Sample Business Plan
PROBIKE Business Plan
A well planned and formatted business plan is an essential step for a successful business venture. This tutorial is meant to illustrate the components of an effective business plan and familarize the prospective business owner with the use and function of each part. As each business is unique in their needs, additional information may be needed. Contact the Maine Small Business Development Center for more information.
Statement of Purpose ProBike will be an independent bicycle dealership which will sell and service a wide array of bicycles. We intend to locate the business on the corner of Main Street and Bourne Avenue in downtown Abbotville. ProBike is seeking a loan of $71,000 in addition to a $19,000 owner investment to finance the lease of a building, make renovations, purchase inventory and equipment, and provide working capital for growth and development. It is expected that the proceeds of the business will be adequate to repay the loan and that inventory, equipment and personal assets will provide adequate collateral to secure the loan.
Description of Business ProBike will specialize in selling a variety of high quality bicycles to retail customers. We will also service the bicycles that we sell and carry a large selection of bicycle accessories. The business will be open six days a week, from 10:00 a.m. to 6:00 p.m. on weekdays and from 10:00 a.m. to 8:00 p.m. on Saturdays. Demand for bicycles is seasonal and we may need to adjust our schedule as demand fluctuates, possibly closing the store for a month or so during the winter months. We believe that we have found an ideal location for the business; a 2500 square foot building in Abbotville. We feel that Abbotville's demographic characteristics and location make it an ideal place to open a bicycle shop. The city has a large population of children and young adults; segments of the population that are heavy users of bicycles. Also, with a large state university only three miles away, we expect to attract a number of college customers. This shop would also be the only independent bicycle dealership in the area. These factors lead us to believe that Abbotville is a perfect place to open a bicycle dealership. The building itself will need some renovations in order to make it suitable for our needs. We intend to partition the building into the following areas: (1) showroom (1000 square feet); (2) office area (300 square feet); (3) service area (300 square feet); and (4) other space for restroom and storage (900 square feet). We feel that this building offers more than adequate space and will meet our needs for the
foreseeable future.
Market Analysis The bicycle industry has benefited greatly from the public's increased concern for their health and physical fitness. Bicycling is an excellent cardiovascular exercise and a great stress reliever. People have begun to realize the benefits of bicycling and are flocking to the sport. In 1995 there were an estimated 12.5 million bicycles sold in the United States--an increase of almost 3 million over the figures for 1993. Sales of bicycles and bicycle accessories have reached an astounding $3.5 billion per year. Currently, there are an estimated 55 million adults and 45 million children in the United States who own bicycles. Information found in The Official Guide to Household Spending indicates that the average person in the United States spends approximately $14.50 per year on bicycles and bicycle accessories. With a population of 30,000, the citizens of Abbotville spend roughly $440,000 a year on bicycling. In addition to the local population, we would also expect to make sales to tourists and students at the university. The State Department of Tourism has estimated that we could reasonably expect sales to increase 25-35% during the tourist season. A conservative estimate would be for total sales to grow by 35% to compensate for tourism (25%) and college customers (10%). This brings the total amount of money spent on bicycles and bicycle accessories by the citizens of Abbotville along with tourists and students to $594,000. If ProBike is able to capture just 30% of market share, we could expect to have retail sales in the area of $190,000 per year, disregarding service income. We believe that this is an easily achievable goal given the lack of serious competition. In order to become profitable and competitive, we will need to stay on top of industry trends and respond to customer demands. We initially plan to carry three different types of bicycles. We expect to sell a large number of mountain bikes as they accounted for 65% of all bicycles sold in the United States last year. Mountain bikes are designed for rough terrain and are primarily used for off-road riding. The prices of these bicycles will range from $200-$1200. The second style of bicycle that we intend to sell is known as a hybrid bike. This bicycle is essentially a cross between a mountain bike and a road bike. In 1995, hybrid bicycles accounted for 12% of all the bicycles sold in the United States. These models are for the person who wants to ride their bicycle on different types of terrain, from asphalt roads to dirt trails. The prices of these bicycles will range from $150-$1200. We will also carry a wide selection of children's bicycles. Children's bicycles account for the second largest portion of the bicycle market. The prices of these bicycles will range from $125-$400.
Competition There are three businesses in the Abbotville area that will be directly competing with ProBike. (1) George's Department Store -- This is a large nationwide discount retailer which offers a wide array of products including a limited selection of bicycle and bicycle accessories. The majority of their bicycles are geared towards those individuals seeking a relatively inexpensive product. This retailer does not service the bicycles they sell and they do not offer instruction on the safe and proper use of bicycles. George's is located approximately two miles south of the proposed Probike location. (2) Sports R Us -- This is a retail chain specializing in sporting goods. They currently have a store three miles west of the ProBike location. We do not believe that this store will pose a significant threat as they rarely have more than seven or eight bicycles in stock at any given time. Like George's, this business also does not service the bicycles that they sell. This retail chain has been experiencing significant financial problems in the past year and they have announced that they intend to close nine of their less profitable locations.
However, we have been unable to determine if they plan to close their Abbotville store. (3) The Cykel Shop -- This is the only independent bicycle dealership in the area and is located fifteen miles west of downtown Abbotville. The Cykel Shop is a family owned business and was established in 1979. This is a small operation; they usually have less than thirty bicycles in stock and offer a limited selection of bicycle accessories. The Cykel Shop has been slow to adapt to the trends developing in bicycling and has just recently started selling mountain bikes, a product which accounted for 65% of all bicycle sales last year. Due to their distance from ProBike and their small size, we do not feel that The Cykel Shop will pose a significant threat to the success of ProBike. Each of our direct competitors has a limited selection of bicycles and does not service the bicycles they sell. Abbotville does not have an independent bicycle dealership and those wishing to purchase a higher quality product or who want to service their bicycles have been forced to travel elsewhere. We feel that ProBike will fill a niche in Abbotville; we will be the only store in town which not only sells bicycles but services them as well.
Marketing Strategy Our location on the corner of heavily traveled Main Street and Bourne Avenue will provide us with excellent exposure. We intend to install a sign in the front of the building to advertise our presence. We plan to spend approximately $200 a month to advertise on local radio stations, in the local newspaper, and in the university newspaper. A small ad in the local business directory will provide us with some additional exposure. We intend to conduct bike maintenance and safety clinics at the local elementary schools. Each workshop will include a bike safety trial ride and obstacle course. Participants will all receive a "ProBike" safety patch. We have contacted town officials and they have been very enthusiastic about our proposal to sponsor a bicycle race at the annual "Abbotville Days" festival held every July. Additional promotional efforts will include sponsoring riders in several area road races. Their entry fees will be paid by ProBike in exchange for their wearing ProBike t-shirts and insignias. A grand opening ceremony has been scheduled for March 1st. We will extensively advertise our grand opening by way of the local media. We intend to raffle off a new mountain bike at our opening in the hopes of attracting a large crowd.
Management Michael and Laurie Ross are a recently married couple who will be the owners of ProBike. In 1993, Mr. Ross earned a Bachelor's degree in Accounting from a nearby university. Following college, he worked for two years at Sports Galore, a sporting goods retail outlet. Through his work at Sports Galore, Mr. Ross gained valuable experience in the areas of customer service, marketing and management. At ProBike, Mr. Ross will be responsible for store management, accounting and marketing. Laurie Ross recently earned an Associate's Degree in Physical Fitness. She has worked on a part-time basis for the past three years as a cashier at a local discount retailer. Mrs. Ross is an avid cyclist and has competed in numerous bicycle races. She is very familiar with bicycles and bicycle accessories, safety issues, as well as bicycle repair and maintenance. Mrs. Ross will be in charge of sales and bicycle service at ProBike. Michael and Laurie strongly believe that with their combined knowledge and skills, they will be able to make this business a success.
Their resumes are included on pages 11 and 12.
Personnel We will need to hire part-time employees to assist in sales and/or bicycle repair. As was mentioned earlier, bicycle sales are seasonal and we expect to hire part-time help for twenty to thirty hours per week during the busy season. We intend to find students at the nearby university who would be willing to work at ProBike. Starting pay would probably be in the range of $6.00-$7.50 per hour depending the individual's skills and experience.
Specific Uses of Funds The $90,000 will be used as follows:
We plan to start with an inventory of approximately 120 bicycles. The prices of these bicycles will range from $125-$1200. We also intend to carry a large selection of bicycle accessories. Of course, we will be able to order additional bicycles and accessories should we find an unexpected demand for a particular product. We should get a better feel for the right product mix as time passes. Specialized tools and equipment will be needed to service some of the bicycles. Mrs. Ross has significant experience in bicycle repair and already possesses a number of tools. The business will need some additional equipment including a cash register and some assorted supplies. The renovations include: partitioning the building into four areas; installation of flooring in the showroom and service areas; replacing the existing heating system with a more modern and energy efficient one; installation of a counter and cash register; and, remodeling the restroom. The working capital will enable ProBike to meet current expenses and insure the growth of the business.
Summary After carefully examining the market conditions, we have come to the conclusion that there is a strong demand for an independent bicycle dealership in Abbotville. There are very few businesses in the area where an individual can purchase a bicycle. The stores that do sell bicycles have a limited selection and they do not service the products that they sell. ProBike will not only sell bicycles and bicycle accessories, but service them as well. We feel that our promotional efforts and business location will generate the exposure necessary to enable us to achieve our sales goals. We firmly believe that our revenue and expense projections are realistic.
Notes to the Cash Flow Statement
Resumes of Principles