Dollar Store

BUSINESS PLAN     DOLLAR DAZE

3535 Lincoln Plaza Drive
Dayton, Ohio 45402

Dollar Daze is a business specializing in general merchandise. The store has access to the purchasing power of buying centers offering merchandise at prices 10 to 30 percent below wholesale with immediate delivery and low to no minimum orders. These centers are well stocked and prepared to meet the increased demands of the peak selling seasons. Our mission is to provide the Dayton area with a wide variety of quality general merchandise generally priced at one dollar, in a clean and friendly atmosphere.

• executive summary
• company summary
• products
• market analysis summary
• strategy & implementation summary
• management summary
• financial plan
• appendix

EXECUTIVE SUMMARY

Dollar Daze is a business specializing in general merchandise. It will be located in the brand-new Town Square Plaza, which is in a high traffic area. The space will be next to Nicky's, a café and bakery. The space is easily accessible and provides ample parking for its customers. The space is visible from all points within the center itself as well as the traffic from Martin and Washington Streets. The business is a retail establishment selling current dollar variety merchandise at retail. The majority of the merchandise is priced within a one-dollar price range, thus attracting the widest possible range of customers.

Dollar Daze has access to the purchasing power of buying centers offering merchandise at prices 10 to 30 percent below wholesale with immediate delivery and low to no minimum orders. These centers are well stocked and prepared to meet the increased demands of the peak selling seasons such as Seasonal Changes, Back-to-School, Holiday Needs, etc. Since delivery from these centers to the business takes only five to ten days, Dollar Daze is assured of a well-stocked store regardless of seasonal demands. Also, since these buying centers are able to deliver in such a short time, there is not a necessity to carry an extremely large inventory in advance of peak selling periods.

Dollar Daze attracts its customers through the use of specialized advertisements, handbills, news releases in newspapers, as well as the traffic flow of which the area itself generates.

A Grand Opening will commence after Dollar Daze has been in business for six to eight weeks. This event will be held on a Saturday. Dollar Daze's owner Melinda Parker will coordinate the Grand Opening. It will include a local political official, ribbon-cutting ceremonies, pictures, speaking, etc. Professional news releases will be submitted to the local and market area newspapers, and possibly radio and television.

The storeowner of Dollar Daze has access to over 250 of the best buying centers in the country. The buying centers provide inventory and fixtures. Melinda Parker will take a buying trip for initial inventory with her close friend and professional buyer Jill Smythson. All staff will be provided with in-store training.

According to the information contained in this business plan, we feel that Dollar Daze is a sound business investment for the financial institution to consider for a loan in the amount of $35,000.

Key to Success

The key to our successful retail business is our flexibility. The buying habits of customers change and vary. The availability of equally varied merchandise gives us the freedom to change with our customers.

Mission

Our mission is to provide the Dayton area with a wide variety of quality general merchandise generally priced at one dollar, in a clean and friendly atmosphere.

COMPANY SUMMARY

Dollar Daze will rent a 1,300-square-foot space, having 1,000 square feet of selling space from Noel Sparks. Located in the brand-new Town Square Plaza, it is a high traffic area. The space will be next to Nicky's, a café and bakery. The space is easily accessible and provides ample parking for its customers. The space is visible from all points within the center itself as well as the traffic from Martin and Washington Streets.

Proposed hours of operation are from 9:00 A.M. to 7:00 P.M., Monday through Saturday and 12:00 P.M. to 6:00 P.M. on Sunday. Dollar Daze will also maintain extended holiday hours. The business will be closed Christmas Day as well as three other national holidays yet to be decided.

Since the selected location is in the heart of one of the busiest retail corridors in the area, we feel that this space is the best possible location in Dayton and surrounding areas.

Company Ownership

Dollar Daze is a sole-proprietorship and is registered to the owner, Melinda Parker.

Start-up Summary

Start-up costs will be financed through a combination of owner investment and a short-term loan. The start-up chart shows the distribution of financing.

Those expenses include:

• Inventory, fixtures, and supply fees of $24,400
• Marketing/advertising fees of $600 for our grand opening
• Build-out fees of $3,000 for our location including our sign
• Deposits on location, utilities, telephone, and insurance

Equipment and Supplies

Listed below is our equipment and supplies list:

Inventory at cost
Gondolas
Shelving
Pegboard & Slatwall
Pegboard & Slatwall Hooks
Cash Register (Multi-Department)
2 Rolls Register Tape
2,000 Plastic Bags
12 Shopping Baskets
1 2-Line Labeler
6 Rolls for Labeler
Tissue Paper
Weekly Bookkeeping & Record System
Inventory Control System
Supplier/Order System
Advertising Manual
Training Manual
Promotional Idea Manual
Custom Designed Handbills
Customer Register Cards
Pre-opening Guide
Store Merchandise Guide
Store Manual
Buyers Guide
Newsletter Service

PRODUCTS

Our product line will include items from the following categories:

• Hardware
• Toys
• Gift Items
• Office Supplies
• Schools Supplies
• Baby Products
• Bath Products
• Cleaning Products
• Pet Supplies
• Safety & Security Items
• Kitchen Items

We will always have an abundant selection of items available from which to choose.

MARKET ANALYSIS SUMMARY

The Dayton market faces the economic challenges of poverty, single parenthood, and public assistance, plus the generational squeeze of caring for the young and elderly at the same time. The majority of their budget goes to basics, such as rent and groceries. They are top-ranked for buying major household appliances and baby products and they tend to purchase fast food and takeout food.

General Statistics for 1999 in the 45402 zip code area are as follows:

Total Population - 39,889

Number of Households - 14,344

Population by Race

White - 11.8% Black - 86.5% Asian Pacific Islander - 0.1% Other - 1.6%

Population by Gender

Male - 46.2% Female - 53.8%

Income Figures

Median Household Income - $21,729

Household Income Under $50K - 75.3% Household Income $50K-$100K - 20.8% Household Income Over $100K - 4.0%

1990 Housing Figures

Average Home Value - $38,152 Average Rent - $272

Market Segmentation

Dollar Daze will provide high quality merchandise at a discount price range to its customers. Since the majority of its items offered will be in the one-dollar price range, Dollar Daze will be able to maintain its competitiveness.

The target female market is in a growing community that has a population in excess of 39,889 people, well over 14,344 households, of which approximately 53.8 percent are female. The median family income for Dayton is $21,729.

Target Market Segment Strategy

The approaches to be used to attract these customers will be a website, radio and print advertising, signs in the store windows, and word of mouth advertising from our satisfied customers.

Industry Analysis

In 1999, retail sales grew 9 percent to almost $3 trillion dollars. General merchandise and apparel grew to $784.5 billion, a 7.6 percent rise over 1998. According to the Department of Commerce, Internet shopping reached $5.3 billion or .64 percent of U.S. retail sales in 1999. The growth of traditional U.S. retailing should not be robust due to a dearth of economically favorable store locations. Many companies have responded by using their capital for other purposes such as reducing long-term debt and repurchasing their common stock.

Some companies can continue to grow their store count where they have a very specific demographic group to serve and locations can be developed in sparse locations at minimal costs. General Washington and Family Cents Savings for instance, continue to expand their store counts. Keys to their success are convenient locations, relatively small stores, and the ability to provide most nonfood merchandise to their lower-income customer bases.

The retailing industry is mature and slow growing. These factors mean companies will have to do a better job of managing their operations. Specifically, retailers must close unprofitable stores, locate in regions with faster growth, and manage their inventory better. Retailers must also invest in automated processes to keep their costs down. Some companies have taken steps to reduce their exposure to economic cycles and consumer trends.

Traditional retailers may have finally recognized the potential of Internet commerce and its impact on their business. Initially, retailers had just a website that was more for informational purposes than e-commerce transactional purposes. However, beginning in the year 2000, several retailers will devote more time to developing full blown e-commerce sites. Most notably, Target Stores plans to launch a major e-commerce program in the year 2000. Savings Marts' purchase of Billings in March 1999 is significant. It allows Savings Marts to use Billings's expertise and technology in direct marketing to further promote and enhance Savings Marts's Yonkers.com Internet site. Picway also launched a comprehensive Internet site focused on their shoe retailing concept.

Industry Trends

Consumers are more value conscious than they've been in the past. Their shopping habits have shifted from department stores to discounters and mass merchandisers. Many consumers can find the same items at a mass merchandiser that they can find at a department store at a substantially lower price.

Competition and Buying Patterns

There is currently no other store of this kind in the area, which ensures its success!

Dollar Daze will offer a wide selection of general merchandise priced at only one dollar. Having over 25,000 different items to choose from for its inventory selection insures that Dollar Daze will be able to maintain a full and diverse inventory for its customers. It will have suppliers that can deliver these items within 5-10 working days, so the shelves and walls will remain full and well-stocked.

The Christmas season has traditionally been important to retailers but there has been lackluster growth in the past few years despite the booming economy. Part of the problem is shifting demographics. Older people tend to buy fewer items as they age. Since the baby boom generation is approaching their fifties, they will have less need for more items. So the target market of these stores lean towards men and women ages 18-49.

Some retailers have responded by offering theme promotions during other parts of the year, such as Valentine's Day, Independence Day, and Easter. Retailers are also requiring their suppliers to develop unique and exclusive merchandise and product assortments for their stores to avoid competition with another store for the same product.

Consumers are much more value-oriented which has contributed to the growth of mass merchandise stores. Another indication is the growth of the wholesale club and dollar store concept over the past two decades. These stores allow consumers to buy products in bulk and get more products for their money. These stores mostly carry fast-moving merchandise brands which are number one or two in their respective product categories.

The Dayton area continues to expand, offering the retail establishments an ever-growing opportunity for success.

STRATEGY & IMPLEMENTATION SUMMARY

Melinda Parker has chosen three strategies for implementation of Dollar Daze and they are:

1. to build sales volume
2. to create a customer database
3. to develop an effective product line and pricing strategy

During the first few years, the store's sales, she hopes, will grow through the use of promotional campaigns, magazine advertisements, and website sales. Trisha will develop the customer database through careful selection and screening of mailing lists. She plans to select an inventory she feels is affordable and unique when compared to the other dollar store products. For her pricing strategy, she will establish an ongoing campaign to purchase products at pennies less than her competitors, whereas sometimes she can sell items at $.99 instead of $1.00.

Competitive Edge

Dollar Daze will be locally owned and operated, insuring that the needs and desires of the local community are met. It will also be able to provide special ordering of items for its customers and offer a personal and friendly atmosphere that you cannot find in larger chain variety stores.

Sales Strategy

Our sales strategy is to:

• develop a website for e-commerce sales within the next year
• provide quality customer service
• have a "no cash refund/exchanges only" policy
• accept all major credit cards
• survey our customers regarding products they would like to see added to our store
• sponsor school and other community events
• automate our sales process, such as using bar codes and a Point-of-Purchase cash register to track inventory and sales

Sales Forecast

Revenues of stores of this nature, using the available demographics, average between $176 to $177 in sales per square foot of selling space during their first year of business. This business projected its first year at 90 percent of low average.

Each year reflects an increase of 5 percent per year in fixed expenses to more than keep up with the current consumer price index (CPI).

Year 2 reflects a conservative growth rate of 15 percent. Year 3 reflects a growth rate of 10 percent. The information in the chart below is based on a 1,300-square-foot unit with 1,000 square feet of actual selling space.

MANAGEMENT SUMMARY

Melinda Parker, owner of Dollar Daze, has a B.A. degree in Marketing. For two years she has managed a dollar store similar to Dollar Daze. She has a full understanding of how to operate and manage a dollar store and its employees.

Personnel Plan

The personnel plan is included in the following table. It shows the owner's salary (Other) and two full-time salaries for cashiers. There will be no benefits offered at this time. Cashiers will have other duties as assigned.

FINANCIAL PLAN

Our financial plan includes:

• moderate growth with a steady cash flow
• investing residual profits into company expansion
• repayment of our loan calculated at a high A.P.R. of 10 percent and at a 10-year-payback on our $35,000 loan

Important Assumptions

We do not sell anything on credit. The personnel burden is low because benefits are not paid to our staff. We will continue to work on a short-term interest rate that is lower. We are also assuming the economy will continue to grow and there will continue to be a need for stores such as Dollar Daze.

Break-even Analysis

A break-even analysis label has been completed on the basis of average costs/prices. With fixed costs averaging $5,979 and $176 to $177 in sales per square foot, we need $7,972 in sales per month to break-even.

Projected Profit and Loss

We predict advertising costs will go down in the next three years as word of our store gets out to the public. Our net profit/sales ratio will be low the first year. We expect this ratio to rise at least 12 percent the second year and at least 3 percent in our third year. Normally, a startup concern will operate with negative profits through the first two years. We will avoid that kind of operating loss on our second year by knowing our competitors and having a full understanding of our target markets.

Projected Cash Flow

We are positioning ourselves in the market as a medium risk concern with steady cash flows.

Projected Balance Sheet

All of our tables will be updated monthly to reflect past performance and future assumptions. Future assumptions will not be based on past performance but rather on economic cycle activity, regional industry strength, and future cash flow possibilities. We expect a solid growth in net worth by the year 2005.

APPENDIX

Sales Forecast

Personnel Plan

General Assumptions

Profit and Loss (Income Statement)

Projected Cash Flow

Projected Balance Sheet