Business Plan for a Bookshop

Nuaman ZahidBBA-E, 2nd semester(session 2008-12)Submitted to: Madam Shandana ShoiabSmall and Medium Enterprise(SME)

BOOKS N BOOKS20-city towersuniversity road

Peshawar

Business Plan

Principals:NUAMAN ZAHIDNADEEM AFZAL

SHAHID NAWAZ MUGHAL

EXECUTIVE SUMMARY

Books n Books will be a general partnership type of business. The shop will be jointly owned by Nuaman Zahid, Nadeem Afzal and Shahid Nawaz Mughal. Books n Books will be establishing its shop in citytowers main university road Peshawar. This area is well known for every sort of shopping. Our facility is a 5,500 square ft. shop which allows us to stock a large amount of inventory. Our start-up expenses come to Rs 25 million, which are single time fees associated with opening the shop. These costs are financed by a bank loan and our investment as well. We have divided the market into three segments of potential customers. They include casual shoppers, hard to find shoppers and specific category shoppers. We will provide our customers a relaxed atmosphere for reading the books by the arrangement of comfortable chairs and tables.

EXECUTIVE SUMMARY(continued….)

We will be having a buyback program to lower inventory acquisition costs and allow the customers to discard unwanted literature and music. Books n Books will offer a wide range of every kind of books and music CD’s and DVS’s on low prices. Our main competitors are London Book Shop and Saeed Book Bank and also local bookshops Our competitive edge will be the lower prices we will charge our customers and the larger selection we can offer. One of the most critical elements of Books n Books’ success will be its marketing and advertising. Our sales forecast for the first three years is estimated to be as under:

Year 1 Year 2 Year 3

Rs.1,304,000 Rs.1,357,000 Rs.1,428,000

NATURE OF THE BUSINESS

Books n Books is a bookshop on main university road. It is the goal of the management to acquire local market share in the bookshop industry through low price, a dominant selection of products, a competitive variety of services including a buyback/trade program and hard to find book search, plus a relaxing, friendly environment that encourages browsing and reading.

FINANCES REQUIREDOur start-up expenses come to Rs 25 million, which are single time fees associated with opening the shop. These costs are financed by a bank loan and our investment as well. We expect to be operating at a loss for the first couple of months before advertising begins to take effect and draw in customers. Books n Books will be receiving periodic influxes of cash to cover operating expenses during the first two years as it strives toward sustainable profitability. We do not anticipate any cash flow problems during the next three years

INDUSTARY ANALYSIS

Market SegmentationWe anticipate serving the needs of all the potential customers within a ten to fifteen mile radius in which the approximate population is 150,000 (estimate). Bookshops serve the entire purchasing population of its geographical area but focuses on customers who desire to purchase books/music at low prices because they are seen either as near commodity items or, in the case of books, are not considered to be a long-term investment (i.e. they will trade them back). This is especially true with people seeking to cut costs with the bad economy. Even though we service the entire book reading population in University road and the surrounding area, we can divide our customers based on purchasing habits.

Continued…..

Casual Shoppers: These are customers who go to the bookshop with no set idea of what they want to purchase. They seek to spend a fair amount of time browsing the store and often are considered impulse buyers. Often they leave the store with small purchases or without buying anything. These customers are attracted to bookshops with low prices and large inventory."Hard to Find" Shoppers: These are customers with very specific needs. They are looking for a difficult to obtain item, usually a book that is out of print. If we can satisfy this customer, then we are able to build significant customer loyalty. These clients are generally price insensitive and are also drawn to bookshops that have large inventory.Specific Category Shoppers: These customers are those types that generally buy books or music of one category, such as fiction or textbooks. These customers generally have a good idea of what they want to purchase and have the greatest buyback/trade potential. These customers represent the highest volume purchaser, often leaving the store having spent Rs500-1500.

COMPETITORSOur main competitors are: London Bookshop (which holds approximately 30% local market share), Saeed Book Bank (which holds approximately 20%), and other local new and used bookshops.

DESCRIPTION OF THE VENTURE

Products and ServicesBooks n Books will offer a wide range of book, magazine, and music selections. This includes just about every conceivable category including fiction, non-fiction, business, science, children's, hobbies, textbooks, and other types of books. Our music selection will concentrate on CD's and DVD’s as these are the most popular and take up the least amount of floor space. In addition, we will be offering a competitive buy and trade service to assist in lowering our inventory acquisition costs and making our store more attractive to our customers. In addition, we offer a search and order service for customer seeking to find hard to get items. Books n Books will have a relaxed "reading room" type atmosphere that we will encourage through the placement of chairs, couches, etc. We strongly encourage our customers to spend as long as they like reading through our book selection and enjoying a quiet, relaxing environment. Our store hours will be 8:30 a.m. to 8:00 p.m. Monday-Saturday and 10:00 a.m. to 6:00 p.m. Sunday. Once profitability becomes stable, we will extend these hours.

Continued…..

Office Equipment and PersonnelWe will initially recruit 3 computer operators and 8 salesmen. The computer operators will be working on separate computers on separate counters. The computers will help us in recording day to day sales and will also give us the inventory data. The sales men will be paid a good salary and will be recruited by the basis of their relevant experience.The store will be requiring racks of different sizes in which books and CD’s/DVD’s will be placed.As we are providing reading facility also, so for that purpose we will arrange chairs and tables.

BACKGROUND OF THE ENTREPRENEURS

Nuaman ZahidBBA in progress.No experience in this field.

Nadeem AfzalBBA in progress Have served in a local book shop as a salesman.

Shahid Nawaz MughalBBA in progressHave served in Saeed Book Bank as a salesman.

OPERATIONAL PLAN

The business and science books will be purchased from National Book foundation, as they give discounts and offer attractive packages for the retailers. For the textbooks we will have to get registered with the local textbook board. And for the other type of books including fiction, hobbies, children and story books will be purchased from the distributors in Lahore. Music CD’s and DVD’s will be purchased the markets of Karachi, Lahore and from foreign distributors as well. For the inventory control system we will buy software through which we can keep the management informed about day to day sales, quantity of stock and also about the customers who visit us regularly. The customers will select books or music selections from the display in the racks and the salesmen will provide the item. Customers can also give orders for the books which are not available with us, we will request the distributor for that order and will provide it to the customer. We will be using updated accounting softwares and database softwares.

MARKETING PLANCompetitive EdgeThe firm's competitive edge will be the lower prices we will charge our customers and the larger selection we can offer: through our large store, buyback/trade program, and leveraging management excellent supplier contacts. As stated before, in the bookstore industry, low cost and dominate selection are the two success criteria. We plan to create these advantages in a new, comforting environment that will retain customers.

MARKETING PLAN(continued…..)

Marketing StrategyOne of the most critical elements of Books n Books’ success will be its

marketing and advertising. In order to capture attention and sales we will use prominent signs at the store location, billboards, media bites on local news, and radio advertisements to capture customers. We will arrange book fairs in colleges and universities and will offer books to the students on discount rates.

MARKETING PLAN(continued….)

Sales StrategySince our store will be a standalone facility, there is little in the way to

directly influence how we close the sale other than to have an attractive storefront with our low prices and excellent selection. We believe this in itself is its own seller. One critical procedure we will be establishing is to insure top customer service and reliability and that our store always has enough inventory of all our products. We will be using industry data on inventory for bookstore chains to assist us.

MARKETING PLAN(continued….)

Sales Year 1 Year 2 Year 3

Fiction Books Rs.164,292 Rs.172,507 Rs.182,512

Sci-Fi Books Rs.184,829 Rs.194,070 Rs.205,327

Textbooks Rs.143,756 Rs.150,944 Rs.159,698

Children's Books

Rs.184,829 Rs.194,070 Rs.205,327

Biography Books

Rs.123,219 Rs.129,380 Rs.136,884

Business Books

Rs.112,951 Rs.118,599 Rs.125,477

CD's and Music

Rs.184,829 Rs.188,526 Rs.199,460

Other Rs.205,366 Rs.209,473 Rs.214,081

Total Sales Rs.1,304,071 Rs.1,357,569 Rs.1,428,767

Sales Forecast

ORGANIZATIONAL PLANForm of ownership

Books n Books will be a general partnership type of business. The shop will be jointly owned by Nuaman Zahid, Nadeem Afzal and Shahid Nawaz Mughal. We expect to begin offering services in December. Roles of owners

All the owners will have to attend any type of meeting and business deal. The members will have to be present during the working hours.

FINANCIAL PLANYear 1 Year 2 Year 3

Assets

Current Assets

Cash Rs.179,568 Rs.182,408 Rs.220,036

Inventory Rs.122,562 Rs.125,933 Rs.130,793

Other Current Assets Rs.8,000 Rs.8,000 Rs.8,000

Total Current Assets Rs.310,130 Rs.316,341 Rs.358,830

Long-term Assets

Long-term Assets Rs.8,000 Rs.8,000 Rs.8,000

Total Long-term Assets Rs.8,000 Rs.8,000 Rs.8,000

Total Assets Rs.318,130 Rs.324,341 Rs.366,830

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable Rs.125,904 Rs.97,722 Rs.101,894

Current Borrowing Rs.20,000 Rs.13,000 (Rs.2,000)

Other Current Liabilities Rs.10,000 Rs.10,000 Rs.10,000

Subtotal Current Liabilities Rs.155,904 Rs.120,722 Rs.109,894

Long-term Liabilities Rs.125,000 Rs.120,000 Rs.110,000

Total Liabilities Rs.280,904 Rs.240,722 Rs.219,894

Paid-in Capital Rs.124,000 Rs.124,000 Rs.124,000

Retained Earnings (Rs.112,180) (Rs.86,774) (Rs.40,381)

Earnings Rs.25,406 Rs.46,394 Rs.63,316

Total Capital Rs.37,226 Rs.83,619 Rs.146,935

Total Liabilities and Capital Rs.318,130 Rs.324,341 Rs.366,830

Net Worth Rs.37,226 Rs.83,619 Rs.146,935

Pro Forma Balance Sheet

FINANCIAL PLAN(continued….)Pro Forma Income statement

Year 1 Year 2 Year 3

Sales Rs.1,304,071 Rs.1,357,569 Rs.1,428,767

Direct Cost of Sales Rs.1,004,135 Rs.1,031,752 Rs.1,071,575

Total Cost of Sales Rs.1,004,135 Rs.1,031,752 Rs.1,071,575

Gross Margin Rs.299,936 Rs.325,817 Rs.357,192

Gross Margin % 23.00% 24.00% 25.00%

Expenses

Payroll Rs.111,000 Rs.125,600 Rs.130,600

Sales and Marketing and Other Expenses

Rs.36,000 Rs.15,000 Rs.15,000

Rent Rs.60,000 Rs.65,000 Rs.68,000

Utilities Rs.3,600 Rs.4,000 Rs.4,000

Insurance Rs.7,200 Rs.7,200 Rs.7,500

Payroll Taxes Rs.17,093 Rs.18,840 Rs.19,590

Other Rs.15,000 Rs.10,000 Rs.10,000

Total Operating Expenses Rs.249,893 Rs.245,640 Rs.254,690

Profit Before Interest and Taxes

Rs.50,044 Rs.80,177 Rs.102,502

Interest Expense Rs.13,750 Rs.13,900 Rs.12,050

Taxes Rs.10,888 Rs.19,883 Rs.27,136

Net Profit Rs.25,406 Rs.46,394 Rs.63,316

Net Profit/Sales 1.95% 3.42% 4.43%

FINANCIAL PLAN(continued….)

Pro Forma Cash FlowYear 1 Year 2 Year 3

Cash Received

Cash from Operations

Cash Sales Rs.1,304,071 Rs.1,357,569 Rs.1,428,767

Subtotal Cash from Operations

Rs.1,304,071 Rs.1,357,569 Rs.1,428,767

Additional Cash Received

New Current Borrowing Rs.5,000 Rs.0 Rs.0

New Long-term Liabilities Rs.50,000 Rs.0 Rs.0

New Investment Received Rs.54,000 Rs.0 Rs.0

Subtotal Cash Received Rs.1,413,071 Rs.1,357,569 Rs.1,428,767

Expenditures Year 1 Year 2 Year 3

Expenditures from OperationsCash Spending Rs.111,000 Rs.125,600 Rs.130,600

Bill Payments Rs.1,156,323 Rs.1,217,129 Rs.1,235,539

Subtotal Spent on Operations Rs.1,267,323 Rs.1,342,729 Rs.1,366,139

Additional Cash Spent

Principal Repayment of Current Borrowing

Rs.0 Rs.7,000 Rs.15,000

Long-term Liabilities Principal Repayment

Rs.0 Rs.5,000 Rs.10,000

Subtotal Cash Spent Rs.1,267,323 Rs.1,354,729 Rs.1,391,139

Net Cash Flow Rs.145,748 Rs.2,840 Rs.37,628

Cash Balance Rs.179,568 Rs.182,408 Rs.220,036

FINANCIAL PLAN(continued….)

Monthly Revenue Break-even Rs.90,541

Assumptions:

Average Percent Variable Cost 77%

Estimated Monthly Fixed Cost Rs.20,824

Break Even Analysis

FINANCIAL PLAN(continued….)

All the partners will contribute initially Rs.15million. It means each of the partners will invest 5million. The remaining 10million will be obtained from a bank by taking a loan.

We expect Rs.3million to be the expenses of store decoration, reading room arrangements, computer systems and initial promotions.

Of the remaining 2.2million, we will have our inventory.

ASSESSMENT OF RISK

Weaknesses of the businessThough two of the partners

have experience of sales in bookshops but are not having the experience to manage such a large scale shop. The local community is not that much attracted towards reading and studying books other than their text, so this may also be a weakness of our business.

MISSION

Books n Books’ mission is to provide quality literature of all types at the lowest possible prices in Peshawar. The firm additionally seeks to provide a comfortable atmosphere for its clients that promote browsing, relaxation, and an enjoyable environment to spend extend time in. Books n Books’ attraction to its customers will be our large selection of books, magazines, music CD's and DVD’s and our purchasing/buyback option, which lower our book acquisition costs and allows our customers to discard unwanted books/CD's in exchange for cash.

OBJECTIVES

These are the goals for the next three years for Books n Books: Achieve profitability by the mid of Year 2. Earn approximately Rs.200,000 in sales by Year 3. Pay owners a reasonable salary while running at a profit.

KEYS TO SUCCESSIn order to survive and expand, Books n Books must keep the following issues in mind: We must attain a high level of visibility through the media, billboards, and other advertising. We must establish rigid procedures for cost control and incentives for maintaining tight control in order to become THE low-cost leader in books. In order to continually attract customers, we must be able to keep the maximum amount of inventory available and achieve a high level of customer service.