Majestic

BUSINESS PLAN

Business Plan Prepared By Sovattey Enn CEO 1400 South Congress Austin, TX 78704 512-237-8434 E-mail: Sovattey@majesticstore.com Website: Majesticstore.com Date Prepared March 20, 2011

Business Plan
Table of Contents EXECUTIVE SUMMARY ...................................................................................................... 4 MANAGEMENT AND ORGANIZATION ........................................................................... 6 Management Team..................................................................................................... 6 Compensation and Ownership ................................................................................... 6 Board of Directors/Advisory Council ........................................................................ 6 Infrastructure .............................................................................................................. 7 Contracts and Franchise Agreements......................................................................... 7 Insurance .................................................................................................................... 7 Employee Stock Option Plan and Other Incentives ................................................... 8 Organization Charts ................................................................................................... 8 PRODUCT/SERVICE .............................................................................................................. 9 Purpose of the Product/Service .................................................................................. 9 Unique Features ......................................................................................................... 9 Stage of Development ................................................................................................ 9 Future Research and Development ............................................................................ 9 Trademarks, Patents, Copyrights, Licenses, Royalties ............................................ 10 Government Approvals ............................................................................................ 10 Product/Service Limitations..................................................................................... 10 Product/Service Liability ......................................................................................... 10 Related Products/Services and Spin-Offs ................................................................ 11 Production ................................................................................................................ 11 Facilities ................................................................................................................... 11 Suppliers .................................................................................................................. 11 Environmental Factors ............................................................................................. 11 MARKETING PLAN ............................................................................................................. 12 Industry Profile ........................................................................................................ 12 Growth Potential .......................................................................................... 12 Geographic Locations .................................................................................. 12 Industry Trends ............................................................................................ 12 Seasonality Factors ...................................................................................... 13 Profit Characteristics................................................................................... 13 Distribution Channels .................................................................................. 13 Basis of Competition .................................................................................... 14 Competition Profile .................................................................................................. 14 Customer Profile ...................................................................................................... 15 Target Market Profile ............................................................................................... 15 Pricing Profile .......................................................................................................... 16 Gross Margin on Products/Services ......................................................................... 17 Market Penetration ................................................................................................... 17 Sales Representatives ................................................................................... 17 Direct-Sales Force ....................................................................................... 18

Business Plan
Direct Mail/Telemarketing........................................................................... 18 Advertising and Promotion ...................................................................................... 18 Packaging and Labeling ........................................................................................... 18 Service and Warranties ............................................................................................ 18 Trade Shows............................................................................................................. 18 Future Markets ......................................................................................................... 19 OPERATING AND CONTROL SYSTEMS ........................................................................ 20 Administrative Policies, Procedures and Controls................................................... 20 Receiving Orders ......................................................................................... 20 Billing the Customers ................................................................................... 20 Paying the Suppliers .................................................................................... 20 Collecting the Accounts Receivable ............................................................. 20 Reporting to Management............................................................................ 20 Staff Development ........................................................................................ 20 Inventory Control ......................................................................................... 21 Handling Warranties and Returns ............................................................... 21 Monitoring the Company Budgets ............................................................... 21 Security Systems ........................................................................................... 21 Documents and Paper Flow ..................................................................................... 22 Planning Chart ......................................................................................................... 22 Product/Service Development ...................................................................... 22 Manufacturing.............................................................................................. 22 Financial Requirements ............................................................................... 22 Marketing Flow Chart ................................................................................. 22 Market Penetration ...................................................................................... 22 Management and Infrastructure .................................................................. 23 Risk Analysis ........................................................................................................... 23 Salvaging Assets ...................................................................................................... 23 GROWTH PLAN .................................................................................................................... 24 New Offerings to Market ......................................................................................... 24 Capital Requirements ............................................................................................... 24 Personnel Requirements........................................................................................... 24 Exit Strategy............................................................................................................. 24 FINANCIAL PLAN ................................................................................................................ 25 Startup Cost Worksheet ........................................................................................... 25 One-time startup expenses...........................................................................25 First three months.......................................................................................26 Break-Even Analysis ............................................................................................... 27 Source Funds ............................................................................................................ 28 SUPPORTING DOCUMENTS ............................................................................................. 29

Business Plan

EXECUTIVE SUMMARY Venture History The idea for Majestic was conceived in January 2011 after the founder, Sovattey Enn, experienced difficulty finding fashionable dresses and skirts that fit well. The company is being formed to provide young women a wide selection of sexy and elegant apparel at affordable prices. Majestics mission is to offer luxuriously looking clothes that will showcase a womans femininity, highlight their beautiful form and uplift their confidence. Venture Description Majestic is in the boutique clothing industry specializing in glamorous apparel for social occasions. The venture is currently in the conception phase and is seeking to raise funds to build out development. Majestic will enter the apparel market by creating a unique product line called The Orchid, primarily consisting of dresses that are designed with an Asian theme. The company will have a physical retail presence in Austin, Texas and will supplement sales through an e-commerce channel. The physical store will provide a unique atmosphere by including a small social lounge. Venture Organization The company will operate as an LLC in order to gain benefits inherent to a corporation without having to experience many of the drawbacks of actually being a corporation. The CEO, Sovattey Enn, will be the sole owner and has over a decade of working in the customer service industry. Ms. Enn will lead Linda Smith, the assistant manager, who has many years of experience managing small teams. The company will work closely with a talented advisory board, which includes Michael Marston, a successful serial and retail entrepreneur. Venture Market The apparel industry in the United States is a $150 billion dollar market with over 100,000 stores. A majority of the revenue is owned by the top 50 companies, including TJ Maxx, Marshals and Gap. Locally, Austin has 1,246 apparel and accessory stores operating in a $1.9 billion dollar market. The target demographic is primarily young ladies aged 18-34 with an annual income of $20,000$60,000. These ladies are often students and young professionals seeking elegant apparel for their social nightlife. Secondary customers will be seeking products for more casual activities such as formal dining and events. Majestic will have an advantage in this demographic since Austins population of women in this range is roughly 19% higher than the national average. This industry is highly competitive with the main competitors being national brands, such as bebe, BCBG and Guess by Marciano. These companies have strength in their size and brand awareness but have weaknesses in their high pricing and lack of unique product lines. Majestic

Business Plan

will differentiate itself by offering unique products based on specialized Asian designs. Prices will be competitive and the company will build a loyal customer base by advertising locally to targeted residents. Majestic will also run promotions that provide incentives for first time buyers, which will help penetrate the market. Venture Operations Majestic will need an initial $500,000 in capital to effectively enter this business. This money will be used to construct the physical store, stock inventory, execute the initial marketing promotions, and build the e-commerce store. This money will also cover an estimated expense of $169,200 in fixed costs and operating expenses such as insurance, salaries, and rent. After three years, the company will become profitable and self sustainable. Venture Financing The type of financing that will be needed is mostly loans. Approximately 80% of the investment will be raised through family and friends with about 20% coming from traditional investment firms. Money will start to be paid back after the third year and will be completed over a 10 year period. Majestic has not raised any money to date.

Business Plan

MANAGEMENT AND ORGANIZATION Management Team Sovattey Enn will be the CEO and president of Majestic. She will be responsible for organizing, coordinating, and controlling the finances, sales, management, and customer relationship department. Linda Smith will be the assistant manager, who will be assisting Ms. Enn with interpreting sales information, analyzing competition, actively promoting the business and maintaining the store. Her duties will also include training employees, managing inventory and daily upkeep. Ms. Smith has owned her own retail business and has over 10 years of experience working with public relation and marketing firms. Compensation and Ownership This is a limited liability company. Sovattey Enn is the sole owner of Majestic. Serving as the president, she will receive an annual salary of $30,000. Management Team President Assistant manager Name Sovattey Enn Linda Smith Annual Salary $30,000 $40,000

Board of Directors/Advisory Council The company will have an Advisory Council comprised of Michael Marston and Caron Spatola. The advisory role will require a term of service for two years and will be obligated to contribute a minimum of four hours per month. Advisors will be called upon when council is needed. There will be no Board of Directors at this time. Advisor Michael Marston Caron Spatola Expertise Information technology and business strategy Online fashion retail business Phone number 512-913-4637 512-554-8473 Address 575 East 9th St Austin, TX 78701 78 West 5th St Austin, TX 78701 Compensation $800 annually $500 annually

Business Plan

Infrastructure Majestic has built relationships with different firms who will provide professional services for the business. Firm Attorney at Law Specialist Attorney Representative John McDuff Address/Phone 100 Congress Avenue, Suite 2100, Austin, TX 78701 (512) 457-1177 3315 RR 620 South, Suite 120, Austin, TX 78738 (512) 634-8134 81 Lisburn Road Harrisburg, PA 17101 (717) 652-4673 Compensation $500 annually

Law Office Of Jerry Rios, P.C.

Accountant

Jerry Rios

$300 annually

Insurance consultant

Insurance

Jack Scott

$200 annually

Contracts and Franchise Agreements Majestic will enter a five year leasing contract for 1,200 square feet of retail space on South Congress. The price will be $25 per square foot, NNN. Thus, the charges will be $2,500 for the base rent plus an estimated 40% to cover the NNN, which is an additional $1,500. The total will be $4,000 per month (LoopNet, 2011). All employees will be required to sign a standard employment agreement. This form will be a legally binding contract between employer and employee that documents general terms of employment (Sack, 1995). Insurance General liability will be provided by Liberty Insurance for the price of $50 per month. This will cover up to $1,000,000 in liability. Health and dental coverage will be provided for Ms. Enn, Ms. Smith and Ms. Lang through BlueCross BlueShield of Texas. Each of these full-time employees health insurance will be $148 per month, of which the company will pay 80%, equivalent to $118.40 per month. The company will also provide full dental coverage, which will be $20 per month. Thus, total health and dental coverage for each employee will cost Majestic $138.40 per month.

Business Plan

Employee Stock Option Plan and Other Incentives Employee stock options will not be provided since LLC companies are prohibited from issuing stock options. To provide incentives, all employees will be eligible to receive a bonus, not to exceed 10% of their annual wages. The amount of each recipients bonus will be determined at the owners discretion only upon a profitable fiscal year. Organization Charts Ms. Sovattey Enn will be the CEO of Majestic. Ms. Enn has over ten years of customer relationship experience and has studied Fashion Retail Management at the Art Institute of Austin. Ms. Linda Smith will be the Assistant Manager. Ms. Smith has over a decade of experience managing small teams and leading sales and marketing organizations. Ms. Theresa Lang (full-time), Ms. Nina Lee and Mr. Mark Brown collectively share over eight years of experience in retail clothing sales.

Sovattey Enn C.E.O. Linda Smith Assistant Manager

Theresa Lang Sales Rep

Nina Lee Sales Rep

Mark Brown Sales Rep

The store operation hours are Monday Friday from 9am to 6pm and Saturday from 10am to 9pm. Employees weekly schedule Staff Sovattey Linda Theresa Nina Mark Monday 9-5pm Off 10-6pm 10-6pm Off Tuesday 9-3pm 10-6pm 10-6pm Off Off Wednesday 9-3pm 10-6pm Off Off 12-6pm Thursday 9-3pm 10-6pm 10-6pm Off Off Friday 9-3pm 10-6pm 10-6pm 12-6pm Off Saturday Off 10-6pm 10-6pm 11-7pm 5-9pm Sunday Off Off Off Off Off

Business Plan

PRODUCT/SERVICE Purpose of the Product/Service Majestic will offer women trendy, sexy, and elegant clothes for social and formal events. These fashionable outfits will provide customers a unique and luxurious look that will showcase their femininity and highlight their beautiful form. The wide selection of stylish clothes will provide women the ability to both empower and distinguish themselves. The merchandise will be affordably priced and purchasable through both the retail store and e-commerce website. Unique Features The clothes will be unique in the marketplace. Some of the product lines will have an Asian style signature with a variety of beautiful flower embroidery. Other lines will be exclusively designed for the company. The result will be a large collection of sexy club attire, casual social outfits and elegant dresses. See appendix Figure 1-1, Figure 1-2 and Figure 1-3. The shopping experience in the store will be unique. A small section will be devoted to a lounge area, which will provide comfortable seating, a television, snacks and non-alcoholic beverages. The purpose of this area is to allow women more time to shop while their partners or children have an enjoyable place to relax. The consumer who chooses to purchase online will also have a unique shopping experience. This will be achieved by providing the customer a money back guarantee of 90 days and an easy to return process by offering preprinted return labels. Overall, these customer friendly policies will provide the necessary trust and confidence for customers to make multiple and experimental purchases. The result will be a greater conversion of browsers into loyal and valuable long-term customers. Stage of Development Majestic is in the introductory and conception stage. It is currently an idea and conception of a new business. Future Research and Development Majestic will conduct a customer feedback survey every six months via e-mail. The survey will rank customer opinions on the product quality, design, color scheme, and customer service. It will also solicit feedback on design and website improvements. The company will also continue to research the latest and emerging fashion trends on a regular basis in order to provide customers the most up-to-date styles. In the future, Majestic will enhance the website by creating a tool that will allow a customer to try on clothes virtually by uploading their own personal picture.

Business Plan

Trademarks, Patents, Copyrights, Licenses, Royalties Both Majestics logo and name will be trademarked. Majestic will also create a few proprietary product lines that will be trademarked, such as Merasia and Button Top Floral. The company will not file any patents since there are currently no patentable inventions; however this could change if inventions are made on the e-commerce website. All website content will be protected via copyright. Since the store will carry several product lines that are not owned by Majestic, product resell licenses will need to be obtained for those products. No royalties will need to be paid since merchandise is purchased wholesale. Government Approvals To open a retail store, an Employer Identification Number (EIN), also known as a Federal Tax Identification Number is required, which is used to identify a business entity (Waters, 2011). The company will also obtain a Texas sales tax permit (Triplett, n.d.). Majestic will also need to acquire a DBA (Doing Business As) permit. A small business license is not required in Austin, TX (Travis Clerk County, 2010). These licenses and permits will also cover the e-commerce operations (Burns-Millyard, n.d.). Products will primarily be sourced through domestic import companies, thus limiting the need to obtain any government import approvals. However, some limited products may be sourced directly from overseas in the future, such as China, in which case the company will abide by textile import regulations and quotas set by the Customs and Borders Protection Agency (Customs and Border Protection Agency, 2009). Since some prepackaged food and beverages will be provided, a vending machine license and food permit is required. Product/Service Limitations One of the largest product limitations will be obsolete inventory. When certain merchandise does not sell for over 6 months, it will be moved to the clearance section or be placed as a promotional item. However, if it still does not sell then it will become dead inventory. At this point, Majestic will attempt to make a deal with the distributor or will give it away to charity to gain tax breaks. Product/Service Liability Liability for clothing and accessories is minimal but does exist. For example, some of the clothing could be defective or flammable due to the materials and finishes used. Some of the clothing dye may also run and cause stains or damage to personal property. Some of the jewelry accessories may be sharp or cause injury. Also, someone could get hurt in the store while shopping. In order to protect the company from being sued, a general business insurance policy will be acquired. Teresa, an agent from General Texas Insurance, provided a quote of $500 per month for $1,000,000 in liability coverage.

10

Business Plan

Related Products/Services and Spin-Offs Other related products are accessories and shoes. Accessories will include a limited selection of purses, necklaces, bracelets and earrings. All of these products will help to upsell customers and also increase traffic for the website and the physical store itself. Production For Majestics physical store, there are only a few isolated parts that require contracting. These include advertising campaigns, graphic design, signage and marketing materials. For the e-commerce site, significant parts will be contracted. The website itself will be hosted through a shopping platform like shopify.com ($700 per year), which will provide all the necessary functionality. Most of the product content will not require any contracting since it can be acquired directly from catalogs from wholesalers. This does not apply to customized content and exclusive merchandise because these products will require graphic designers, product photographers and fashion models. Facilities A single retail store will be required to conduct business. The store will be 1,200 square feet with 25% dedicated to a back office. The rent is planned to be $25 per square foot on a NNN lease. It will be located at 1400 South Congress Ave. This location will also serve as a convenient location to store and ship products for the website (LoopNet, 2011). See Appendix Figure 2-1. Suppliers Majestic will receive products from international wholesale consolidators such as DHgate.com. Fimka, 247 Fashion store, and Caliente. There are no contract requirements, however most products require a minimum quantity purchase. Environmental Factors Environmental factors are minimal. Many of the clothes are made from natural fibers, but some clothes will be manufactured from synthetic fibers that are not biodegradable. Majestic encourages donating clothes to shelters and charities as opposed to throwing away. In the case of clothes that are not typically donated, such as the sexier outfits, the company will attempt to purchase items made from environmentally friendly materials. Any sales done through the website will be environmentally friendly, with the exception of the actual shipping and transportation which will require some non-biodegradable packaging.

11

Business Plan

MARKETING PLAN Industry Profile The United States has an apparel industry that extends over 100,000 retail stores with combined annual revenues of over $150 billion dollars. Approximately 65% of this revenue is owned by the top 50 companies, which includes TJ Maxx, Marshalls, Gap, Limited Brands, Ross, and Abercrombie & Fitch (Hoovers, 2011). According to 2008 statistics, there are 1,246 apparel and accessories stores in the Austin area, which generated sales of approximately $1.9 billion dollars (Austin Chamber of Commerce, 2011). Searching 2011 data revealed 373 apparel stores that specialize in women clothing in the city of Austin. (Yellowpages, 2011). Growth Potential Apparel sales in the United States increased nearly 2% in 2010, which was a big improvement over a 2009 decline of 5%. Both men and womens apparel grew at roughly 2% to 3%, as opposed to childrens wear, which declined. Online commerce was a large growth channel, posting an increase of nearly 10% in 2010. The categories that captivated the consumers attention the most were womens skirts and dresses, at 13% and 4% respectively. This is very encouraging data for Majestic since these items are the primary merchandise for the company. Another good sign for retail clothing businesses was a 1.8% increase in United States nondurable goods sales in November 2010 compared to November 2009 (Webmaster, 2011). Geographic Locations Boutiques that specialize in skirts and dresses are not dependent upon any specific location, but are more suitable to areas with a warm climate. This is because Majestics product lines are typically more revealing and made from light fabrics. Geographic areas that work best for Majestic are urban areas due to social and nightlife activities, while rural areas would likely be excluded. Industry Trends Technology is having an impact on the clothing industry in that more and more people are buying online. This provides customers the convenience to shop at home, compare prices, and view a large variety of styles. Primary customers are young ladies who like to dress up pretty, sexy, or elegant for any special occasions. Therefore, popular culture also has a major influence on trends. Factors that drive this industry are youth, celebrities, designers, nightlife, and music.

12

Business Plan

Seasonality Factors Seasonality has a big impact on the apparel industry. Weather and climate changes throughout the year affect the types of materials and fabrics sold. Colors and seasonality trends are also constantly changing. Majestic will be required to modify their product lines in accordance with the seasons, although rather minimally since most of the dresses and skirts are designed for wearing indoors. Peak sales will occur in the spring/summer seasons due to the abundance of nightlife activities. However, the holiday seasons, such as Christmas and New Years, are also big contributors to sales. Profit Characteristics Creating a profitable retail clothing store is difficult considering 80% of all new retail clothing stores fail within the first five years of business. This is most often due to poor management, tough competition, or falling behind quickly changing fashion trends (Mendoza, 2010). Retail clothing stores that do succeed generally have profits in the 4% to 13% range according to Imperial Capital, with the average approximately 8% (Crane, 2007). Distribution Channels There are many distribution channels that currently exist that will support Majestics supply chain management. The main distribution channel will be provided by DHgate.com, an online wholesaler that procures goods from China. They are an industry leader and have been serving small and medium businesses since 2004. Other distribution channels include 247fashions.com and Caliente. These intermediary companies provide a convenient and cost effective method for Majestic to acquire wholesale apparel without having to initiate direct relationships overseas. In the case Majestic needs to import merchandise directly, Majestic will attempt to acquire products from the countries listed in the chart on the next page. This chart represents a list of the top exporters of apparel to the United States in 2010.

13

Business Plan

Basis of Competition Majestic competes in an industry heavily based on price, quality and promotion. Many companies even create brand segmentations to compete more aggressively within a price/quality category. A perfect example of this segmentation is Gap, which owns Banana Republic, Old Navy and Gap. Apparel is a highly competitive industry that relies on effective promotions and merchandising to drive sales. Although product pricing in clothing is not easily comparable since products are often unique to retailers, discounts and promotions are important tools that drive company revenues. Competition Profile The apparel industry is highly competitive. There are several companies that retail merchandise similar to Majestics product line, however there are many opportunities to differentiate and succeed within this market. Majestic will build a loyal customer base in Austin, Texas and offer unique products with a specialized Asian theme. Sales will also be supplemented through an online channel. The following chart compares Majestic with some of the top competition in the industry.

14

Business Plan

Store

Dress Product Price /Quality

$20 $40 Fair

Unique Features
Sexy & Revealing

Distribution Marketing Geographic Strength System /Advertising Location /Weakness

Proprietary Designers Online & Product Placement (MTV, Cosmo) Print, online, shopping malls E-commerce (US Based) US & International Loyal customer base / No physical location Strong Brand awareness / Recently not profitable Leverage Guess brand / High price associated to Guess High Profit / High Management Turnover Strong advisor board / Lack of experience

GreatGlam .com

bebe

$60 $300

Good

Distinctive & Contemporary

China, Venezuela, etc.

Guess by Marciano

$100 $300

Very Good

Sophisticated

China, Italy, US, etc.

Print, online, shopping malls Product placement, online, print, shopping mall Online & local promotions

North America

BCBG

$100 $500 $60 $400

High

Elegant

China US distributors importing from china

US & international US

Majestic

Very Good

Sexy yet Classy

Customer Profile The customer profile for Majestic is primarily young ladies aged 18-34 with an annual income of $20,000-$60,000. Most are students and young professionals. These ladies enjoy having a social lifestyle, which includes nightlife at clubs, parties and events. Other customers purchase our products for more casual activities such as formal dining with family and friends. Target Market Profile Majestics target market is Austin women aged 18 to 34. In Austin, 44% of the population is within the range of 18-44, which is 19% higher than the national average of 37%. There are 343,000 women living in this area within the age range, which accounts for 43% of all women.

15

Business Plan

(Austin Chamber of Commerce, 2011) More specifically, there are two customer market profiles Majestic will target. 1. Females, 18 to 24 of age, who desire wearing something sexy for clubbing and partying. Majestic has a great opportunity to penetrate this market since Austin is home to several universities, including the University of Texas. Majestics location will also be very close to downtown on South Congress, which features 6th street where many potential customers will socialize. 2. Females, 25 to 34 of age, who desire wearing something sexy and elegant for social events. The South Congress area is a high trafficked location that features many venues where this demographic socializes. Pricing Profile Majestics pricing structure will be highly competitive. Prices will be slightly less expensive than national competitor brands, such as Marciano and BCBG, but will be slightly more expensive than GreatGlam.com, which operates strictly online.

16

Business Plan

Majestic will create a pricing policy that focuses on the lifetime value of customers. This means that Majestic may offer heavy promotions and discounts to first time buyers in order to gain brand exposure and penetrate the market. Target customers are sensitive to price points because they are budget-conscious students and young professionals, thus do not often have much disposable income. This provides Majestic an opportunity to capture shoppers who seek fashionable apparel, yet cannot afford to purchase dresses and skirts at BCBG or bebe. Gross Margin on Products/Services Majestic will have very healthy gross margins. This is achieved by investing significant time finding suppliers that offer desirable merchandise at a low cost. Initial research suggests that there are several wholesalers that can offer volume pricing at large discounts, which will allow Majestic to price products competitively while maintaining good gross margins. Also, because Majestics clothing line is relatively unique and cannot be easily found elsewhere, Majestic can price merchandise higher than other retail industries. Gross margins will be estimated at approximately 60%, which is higher than the industry average of 40-50%, but certainly achievable by working with the right import wholesalers. If sales slow down at any time, there will be room within the margins to offer steep discounts and promotions without taking a big loss. Market Penetration There will be two main distribution channels for selling the products to the customer. The primary channel will be the physical retail store location, which will target customers in the Austin area. The second channel will be the e-commerce platform, which will target US customers. Other possible distribution channels include online market places such as Ebay and Amazon. When Majestic begins designing a unique product line, distribution channels will include other retailers and partners. Sales Representatives Sales representatives are very important for selling products to customers. The store will feature well-trained representatives who will provide great customer service that will help drive sales. This will be done by proactively notifying customers to promotional items and upselling accessories. For the e-commerce store, live chat sales representatives will be available to help customers navigate the site and find products for purchase. There will also be a phone number provided.

17

Business Plan

Direct-Sales Force Majestic will not have a direct sales force because it is a wiser strategy to invest in marketing and advertising campaigns. Typically, boutiques do not employ direct sales techniques. Direct Mail/Telemarketing At launch, Majestic will perform a limited trial run of direct mail. This campaign will introduce the Majestic brand to the local area. Telemarketers will not be used since it is not standard for clothing stores to use this marketing strategy. Advertising and Promotion There are many advertising and promotional campaigns that will be critical to driving Majestics growth. For the physical store, direct mail will be used at launch to gain exposure in the surrounding area. Majestic will also run local radio advertisements to target key demographics. As mentioned, heavy promotions will be offered to new customers to bring awareness of the new store. For the e-commerce store, Majestic will run many standard Internet advertising campaigns such as Google pay per click, affiliate programs and Groupons. Majestic will also attempt to collect customer email addresses in order directly advertise to them in the future. Packaging and Labeling Packaging will be a very important factor for creating the Majestic brand. For e-commerce orders, both labels and packaging will emphasize a trendy, elegant and sexy look. For the physical store, the paper bags will be sleek and feature the Majestic corporate logo. See Appendix for samples. Service and Warranties Majestic will be known for their great customer service, thus will offer a very consumer friendly service policy. This includes a full 90 day return policy. For purchases made on the e-commerce site, return shipping will be prepaid and Majestic will conveniently supply preprinted shipping labels. Having superior customer service is a critical strategy to building loyal and repeat customers. Trade Shows At launch, trade shows will not be used. This is because products are purchased from wholesalers. In the future, Majestic will design their own products, which will offer the opportunity to participate in trade shows so other boutiques can carry the Majestic product line.

18

Business Plan

Future Markets For the near future, Majestic will focus entirely on the sole physical location and e-commerce store. Longer term, there are many opportunities to expand into future markets. These include: Expanding into the suburban areas of Austin. Expanding into new urban and suburban areas within the United States. Expanding internationally. Licensing Majestics product lines.

19

Business Plan

OPERATING AND CONTROL SYSTEMS Administrative Policies, Procedures and Controls Receiving Orders A receiving policy will be put into place to ensure all packages are received properly. All packages must be inspected for any external damages prior to signing for and accepting. If the package is damaged, it needs to either be returned or noted with the carrier. A package may only be opened when the store manager or assistant manager is present. At this time, a written log of received items must be documented, preferably against a packing slip or purchase order. The managers will be responsible for placing price tags on merchandise and preparing them for sale. Also, only the managers have permission to place received merchandise directly on the floor for sale. Billing the Customers Customers must pay for merchandise upon sale with either cash or credit card. A point of sale system will be added. Only the sales representative or manager logged into the register will be able to accept a customer sale. For any price discrepancies between the product and the system, only a manager may change the purchase price. Paying the Suppliers For orders from supply that do not require cash in advance, the accounting system will help manage the accounts payable. Only the manager or assistant manager will have permission to pay bills via check or credit card. All payments must match a purchase order for products, which were received and accepted. Payments will be made the 1st and 15th of each month. Collecting the Accounts Receivable There are no accounts receivable because all customer sales require immediate payment upon purchase. A collection agency will likely not be necessary unless the company decides to pursue collections for credit card chargeback. Reporting to Management Majestic is a small company and all staff will report to the CEO. All floor staff will report to the assistant manager when the CEO. is not available. Meetings will be scheduled weekly to review store performance and encourage employee morale. Staff Development Staff training is essential. The employee team is small and manageable, therefore it is relatively easy to perform hands-on training. Each new employee will be required to participate in a day

20

Business Plan

long training program. This training program will be used to familiarize employees with the merchandise and policies of the store. Employees will also be trained adequately on customer service and upselling skills. Employees that are with the company at least six months will have the opportunity to participate in career growth training. This will motivate employees and provide them an opportunity to learn more advanced skills so they can eventually become managers if desired. Inventory Control Inventory counts will be checked on a monthly basis to ensure proper inventory control. The total count of merchandise will be compared to the total count indicated in the supply chain management software. A more thorough end of year inventory check will be conducted annually in order to properly account for financial statements and taxes. A security system will be installed which will include cameras and embedded RFID tags. This will help prevent the theft of unpaid merchandise leaving the store. Handling Warranties and Returns All merchandise purchased from the store may be returned within 90 days from purchase. This excludes certain merchandise, such as clearance or final sale items. All items must be returned in their original condition with a receipt and labels attached. Any items failing to meet these conditions may be exchanged at the managers discretion. Monitoring the Company Budgets A company budget will be created at the beginning of each year to ensure the companys cash is being spent properly. The budget will be reviewed monthly and may be adjusted according to sales performance and forecasts. The budget will be created by the C.E.O with assistance from an outside accountant. Security Systems The store will have several different security systems and controls in place. The primary security system will be provided by ADT to alert the stores owner and police of any off-hour intrusion. The store will also contain anti-theft RFID tags to prevent merchandise from being stolen. A closed circuit television system will be installed to monitor and record both the sales floor and all exits. All cash received from customers will be placed in a cash register, which will be regularly dropped in a safety slot when cash in the register exceeds $500.

21

Business Plan

Documents and Paper Flow A majority of the financial information will be documented and reported on through electronic systems. The point of sales system and supply chain management system will record all transactions. This will provide a consolidated view of all transactions and minimize the risk of any lost transactions. A data backup system will be installed that will periodically upload transactions to a secure spot on the Internet. This will help prevent a loss of data due to theft, fire, system failure, or manual data accidents. Planning Chart Product/Service Development Majestic does not currently develop any products, therefore does not have a product/services department. In the future, Majestic may design and develop its own apparel product line and will address the need for a department at that time. Manufacturing Majestic will not be performing any manufacturing of merchandise in the foreseeable future. Financial Requirements Majestic will need to raise an initial $500,000 which will be needed approximately six months prior to the store opening. The money will be made available in equal disbursements every three months. Marketing Flow Chart In order to gain exposure to the local market, Majestic will send direct mail and other promotional materials immediately at launch. Brochures and other marketing materials will be created one to two months in advance. On-going, advertisements and brochures will be created several months prior to a season or before a promotional sale beings. Market Penetration Majestic will attempt to penetrate the market quickly. This will be achieved by running a variety of advertising campaigns. Majestic will mail promotional coupons by purchasing postal addresses of targeted customers living within five miles of the store. This will be performed at store opening and will be repeated a few times within the first year based on performance. The company will also run local radio spots on radio stations that have a similar target audience, such as Mix 94.7. Majestic will also leverage the Internet by running advertisements on local websites and creating a Facebook page that customers can join and share.

22

Business Plan

Management and Infrastructure Additional management will likely not be necessary unless Majestics physical or online operations are extended. The current management team can easily handle the currently projected volume of sales. Ideally, Majestic will grow out of its existing space within five years and either acquire a location nearby or branch out into multiple locations. If Internet sales grow quickly or exponentially, then Majestic may need to procure a separate distribution facility to receive inventory and ship these orders. Risk Analysis Like any business, there are several inherent risks and potential negative factors. The most likely scenario is difficulty generating sales without having to overspend on advertising. Other risk factors include bad weather, store damage, theft, a downturn in the economy, or an increase in competition nearby. These risks can be minimized by attaining proper insurance, planning inventory properly, and ensuring non compete agreements with the property landlord. Another significant risk is ensuring that Majestic keeps up with the latest styles and trends to prevent accumulating stagnant and old inventory. Salvaging Assets There are several plans to salvage assets and attempt to recover as much as possible in the event that the venture becomes unsuccessful. A sale of the business at a significant discount can be attempted. Also, merchandise and certain assets can be liquidated. The most beneficial scenario would be for a competitor to overtake the lease and space, since Majestic could get a premium value due to the existing customer base and investments in upgrading the store floor plan.

23

Business Plan

GROWTH PLAN New Offerings to Market Majestic plans to pursue many growth initiatives in the future, which will include new products and store locations. After gaining initial exposure the first few years in the Austin market for retailing club apparel, elegant dresses and cocktail dresses, Majestic will begin to design its own exclusive line of clothing in this category. At that time, Majestic will begin exploring expansion inside the city of Austin by building two to three new store locations to cover both northern and western Austin. The next phase of growth will be created by entering new metropolitan marketplaces, such as Dallas, Houston and San Antonio. Upon successful growth, the company will research plans to build a distribution center to support growth outside Texas and eventually internationally. As the company explores international expansion, Majestic will also research localizing the e-commerce website into international markets. The projected revenues for Majestic will be $350,000, $450,000 and $600,000 for the 1st, 2nd and 3rd years respectively. After the 5th year, Majestic will begin receiving revenue from new store locations, which will be the same growth rate of $350,000 for the 1st year and $600,000 for the 3rd year. Capital Requirements Majestic will need to raise capital to pursue new product lines and store locations. To initiate new and exclusive product lines, approximately $50,000 will be needed. Each additional store will require $400,000 to build and open. Funding will be provided through both private investors and institutional loans that are backed by the success of the already existing stores business. Personnel Requirements Skilled management and employees will be needed to support the projected growth. For the development of exclusive product lines, upper level managers will organize, plan and work with both designers and manufacturers. For store growth, a new position will be hired with the responsibility of researching, budgeting, planning and executing the development of a new location. Each new store that is built will require the hiring of a senior store manager and the necessary floor staff. As Majestic grows into multiple locations, a regional human resources manager and buyer will be hired. Exit Strategy The owner will be able to obtain an exit by selling the company. The growth plan will help this process since the company will have strong financials from having multiple profitable locations. Investors will begin to be paid back from company profits starting on the third year.

24

Business Plan

FINANCIAL PLAN

STARTUP COSTS WORKSHEET Startup Capital Requirements: One-time Startup Expenses Startup Expenses Advertising Starting inventory Building construction Cash Decorating Deposits Fixtures & equipment Insurance Lease Payments Licenses & permits Miscellaneous Professional fees Remodeling/renovations Rent Services Signs Supplies Unanticipated expenses Packaging/Boxes/Bags Logo/Stationery/Cards Store opening event Inventory buying Store equipment Total Startup Costs Amount Description

3,000 Promotion for business opening 15,000 Apparel, bags, jewelry, shoes 0 Amount charged by chosen contractor 400 Cash register starting at opening day 3,000 Rugs, art, plants, mirrors 500 Phone, electricity, trash, gas 12,000 Mannequins, shelves, tables, racks 500 Liability, property, earnings 4,000 Due before opening day 1,000 Renovation, inspection, zoning 1,000 Additional necessities 800 CPA firm, attorney 30,000 Built-in fixtures, lighting, flooring, painting 8,000 Deposit and first month 800 Cleaning, shipping (UPS) 3,000 Store entrance sign 700 Tape, stapler, register, paper, cleaners 2,000 Unexpected expenses 1,400 Shipping boxes, store bags, tissue paper 800 Logo design, direct mail pieces 2,000 Advertising, entertainment, refreshments 1,000 Travel: market buying trips 3,500 POS system & bank card equipment 94,400 Amount of costs before opening

25

Business Plan

STARTUP COSTS WORKSHEET Startup Capital Requirements: Repeating Monthly Expenses (First 3 Months) Expenses (x3) Advertising Bank service fees Credit card charges Delivery fees Dues & subscriptions Health insurance Insurance Inventory Lease Payments Loan payments Office expenses Payroll other than owner Payroll taxes Professional fees Rent Repairs & maintenance Sales tax Supplies Telephone Utilities Your salary Total Repeating Costs Total Startup Costs Total Cash Needed Amount Description

3,000 Newspaper ads, magazine ads, radio 150 Monthly fees 2,000 Charge per credit card transaction 100 UPS, USPS, FedEx 0 Magazine subscriptions 1,250 Excludes amount on previous page 1,000 Excludes amount on previous page 30,000 Boutique stock 8,000 Excludes amount on previous page 0 Principal & interest payments 50 Supplies 16,780 4 employees (2 PT, 2 FT) 1,700 200 Accountant, attorney 0 Storage unit 300 Specific repairs 400 400 Bags, tissues, boxes, tags 450 Internet, local/long distance, cell 1,500 Electric, water, garbage 7,500 If applicable for first 3 months 73,980 94,400 Amount from preceding page 168,380 Repeating costs + startup costs

26

Business Plan

Break-Even Analysis Area Rent (plus maintenance, insurance, property tax) Employees Salaries Employee Health Benefits Utilities Other/Miscellaneous (includes E-commerce) Total Fixed Costs Sales needed to breakeven at 60% GM Yearly Cost
(Approximate)

Monthly Cost
(Approximate)

$48,000 $98,400 $4,800 $6,000 $12,000 $169,200 $282,000

$4,000 $8,200 $400 $500 $1000 $14,100 $23,500

The break-even point is determined by taking fixed costs and dividing it by the unit selling price minus the unit variable cost. Majestic needs to do sales of $282,000, $23,500, $5,875, and $783 for the year, month, week and day respectively to break even. Total units sold needs to be 1,880 units, 157 units, 28 units and 6 units sold per year, month, week and day respectively. This means that on a daily basis at least a minimum of six customers will need to spend $150.

27

Business Plan

Source Funds Majestic will need to raise approximately $500,000 in capital in order to start the business, maintain operations, and grow the company. About 80% of this money will be raised through friends and family via debt financing with unsecured loans. The expected interest rate will be 10%. The remaining 20% will be raised from traditional investors via secured loans. Money will begin to be paid back after the third year since Majestic will likely not be profitable for a few years. The principal and interest will be paid back in full over a 10 year period.

28

Business Plan
Supporting Documents

Figure 1-1

Some of Majestics casual dresses and club dresses.

29

Business Plan

30

Business Plan

Figure 1-2

Some of Majestics elegant dresses.

31

Business Plan

32

Business Plan

Figure 1-3

Majestics asian signature line samples, The Orchid.

33