitars primarily due to its
explosion in becoming the instrument of choice for young musicians as well as for
musical schools. Figures compiled from all over India as well show growth in the
industry with increases of between 50,000 and 200,000 guitars purchased in 2015
compared to 2010. The growth of the sales of budget fretted instruments have risen
3.6% this past year. It is a strong sign for guitar and music retailers to see consistent
growth in the industry, especially for prospective small business entrepreneurs looking
to enter the market.
Lower average prices for guitars have sparked a growth in guitar purchases by both
ends of the age spectrum. More and more youth are starting out with guitars due to
influences such as Guitar Hero, and more young players have begun to form bands
once again since their school days. The reason for this being that these people now
have disposable income that allows for easier purchases of guitars and equipment than
a few years before. Demographics therefore have made for a larger and more
expansive market for opportunity.
Music and guitars have always been an intriguing and popular hobby, even profession
that has continued to attract both young and old to the art. Guitars have endured the
test of time and are still a necessity for almost all music genres. Rarely ever will a
person hear a track recording that has not included the work of a guitar to some extent.
Guitar is a skill that requires patience and work, with results that open the door for so
much musical opportunity. It is art that has many diferent styles and techniques that
an individual can discover on their own. Each guitarist is unique and can create his/her
unique sound for recreation, hobby or even profession. The endurance of these
instruments has made them a continuous powerhouse for instrument choice and
continues to drive bands as well as music industry growth. There will always be those
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both young and old who discover their love for the guitars catchy rifs and sweeping
solos, meaning a market that will continue to endure over time.

Mission Statement
Indische Guitars is committed to supporting the music sector within India by serving
its new and distinguished guitarists through the supply of uniquely produced budget
guitars, Exquisite custom made guitars and repair servicing. All of this through a
friendly and knowledgeable-local staff dedicated to providing the best service to our
customers.

Goals & Objectives

Efectively establish an image and brand that is well respected and known

among local guitarists

Serve Kolkatas guitarists with uniquely afordable guitars and necessary post-

sales service
Help to increase the amount of aspiring guitarists in Kolkata and encourage other

musicians to also try guitar

Support local guitarists and artists by providing them with some service and

equipment
Maximize sales by the 3rd year of operation
Achieve a consistent number of equal to or over 10 customers per week

spending on average Rs. 25,000 by the 2 nd-3rd year of operation

Become profitable and pass break-even by the second year of operation

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Operations Plan
Indische Guitars will be both a direct sales company that will specialize in selling
uniquely produced budget guitars and custom made higher end instruments to the
established and prospective guitarists of Kolkata, India. Sales will be achieved through
both in-store, personal contacts and endorsements. Our staf will be very hospitable to
the customers as well as providing them with product knowledge and expertise. Our
instruments (be it budget or high-end) will aesthetically attract customers and close
sales through easy navigation and informative product descriptions.

Workshop Hours
Monday- Friday

10am 7pm

Saturday

10am 4pm

Sunday

Closed

We want to accommodate the high level of customer relations that Indische has aimed
to achieve and we shall do that by having atleast two consistent employees working
during hours of operation. The work will be divided to individual expertise to act as
Luthier, providing sales, marketing and bookkeeping needs of the company. Each of our
unique backgrounds provides the skillset needed to efectively start-up and run the
business. With the need for excellent repair service for customers, another employee
with knowledge of guitar electronics and mechanics will be hired to conduct both
repairs and additional sales service.

Location
Indische Guitars will be located in the suburbs, Kolkata, at a commercial property. The
location will be a commercial space of 2000 square feet that will be leased at current
viable market rates per square foot including basic utilities. In total, the monthly cost
for lease will be around Rs. 20,000. We will choose this location based on the following
reasons:
1. Financial Flexibility The location should be relatively inexpensive for the area,
providing

adequate space and excellent positioning for the start-up all for a

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price that will give the owner more flexibility in budgeting. The building should
provide the preferable size for inventories and space requirements as well.
2. Distance Relative to Competitors Indische Guitars will be situated at a minimum
15 kilometers from its nearest competitor.
3. Instruments - The distance will allow for more freedom of movement in our
marketing strategies and customer relations as there is and will be an
established and developing customer base in that area of the city.
4. Convenience The workshop would be situated in a convenient location for
potential customers to visit and the area should provide the needed consumer
traffic for the businesss sales goals.

Floor Plan

Figure 1
The proposed floor plan for Indische Guitars is designed to have an appeal and feel that
well-suits production, finishing and setup experience. There will be a main production
space where inventories will be held and viewed allowing for a very smooth-flow of
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production traffic on the floor as shown in Figure 1 above. There will also be places
where customers can test out guitars that they are interested in. This area will be
located in a partitioned section from the main area, containing guitars and amplifiers.
Raw materials like wood stocks will be held in racks for easy viewing and access. There
will also be a separate portioned room for spraying finishes. A separate room will be
partitioned of to act as the setup and service area and a final room will be there to act
as the business office.

Business Cycles
Average Business Day
Typical business days at Indische will be very similar year-round. The owners/managers
will check over necessary inventory lists and store needs such as product placement.
The schedule and target for the week will be set on every Monday morning with a short
meeting. Production each day will commence with specific tasks involving choice and
sorting of wood to what hardware to be used with which finish and details of such
production targets will be put on specific tabulated forms to be displayed in the main
production area for convenience of each workstation. The daily stock and equipment
inventory will be maintained in promoting the sales of the inventory. All the employees
must know the ins and outs of each instrument produced as Guitarists will have more
respect for knowledgeable staf that are willing to spend time discussing the products in
question. Weekends will be of lower workload to provide the staf with better and
relaxed work environment.
Time for the other sales/repair work that will have been brought in on earlier occasions
will be allocated separately. The weekend will conclude with another small meeting to
update bookkeeping, marketing strategies and daily purchase orders for inventory as
well as handling sales duties if any are needed. The cleanup and preparation of the
work floor if necessary for the next day as well as making final inventory purchase
orders based on inventory sold during the day, will be done before closure.
Average Business Week
The owners/managers will have some major duties during a weeks time in the business
month including inventory management and payroll. The owners/managers will have to
be making inventory orders for guitars, equipment on a daily basis in order to make
inventory delivery and payment staggered and easy to operate. The advertisements
and online updates will also need to be conducted by the owners/managers during the
week in order to be prepared for the following week. Payroll will also need to be done
bi-weekly, but, for only two staf, it will be relatively quick and simple task.

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Average Business Month

Moving from month to month will not involve much change required tasking. Since our
business will not be seasonal, we do not have to worry about radically changing
inventories that will be stocked. Monthly sales and inventory analyses will need to be
done for each month as to which guitars and product line were most popular with
customers in order to stock accordingly for the next month. The owners/managers will
produce statements indicating these results and will provide them to the shareholders.
Customer feedback will also be important in determining the type of guitars that will be
stocked if they are available. It will also be necessary for the owners/managers to
conduct monthly environmental analyses of Kolkata and its demographics in order to
plan marketing strategies accordingly.
Average Fiscal Year
The year-end financial statements will need to be prepared by the owners/managers
once a year, most likely at year-end on March 31 of each year. The complete business
analysis will also be produced to examine sales, marketing eforts, successes, failures
as well as an external demographic analysis. These year-end analyses will be the driver
on necessary changes to the diferent divisions of the business. It will tease out
strategies that are not yielding sales and inventory products that are not selling. In a
general sense, it will help to remove inefficiencies within the business, allowing for
better-spent finances and for more fruitful strategies/sales to be used.
Supply Analysis
All inventory in the line will be purchased from respected manufacturers that have
strong reputation amongst the music and guitar industry. Woods will be purchased
specifically from reputed suppliers both local and overseas. All the required parts and
electronic components will be purchased in bulk from wholesalers to reduce costs. All
products will be purchased directly from manufacturers which eliminates middleman
costs. These manufacturers (suppliers) have been chosen based on brand, quality,
product availability and overall service level. New suppliers will be proposed and
analyzed by the staf to determine if they should become aligned with Indische.

Capital Budget
The total capital requirement for Indische Guitars is Rs. 2500000.00. This cost includes
leasehold, improvements for the space assumed, machinery, stock, including computer
equipment and custom design costs. The detailed schedule of these costs is found in
Table 1. Inventories are estimated based on the Rs. 25000 per guitar cost and
averaging prices for custom inventories. This inventory cost breakdown can be found in

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Cost of Goods Sold - Appendix A. There will be no accounts receivable as all payments
involving only cash will be accepted both in-shop. Accounts payable is based on the
purchase of these inventories from manufacturers. The bulk of the capital costing is
attributed to inventories. The liquidity value of these inventories after processing is
much higher than their cost, meaning that profits will increase high above purchase
costs. For example, we foresee high margins for the sale of guitars as we can increase
price based on their cost to purchase raw materials in bulk.

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Table 1 Capital Cost Expenditures

Description:
Rent/Lease agreement
Incorp. Expense
Custom Stationary
Machinery
Total Business Space Costs

Estimated Cost

200000.00

Furniture and Fixtures:

Computer
Racks
Shelving
Stools
Work Counter/Benches
Office Supplies
Printer
Inventory Hangers
Spraybooth
Total Furniture and Fixtures

25000.00
10000.00
8000.00
2000.00
15000.00
5000.00
3000.00
5000.00
20000.00

Working Capital:
Inventories
Accounts Payable

500000.00

Total Net Working Capital

Total Capital Requirements

Operating Expenses
Indische will be open 6 days every week for 52 weeks a year obviously excluding
statutory holidays. The estimated monthly operating costs are listed as follows in Table
2. Insurance will be necessary for the inventories as there will always be risk of damage
due to vandalism, accident or weather conditions. We do anticipate that advertising
expenses could rise if opportunity to reach more customers presents itself. Parts and
tools inventory supplies will be a continuous expense and will likely vary each month in
connection with the amount and nature of sales and orders. As you can see, monthly
operating expenses are kept relatively low with wages and repair parts and tools taking
up most of the cost.

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Table 2 Monthly Operating Expenditures

Business Space:
Building Lease/rent
Production/Floor
Expenses:
(20 units)
Electricity
Guitar Parts Inventory
Supplies (stains, paints,
glues)
Internet
Telephone
Office Supplies
Insurance (Space & Product)
Advertising
Consumables
Other Variable Costs
Total Sales/Floor Expenses
HR Expenses:
Employee Salaries
Employee Benefits (15%)
CCA
Total HR Expenses
Total Operating Costs

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Estimated Costs
25000.00

300000
1000.00
2000.00
1000.00

5000.00

25000.00
To be provided
after 6 months

Indische Guitars

January 5, 2016

Marketing Plan
Products & Services
Indische Guitars will be a unique value guitar manufacturer that will provide afordable
products, knowledgeable and engaging staf and excellent service in Kolkata Indische
will sell to a specific market carrying uniquely creative guitars making models with high
quality configurations very afordable.
We will also provide the customers, custom designed high-end instruments with them
having complete control over creative decisions, wood, finishing, hardware and
electronics choices.

Pricing
Indische will be entering a competitive music and instrument retail industry within
Kolkata. In the city, there are a number of smaller music and guitar shops mostly
located in the North and Central areas of the city. Notable competitors include Hobmer,
Givson, Yemaha, etc. which provides an array of guitars as low-quality, low-budget
instruments to a large consumer base. Appendix B shows the current competitor
analysis within Kolkata.
Indische will look to target the influx of low-priced branded (Squire, Epifone, Ibanez,
etc) instrument influx from Chinese manufacturers, using a mix between penetration
pricing and value-based pricing to enter the guitar retail industry in Kolkata. The
strategy is much diferent than almost all usual music and guitar retail stores because it
is based on the unique value of each guitar. Indische will be focused on selling uniquely
produced guitars for a price that will create lots of margin whilst still creating a lot of
value to the customers. With the ability to produce these guitars as factorymade highgrade low priced instruments, it is feasible to sell them at a cost-plus price. (i.e. sell at
a margin of 12-25% over production costs). The advantage of using this strategy is that
guitarists especially take a personalized view to their guitars, and by providing unique
guitars for them to purchase, we will create value for them and profit for our business.
The feasibility of the business is centered on this concept.
The pricing strategy for repairs will be competitive pricing, as there are no lost margins
for repairs, we will charge prices that equal to or just below are industry averages for
repairs

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Promotions
Indisches promotion strategy will be based on the specific pricing and services
strategies for the divisions of products. We aim to be to be recognized as a unique
guitar manufacturer that sells guitars that no one else will ever have, providing
knowledgeable service and repairs for its customers as well. We will focus on our
competitive advantage to get our name out to the market of guitarists and musicians.

Positioning, Targeting & Segmentation

The target market will be residents of Kolkata and all over India. Kolkata is a breeding
ground for up and coming musicians looking for good quality budget instruments and
this financial constraint often limits them to a Chinese manufactured low-quality
branded product. Our segmentation will look to target this population as our primary
customer base. With our prior personal contacts eminent local guitarists will also be
ofered various lucrative endorsement deals to further the sales and circulation of
Indische guitars.
Specifically, we will aim at targeting people aged between 12 and 55 focusing on
younger individuals who are up and coming guitarists who are searching for ways to
aford popular guitar models and sounds and on middle-aged individuals-mainly men
who have been playing for many years.
Our positioning statement will read: For aspiring guitarists, Indische Guitars provides
excellent-sounding and uniquely manufactured guitars from the best-known woods and
parts at afordable prices along with diligent after sales repair services. This positioning
statement communicates our intentions and ofering as well as how we diferentiate
from other guitar manufacturers in the area.

Specific Market Analysis

The demographics of Kolkata also show that there is a growing customer base that is
eager to get into music and specifically, guitars. With Indische producing top quality
instruments at afordable prices and with a targeted marketing and circulation strategy
we are sure to surpass sales for similarly priced lower quality Chinese products.
The current most selling brand is Ibanez in Kolkata with Squire coming a close second,
with their most selling instruments ranging between Rs. 18000-25000 and with our
instruments ranging in the vicinity but with much higher quality of construction,
hardware and electronics, we are sure of reaching our target demographic.

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Marketing Strategy
The objectives of Indisches sales and profits are respectively:

Maximize sales by year 5

Reach monthly sales of 15-20 guitars
Earn an average owner compensation salary over the first 5 years, keeping in
mind the first years extra equity will eventually have to be paid of

There are two channels of distribution for Indische Guitars, in-store purchasing and
personalized demos. The in-store, direct model of purchasing will be the most
prominent for the business because customers will get to experience the quality of the
Indische instrument as well as being able to try out the guitars first-hand against
commonly available options.
Indische wants to establish itself as the new, unique and quality guitar manufacturer in
Kolkata. With the strategy and foreseen success for the business, new customers may
enter the market over time. The location and new selling strategy will place Indische in
a strong position within the market, which will have to be continuously evaluated in
order to maximize position on a consistent basis.
Indische can meet its objectives by achieving the forecasts shown in the financial
model. It must reach a sales level of 20 units per month in year one and increase it to
50 units per month by year 5. The sales predictions are fairly conservative with the
base case in the first year being 10 customers per fortnight spending Rs. 25000 each.
This is made more achievable by the repairs sector of the business. The advantage of a
greater margin in guitars will be a strong advantage as these margins are not
attainable for comparably priced guitars from competitors.
Indisches diferent methods of selling guitars will distinguish it among competitors and
will be difficult to duplicate.

Our reputation will be built upon our ability to ofer

personal and knowledgeable customer service as well as our uniquely produced guitar
inventory provided to the customers.

Selling & Advertising

The main advertising objective in the first two years of business will be to create
awareness in the city and to persuade customers that we ofer unique and quality
products as well as personalized customer service. In the following years, advertising
objectives will focus on cementing Indisches brand in the minds of the citys
consumers. Exposure is key for the business, so most of the advertising methods have
been focused on creating more and more awareness.
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The diferent advertising channels that will be used will include:

Newspaper/Magazine Advertisements This type of advertising specifically in
newspapers and on newspaper sites that focus on the arts and music will reach some of
the market we are targeting although large responses from these are not expected
when compared to other mediums. These ads are inexpensive and can last for the
duration of the 5-year plan changing with new oferings and promotions done by our
store.
Social media The internet is obviously the largest and fastest growing advertising
channel in the world. Consumers almost expect their prospective stores to have some
sort of web presence where they can scout and purchase possible products from their
home. Indische aims to set up a professionally designed profile that will display info,
products and promotions in an aesthetically appealing way. The page also serves the
purpose of boosting sales through the availability of online quotes and personalized
chats.
Online Advertisements In addition to having a website, it will also be beneficial for
our business to purchase advertisements on popular guitar websites such as ultimateguitar.com where many guitarists from around the world can be exposed to the
awareness for our brand
Posters Posters provide unique one-on-one advertising in strategic places around
Kolkata. Our primary focus is to place them in music venues and bars around the city
where aspiring musicians and starter bands can learn about the new guitar store in the
city that wants to form a relationship with them. These posters will have eye-catching
graphics as well as basic information about the competitive advantages.
Sponsorships We will sponsor a few local musical events to create buzz. We will ofer
discounts on our products to sort of kick start our business in Kolkata. We will promote
this long before it happens in order to have maximum awareness for the event.
All of these associated costs are detailed in Table 4 the Marketing Budget

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Financial Plan
Financial Structure
To finance the near Rs. 2500000 required for start-up, we will use a combination of
equity and financing from proven willing backers to provide the equity who are in
support of the business, they will loan the money and expect payment back in time
with due profits.

Owner Compensation
The dividend of the company will primarily go out as owner compensation, making it
a determinant of success for the company. Alternatively, funds could be poured back
into the company once there is a positive net income.

Financial Analysis
The large average owner compensation suggests that the business will be significantly
profitable in future years. The large average compensation can be attributed to the
high equity investment in the first year. As shown in the figure below, the breakeven for
customers per day for the workshop can occur in between years 1 and 2, showing a
strong position for the future years. Projected cash flows indicate that costs will be
covered especially inventory costs. The provided financial model will show these
statements further.
20
18
16
14
12
10
8
6
4
2
0
1

Conclusion
The city of Kolkata is ripe for a specialized guitar manufacturer to enter its market.
Indische Guitars plans to change the scene by ofering a unique type of guitar inventory
that will attract guitarists from all around. A detailed financial analysis of this proposed
business proves that Indische Guitars is feasible and has the opportunity to attain
profits and deliver a quality service and product line to its customers.
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Appendix A: Cost of Goods Sold

Item
Cost
p.m.
Body Blank
500.00
12500
Neck Blank
300.00
7500
Fretboard Blank
400.00
10000
Pickups
6000.00
150000
Bridge (Floyd Licensed)
1700.00
50000
Machine Heads
1500.00
42000
Electronics
250.00
6250
Misc. parts costs
800.00
20000
Paint/Finish
250.00
6250
Gig Bag
300.00
Electricity consumed (calculated as per 25 units
400.00
produced per month)
Logistics
500.00
Other incurred costs
250.00
TOTAL
13650.00
Costs approximated as per bulk purchase and production for minimum of 20-25
units per month.

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Appendix B: Competitor Analysis

Competitor

Positioning

Prices

Squier

Epiphone

Cort

Ibanez

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Appendix C: Kolkata Age Demographics

Median Age 2006

2014 (%)

City of Kolkata

36.1

36.0

Kolkata Census Metropolitan Area

36.4

36.5

West Bengal

36.0

36.5

India

39.5

40.0

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NOTE
S

Salaries of workers to be included as monthly operating expenses of the

business.
Sales made to shops are to be considered as Credit Sales and amount to be
added to Debtors under Current Assets.
Rent estimate to be taken at around Rs. 25000

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