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Male Gear Wear

Executive Summary

Male Gear Wear (Gear Wear) is a men’s aerobic sports retailer based in Ashland, Oregon. Gear Wear offers the most comprehensive selection in town and arguably on the Internet/mail order as well.

By offering the most complete selection as well as a knowledgeable support staff, Gear Wear will quickly gain market share.

Ashland was chosen because of its diverse, active culture. It is not uncommon for people to make a job sacrifices in exchange for quality of life gains, and the active, outdoor lifestyle is the majority in Ashland. Gear Wear is a Oregon based L.L.C. primarily owned by Stan Gearboy.

Keys to Success
Gear Wear has identified three keys to success that they believe will be instrumental in reaching sustainable profitable. The first is the need to meet the customer’s needs by offering the most comprehensive selection and knowledgeable staff. The second key to success is the need to monitor the competitive environment in an effort to ensure differentiation. The last is related to the accounting systems of the organization. Gear Wear has identified the need to design and adhere to strict financial controls.

Competitive Edge
Gear Wear’s competitive edge is its unsurpassed selection and sales staff knowledge. This will be a significant edge because no other store offers the comprehensiveness within multi-sports as Gear Wear. The type of athletes that participate in a variety of aerobic sports do so as a part of their lifestyle. It is a part of their life, an activity that they enjoy and look forward to. While the activities may be somewhat painful when you are doing them, depending of course on the intensity that you reach, overall it is quite enjoyable. This would also explain why they particate in so many different ones. One on hand some of the sports are seasonal, on the other hand, you cannot get enough of just one.

Management
Gear Wear is being lead by Stan Gearboy, a veteran of the outdoor sport industry. While in undergraduate school, Stan was an active member of two different sport teams. This was his first introduction to his passion of aerobically challenging sports.

Following his degree, Stan went to work for R.E.I., a successful outdoor retailer (both brick and mortar as well as mail order). Stan spent years at R.E.I. learning from the best. While Stan was quite comfortable in the retail environment, he realized that if he wanted to pursue his dreams of operating a retail store, he needed to build his skill set. Stan studied for his Masters with the goal of opening his own store within the outdoor industry. Through a combination of passion, experience, and education, Stan is the right person to lead Gear Wear to success.

Gear Wear has conservatively forecasted explosive sales by the end of year two, escalating continually in year three.  The net profit margin will be low in year two and increase modestly in year three.  While this appears to be fairly low for a retail operation, Gear Wear has sufficient cash to weather the first few years with the goal of building a sound foundation for the business, including a loyal customer base. 

Sports clothing retail shop business plan, executive summary chart image

1.1 Objectives

  • Become the premier men’s aerobic sports clothing retailer in Ashland.
  • Increase market penetration to 10% by year three.
  • Reach profitability within the second year.

1.2 Mission

It is Gear Wear’s mission to become the premier men’s sports clothing retailer in Ashland. This will be accomplished by offering fair prices, the best selection, and a knowledgeable staff to assist customers in any way. Gear Wear will strive to exceed all of their customer’s expectations.

1.3 Keys to Success

  • Meet the customer’s needs by offering a comprehensive selection and knowledgeable staff.
  • Monitor the competitive environment ensuring differentiation.
  • Employ strict financial controls.
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Company Summary

Gear Wear is a Ashland, Oregon based retailer of men’s aerobic sports clothing. Gear Wear will concentrate on running, cycling, cross country skiing and snowshoeing apparel.

Currently, there are local retailers that offer these types of garments, however most retailers are sport specific, such as a bicycle shop or a running store. The few retailers that have a wide range of sports have limited inventories. This company was founded on the premise that most aerobic sport athletes participate in more than one type of activity.

2.1 Start-up Summary

Gear Wear is in the process of starting up the company. Legal counsel was consulted for a variety of issues including business organization formation, contract negotiations, and etc. Gear Wear also utilized a business consultant to gain insight into business issues that were not intuitive to Stan. Gear Wear will incur $10,000 of build out expenses for the space. The following equipment will be needed for start-up:

  • Cash register and bar code scanner.
  • Computer system with printer, scanner, and Internet connection.
  • Assorted display racks, shelves, mirrors, etc.
  • Stereo system.
Sports clothing retail shop business plan, company summary chart image

Start-up Funding
Start-up Expenses to Fund $17,900
Start-up Assets to Fund $82,100
Total Funding Required $100,000
Assets
Non-cash Assets from Start-up $9,000
Cash Requirements from Start-up $73,100
Additional Cash Raised $15,000
Cash Balance on Starting Date $88,100
Total Assets $97,100
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $0
Capital
Planned Investment
Investor 1 $45,000
Investor 2 $25,000
Investor 3 $45,000
Additional Investment Requirement $0
Total Planned Investment $115,000
Loss at Start-up (Start-up Expenses) ($17,900)
Total Capital $97,100
Total Capital and Liabilities $97,100
Total Funding $115,000
Start-up
Requirements
Start-up Expenses
Legal $3,000
Stationery etc. $300
Brochures $200
Consultants $2,500
Rent $900
Research and Development $1,000
Other $10,000
Total Start-up Expenses $17,900
Start-up Assets
Cash Required $73,100
Start-up Inventory $0
Other Current Assets $0
Long-term Assets $9,000
Total Assets $82,100
Total Requirements $100,000

2.2 Company Ownership

Gear Wear is an Oregon L.L.C. founded by Stan Gearboy in late 2002.

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Products

Gear Wear sells a wide variety of male-only clothing for aerobic sports such as cycling, running, cross country skiing, and snowshoeing.

The main common element of the products for sale is NO cotton. Cotton is the worst possible fabric to make sportswear out of, PERIOD. Cotton absorbs and holds water which is undesirable because when saturated with water clothing loses almost all of its insulating characteristics. It also becomes much heavier because of the water weight.

Lastly, when a garment is wet friction is significantly increased. This is most evident in socks where blisters are almost guaranteed when running in cotton socks. Gear Wear’s mantra is “friends do not let friends wear cotton.” The following is by no means an exhaustive list of the products that are for sale:

  • Shorts
  • Long and short sleeve shirts
  • Tights
  • Water repellant shells
  • Assorted fleece wear (jackets, pants, vests, hats, gloves)
  • Socks
  • Briefs, including wind briefs (with a wind resistant front panel)
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Market Analysis Summary

Gear Wear has segmented its market into two distinct segments. The first distinguishable segment is hardcore athletes. These are people who live and breathe to push their body harder and harder in aerobic activities. This market segment is present in Ashland, however, they will not be the largest source of revenue as they already have most of the pieces of clothing for their activities as they have been doing it for a long time.

They are more likely to pick up a piece here and there. The second market segment is the newbies, these are people who are relatively new to aerobic activities. While their purchases may not be quite as frequent, their number of potential customers is higher and they will have larger ticket amounts.

Each group will be targeted with a different strategy, recognizing the fact that these groups, although they are participating in the same sports have different demographics. The competitive industry can be broken down into sport specific retailers and all encompassing sports/outdoor retailers.

The sport specific retailers have a lot of clothing, but for only one sport. The all encompassing retailers have a wide selection but not comprehensive selection. Lastly, serving this market should be a steady, profitable endeavor simply because most people that participate in these type of activities tend to for life.

4.1 Market Segmentation

Gear Wear’s market can be broken down into two distinct segments: hardcore athletes and newbies. Each group has distinctive demographics which are detailed below:

Hardcore Athletes

  • Typically spend seven – 15 hours per week on their training/activities.
  • Regularly participate in two to three different aerobic sport activities.
  • 61% have at least an undergraduate degree.
  • Have on average at least a $45,000 household income.

Newbies

  • Typically spend five – 10 hours a week training.
  • Have only recently (within the last few years) began to get serious in aerobic activities.
  • 54% have undergraduate schooling or a degree.
  • > $47,000 of household income.
Sports clothing retail shop business plan, market analysis summary chart image

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Hardcore Athletes 8% 8,097 8,745 9,445 10,201 11,017 8.00%
Newbies 9% 13,223 14,413 15,710 17,124 18,665 9.00%
Total 8.62% 21,320 23,158 25,155 27,325 29,682 8.62%

4.2 Target Market Segment Strategy

The strategy for segmenting the market is based on the fact that the two different groups have distinct buying patterns. The hardcore athletes have a decent amount of sport specific clothing. When they shop for new stuff it is generally a replacement piece here and there.

They are typically buying the latest and greatest on the market. Although they do not need more products it is this group that most appreciates the subtle improvements that the new products bring. They therefore are likely to buy a piece or two if the product shows improvement in design over what they currently own.

This differs from the newbies who are new to aerobic activities, or at least to the level that they currently participate at. This group is more likely to make less frequent but larger purchases. This group is particularly exciting because it allows Gear Wear to have a significant impact on the outfitting of these people.

4.3 Industry Analysis

Gear Wear participates in the men’s retail clothing industry, specifically in the outdoor aerobic sports clothes niche. The aerobic sports clothing market is a $765 million dollar industry.

Gear Wear is well poised in Ashland, Oregon, a sports minded town. Athletes can participate in any number of activities, all within a 20 minute drive from Ashland. Additionally, people can participate in both fall and winter (snow) activities at the same time.

Products in this industry are purchased either through a local retailer or mail order. At the local retail outlet, there are either sport specific stores or larger general retailers that carry a wide assortment of different sports/human powered activities.

Products are also purchased via mail order companies. Within the mail order arena, there are also retailers that offer sport specific clothing as well as mail order retailers that sell a wide assortment of sports.

4.3.1 Competition and Buying Patterns

Gear Wear faces competition from several sources:

  • Run Pro: A running-only store that stocks a decent variety of running-specific clothing.
  • Two Wheel Drive: A bicycle shop that has the best selection of cycling-specific clothing.
  • Assorted ski retailers: There are two ski retailers that sell a variety of clothing, primarily outerwear and base layers that could be used for cross country skiing.
  • R.E.I.: A Seattle-based retailer and mail order company with many regional/local stores that sells a wide variety of different men’s and women’s clothing. While the variety is great in terms of sports, there are not a lot of choices within sport specific clothing.
  • Performance Bike Shop: A mail order, cycling-specific retailer of clothing, bicycles, equipment, components, and accessories. Their selection is great, however, it is cycling specific and being mail order, you cannot try on the products.
  • California Running: The leading running-specific mail order house. The pluses and minuses are similar to Performance Bike Shop.

The buying patterns for the hardcore athletes are that they typically will go to a sport specific store (or mail order) to make a purchase. This is because they use the clothing so much and appreciate the technical aspects of the products that they notice the subtleties between the different products and appreciate the wider selection.

The newbies are more likely to make their purchases from a general retailer because of the wide range of products that they offer.

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Strategy and Implementation Summary

Gear Wear will reach the road to profitability by exploiting its competitive edge of an incredible selection. Gear Wear offers true one-shop stopping. Gear Wear’s marketing strategy will be multifaceted, one facet for each market segment.

For the hardcore athletes, Gear Wear will market themselves as the most complete source of products. For the newbies Gear Wear will be marketing themselves as the knowledgeable source for all different sports. Newbies are in search information in addition to the gear for their new activities and they are more likely to value a salesperson to help inform them.

5.1 Competitive Edge

Gear Wear’s competitive edge is its unsurpassed selection. It is able to offer the same complete selection as the sport specific stores, but Gear Wear has multi sports all under one roof. This creates a truly one stop shopping option where a customer can stop by and have the most complete selection available.

As the demographics indicate, the target customers participate in more than one sport so the value in being able to go to one store and find a anything you might want or need is of tremendous value. While having a large selection is not an inherent sustainable advantage, for now there are no indicators that would suggest that any other competitors are going to try to enter this same space. The retail space seems to be content in not getting too specialized in any one or groupings of activities.

5.2 Marketing Strategy

The marketing strategy that Gear Wear will employ takes into account the two different market segments. Gear Wear will market itself to the hardcore user group as the complete resource for all the different types of male sports clothing.

Gear Wear will use a combination of magazine/journal advertisements to reach this group. In addition to the advertisements, Gear Wear will also be quite visible at the different competitions that the athletes participate in. They will be sponsoring the events as well as handing out flyers as a way to develop visibility for the hardcore athletes.

The marketing strategy for the newbies will a bit different, in addition to advertising itself as a complete source/selection of clothing, Gear Wear will stress the fact that in addition to the selection it offers unprecedented knowledge/advice from its sales people. This will be attractive to the newbies who are just getting into the different sports and could use knowledge and guidance regarding their new activities. Gear Wear will rely on advertisements in the local outdoor sports journals as a way to reach this target audience.

5.3 Sales Strategy

Gear Wear’s sales strategy will be to supplement its outstanding selection with salespeople who can provide good information about the different features of the clothing and the differentiation between all the products. Having just the clothing out on display will not in itself sell the products, there must be supporting staff that can explain the relative differences between the products as well as discuss the need for purchasing the gear. Most newbies will just assume that they can use their traditional cotton workout clothing and they need to be educated as to why specialized clothing makes all the difference in the world.

The sales staff will be well trained in knowing the technical details of the different fabrics and products as well as proper fitting. This training will occur before the staff reaches the sales floor. It is presumed that having the sales staff properly trained will have a significant effect on making the conversion from a casual shopper into a qualified customer.

5.3.1 Sales Forecast

It is forecasted that the first three months will not have any significant sales activity. The first two months will be used to set the business up to be ready for retail. The third month will have a trickle of sales activity. This is to be expected as the business is just opening its doors and there are not a lot of people that are familiar yet with Gear Wear. Sales are expected to grow slowly during first year. Profitability should occur by month 26 with sales revenue escalating continually through year three.

Sports clothing retail shop business plan, strategy and implementation summary chart image

Sports clothing retail shop business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3
Sales
Hardcore athletes $63,157 $151,889 $222,090
Newbies $70,736 $170,116 $248,741
Total Sales $133,893 $322,005 $470,831
Direct Cost of Sales Year 1 Year 2 Year 3
Hardcore athletes $25,263 $60,756 $88,836
Newbies $28,294 $68,046 $99,496
Subtotal Direct Cost of Sales $53,557 $128,802 $188,332

5.4 Milestones

  • Completion of business plan
  • Securing retail space
  • First month the doors are open
  • Profitability
  • Explosive sales revenue
Sports clothing retail shop business plan, strategy and implementation summary chart image

Milestones
Milestone Start Date End Date Budget Manager Department
Completion of business plan 11/1/2002 1/15/2003 $0 Stan Marketing
Securing retail space 1/1/2003 2/1/2003 $0 Stan Department
First month the doors are open 1/1/2003 3/1/2003 $0 Stan Operations
Profitability 1/1/2003 2/28/2006 $0 Stan Operations
Sales revenue >$200,000 1/1/2003 12/30/2005 $0 Everyone Sales
Totals $0

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Management Summary

Stan Gearboy received his undergraduate degree form the University of Oregon. While at the University Stan was on both the cycling and the cross country ski team. It was in college where Stan began to realize that he truly enjoyed pushing his body and mind aerobically.

After school Stan worked at R.E.I., initially on the sales floor for two years, moving to a managerial position soon thereafter. Stan worked at R.E.I. for five years getting a complete picture of the retail outdoor market. Stan had always had the dream to own his own business but felt that he did not have a complete enough skill set to risk his own money so he thought it would be prudent to go back to school for a Masters in Business.

Stan chose Southern Oregon University in Ashland based on its active culture and proximity to the mountains. While at school Stan knew in the back of his mind that he wanted to open a retail establishment. Stan recognized that there was no need for a bicycle shop as there were plenty in the city. What Stan did realize was that there was a true lack of sources of men’s aerobic sports clothing retailers.

After his first year in school Stan knew this was the category that he wanted to work in. He went through his second year of school with this idea in mind, formulating parts of the business plan while he was still in school. Two months after graduation, after applying and receiving a significant loan through the school’s entrepreneurship program, Stan began to work full time on Gear Wear.

6.1 Personnel Plan

Stan will begin operations with a few key positions:

  • Stan: He will wear multiple hats within the organization. Some of his functions include, but are not limited to: sales, marketing, procurement, business development.
  • Sales staff: Initially Gear Wear will have a maximum of three sales people on the floor at any one point. The sales staff will double as customer service agents if any problems arise. The first six months will generally have no more than two staff members.
  • Support staff: Gear Wear will use two support staff agents to assist in the unpacking, inventory introduction, and merchandising of the products. These employees will work primarily behind the scenes, except when it comes to the merchandising functions.
  • Bookkeeper/Accountant: This will be a part-time position where the employee comes in several time a week and performs the necessary bookkeeping duties. Every two to four weeks the financials will be reviewed by a local CPA firm.
Personnel Plan
Year 1 Year 2 Year 3
Stan $24,000 $30,000 $33,000
Sales staff $27,000 $35,000 $40,000
Support Staff $22,500 $27,000 $29,000
Bookkeeper $19,700 $24,000 $28,000
Total People 6 8 9
Total Payroll $93,200 $116,000 $130,000

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Financial Plan

The following sections will outline the key Financial Strategy for Male Gear Wear.

7.1 Important Assumptions

The following table details important Financial Assumptions.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Break-even Analysis

The break-even Analysis indicates what is needed in monthly revenue to reach the break-even point.

Sports clothing retail shop business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $18,844
Assumptions:
Average Percent Variable Cost 40%
Estimated Monthly Fixed Cost $11,307

7.3 Projected Profit and Loss

The following table and charts show the Projected Profit and Loss.

Sports clothing retail shop business plan, financial plan chart image

Sports clothing retail shop business plan, financial plan chart image

Sports clothing retail shop business plan, financial plan chart image

Sports clothing retail shop business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $133,893 $322,005 $470,831
Direct Cost of Sales $53,557 $128,802 $188,332
Other Costs of Goods $0 $0 $0
Total Cost of Sales $53,557 $128,802 $188,332
Gross Margin $80,336 $193,203 $282,498
Gross Margin % 60.00% 60.00% 60.00%
Expenses
Payroll $93,200 $116,000 $130,000
Sales and Marketing and Other Expenses $6,000 $6,000 $6,000
Depreciation $1,800 $1,800 $1,800
Rent $10,800 $11,000 $11,000
Utilities $3,600 $3,600 $3,600
Insurance $3,900 $4,500 $4,500
Payroll Taxes $13,980 $17,400 $19,500
Other $2,400 $2,400 $2,400
Total Operating Expenses $135,680 $162,700 $178,800
Profit Before Interest and Taxes ($55,344) $30,503 $103,698
EBITDA ($53,544) $32,303 $105,498
Interest Expense $0 $0 $0
Taxes Incurred $0 $9,151 $31,110
Net Profit ($55,344) $21,352 $72,589
Net Profit/Sales -41.33% 6.63% 15.42%

7.4 Projected Cash Flow

The following table and chart presents the Projected Cash Flow.

Sports clothing retail shop business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $133,893 $322,005 $470,831
Subtotal Cash from Operations $133,893 $322,005 $470,831
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $133,893 $322,005 $470,831
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $93,200 $116,000 $130,000
Bill Payments $89,861 $193,772 $270,272
Subtotal Spent on Operations $183,061 $309,772 $400,272
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $183,061 $309,772 $400,272
Net Cash Flow ($49,168) $12,233 $70,559
Cash Balance $38,932 $51,165 $121,724

7.5 Projected Balance Sheet

The following table shows the Projected Balance Sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $38,932 $51,165 $121,724
Inventory $9,422 $22,660 $33,133
Other Current Assets $0 $0 $0
Total Current Assets $48,354 $73,825 $154,857
Long-term Assets
Long-term Assets $9,000 $9,000 $9,000
Accumulated Depreciation $1,800 $3,600 $5,400
Total Long-term Assets $7,200 $5,400 $3,600
Total Assets $55,554 $79,225 $158,457
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $13,798 $16,117 $22,760
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $13,798 $16,117 $22,760
Long-term Liabilities $0 $0 $0
Total Liabilities $13,798 $16,117 $22,760
Paid-in Capital $115,000 $115,000 $115,000
Retained Earnings ($17,900) ($73,244) ($51,892)
Earnings ($55,344) $21,352 $72,589
Total Capital $41,756 $63,108 $135,697
Total Liabilities and Capital $55,554 $79,225 $158,457
Net Worth $41,756 $63,108 $135,697

7.6 Business Ratios

The following table indicates key Business Ratios for this company as well as a relative comparison with known industry averages, based upon the NAICS industry code 448190, for Clothing Stores retailing lines of specialized clothes.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 140.49% 46.22% 5.27%
Percent of Total Assets
Inventory 16.96% 28.60% 20.91% 38.34%
Other Current Assets 0.00% 0.00% 0.00% 26.48%
Total Current Assets 87.04% 93.18% 97.73% 88.71%
Long-term Assets 12.96% 6.82% 2.27% 11.29%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 24.84% 20.34% 14.36% 37.92%
Long-term Liabilities 0.00% 0.00% 0.00% 12.86%
Total Liabilities 24.84% 20.34% 14.36% 50.78%
Net Worth 75.16% 79.66% 85.64% 49.22%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 60.00% 60.00% 60.00% 14.97%
Selling, General & Administrative Expenses 101.33% 49.59% 41.34% 6.56%
Advertising Expenses 0.00% 0.00% 0.00% 1.14%
Profit Before Interest and Taxes -41.33% 9.47% 22.02% 1.32%
Main Ratios
Current 3.50 4.58 6.80 2.10
Quick 2.82 3.17 5.35 0.86
Total Debt to Total Assets 24.84% 20.34% 14.36% 57.27%
Pre-tax Return on Net Worth -132.54% 48.33% 76.42% 4.00%
Pre-tax Return on Assets -99.62% 38.50% 65.44% 9.36%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -41.33% 6.63% 15.42% n.a
Return on Equity -132.54% 33.83% 53.49% n.a
Activity Ratios
Inventory Turnover 10.91 8.03 6.75 n.a
Accounts Payable Turnover 7.51 12.17 12.17 n.a
Payment Days 27 28 26 n.a
Total Asset Turnover 2.41 4.06 2.97 n.a
Debt Ratios
Debt to Net Worth 0.33 0.26 0.17 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $34,556 $57,708 $132,097 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.41 0.25 0.34 n.a
Current Debt/Total Assets 25% 20% 14% n.a
Acid Test 2.82 3.17 5.35 n.a
Sales/Net Worth 3.21 5.10 3.47 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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Appendix

Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Hardcore athletes 40% $0 $0 $3,433 $4,412 $4,645 $5,323 $6,112 $6,687 $7,112 $7,454 $7,878 $10,101
Newbies 40% $0 $0 $3,845 $4,941 $5,202 $5,962 $6,845 $7,489 $7,965 $8,348 $8,823 $11,313
Total Sales $0 $0 $7,278 $9,353 $9,847 $11,285 $12,957 $14,176 $15,077 $15,802 $16,701 $21,414
Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Hardcore athletes $0 $0 $1,373 $1,765 $1,858 $2,129 $2,445 $2,675 $2,845 $2,982 $3,151 $4,040
Newbies $0 $0 $1,538 $1,977 $2,081 $2,385 $2,738 $2,996 $3,186 $3,339 $3,529 $4,525
Subtotal Direct Cost of Sales $0 $0 $2,911 $3,741 $3,939 $4,514 $5,183 $5,671 $6,031 $6,321 $6,681 $8,566
Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Stan 0% $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Sales staff 0% $0 $0 $1,500 $2,000 $2,500 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Support Staff 0% $0 $0 $1,500 $2,000 $2,200 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400
Bookkeeper 0% $0 $1,000 $1,200 $1,500 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Total People 1 2 4 5 6 6 6 6 6 6 6 6
Total Payroll $2,000 $3,000 $6,200 $7,500 $8,700 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400

General Assumptions
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $0 $0 $7,278 $9,353 $9,847 $11,285 $12,957 $14,176 $15,077 $15,802 $16,701 $21,414
Direct Cost of Sales $0 $0 $2,911 $3,741 $3,939 $4,514 $5,183 $5,671 $6,031 $6,321 $6,681 $8,566
Other Costs of Goods $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $0 $0 $2,911 $3,741 $3,939 $4,514 $5,183 $5,671 $6,031 $6,321 $6,681 $8,566
Gross Margin $0 $0 $4,367 $5,612 $5,908 $6,771 $7,774 $8,506 $9,046 $9,481 $10,021 $12,848
Gross Margin % 0.00% 0.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00%
Expenses
Payroll $2,000 $3,000 $6,200 $7,500 $8,700 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400
Sales and Marketing and Other Expenses $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Depreciation $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150
Rent $900 $900 $900 $900 $900 $900 $900 $900 $900 $900 $900 $900
Utilities $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300
Insurance $325 $325 $325 $325 $325 $325 $325 $325 $325 $325 $325 $325
Payroll Taxes 15% $300 $450 $930 $1,125 $1,305 $1,410 $1,410 $1,410 $1,410 $1,410 $1,410 $1,410
Other $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200
Total Operating Expenses $4,675 $5,825 $9,505 $11,000 $12,380 $13,185 $13,185 $13,185 $13,185 $13,185 $13,185 $13,185
Profit Before Interest and Taxes ($4,675) ($5,825) ($5,138) ($5,388) ($6,472) ($6,414) ($5,411) ($4,679) ($4,139) ($3,704) ($3,164) ($337)
EBITDA ($4,525) ($5,675) ($4,988) ($5,238) ($6,322) ($6,264) ($5,261) ($4,529) ($3,989) ($3,554) ($3,014) ($187)
Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net Profit ($4,675) ($5,825) ($5,138) ($5,388) ($6,472) ($6,414) ($5,411) ($4,679) ($4,139) ($3,704) ($3,164) ($337)
Net Profit/Sales 0.00% 0.00% -70.60% -57.60% -65.72% -56.84% -41.76% -33.01% -27.45% -23.44% -18.95% -1.57%

Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Received
Cash from Operations
Cash Sales $0 $0 $7,278 $9,353 $9,847 $11,285 $12,957 $14,176 $15,077 $15,802 $16,701 $21,414
Subtotal Cash from Operations $0 $0 $7,278 $9,353 $9,847 $11,285 $12,957 $14,176 $15,077 $15,802 $16,701 $21,414
Additional Cash Received
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $0 $0 $7,278 $9,353 $9,847 $11,285 $12,957 $14,176 $15,077 $15,802 $16,701 $21,414
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending $2,000 $3,000 $6,200 $7,500 $8,700 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400
Bill Payments $84 $2,530 $2,895 $9,226 $7,994 $7,723 $8,807 $9,564 $9,849 $10,070 $10,290 $10,830
Subtotal Spent on Operations $2,084 $5,530 $9,095 $16,726 $16,694 $17,123 $18,207 $18,964 $19,249 $19,470 $19,690 $20,230
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $2,084 $5,530 $9,095 $16,726 $16,694 $17,123 $18,207 $18,964 $19,249 $19,470 $19,690 $20,230
Net Cash Flow ($2,084) ($5,530) ($1,817) ($7,373) ($6,847) ($5,838) ($5,250) ($4,787) ($4,172) ($3,667) ($2,988) $1,184
Cash Balance $86,016 $80,486 $78,669 $71,296 $64,450 $58,611 $53,362 $48,575 $44,403 $40,736 $37,748 $38,932
Pro Forma Balance Sheet
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances
Current Assets
Cash $88,100 $86,016 $80,486 $78,669 $71,296 $64,450 $58,611 $53,362 $48,575 $44,403 $40,736 $37,748 $38,932
Inventory $0 $0 $0 $3,202 $4,116 $4,333 $4,965 $5,701 $6,238 $6,634 $6,953 $7,349 $9,422
Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Current Assets $88,100 $86,016 $80,486 $81,871 $75,412 $68,782 $63,577 $59,063 $54,812 $51,037 $47,689 $45,096 $48,354
Long-term Assets
Long-term Assets $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000
Accumulated Depreciation $0 $150 $300 $450 $600 $750 $900 $1,050 $1,200 $1,350 $1,500 $1,650 $1,800
Total Long-term Assets $9,000 $8,850 $8,700 $8,550 $8,400 $8,250 $8,100 $7,950 $7,800 $7,650 $7,500 $7,350 $7,200
Total Assets $97,100 $94,866 $89,186 $90,421 $83,812 $77,032 $71,677 $67,013 $62,612 $58,687 $55,189 $52,446 $55,554
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable $0 $2,441 $2,586 $8,960 $7,738 $7,430 $8,489 $9,235 $9,514 $9,727 $9,933 $10,354 $13,798
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $0 $2,441 $2,586 $8,960 $7,738 $7,430 $8,489 $9,235 $9,514 $9,727 $9,933 $10,354 $13,798
Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Liabilities $0 $2,441 $2,586 $8,960 $7,738 $7,430 $8,489 $9,235 $9,514 $9,727 $9,933 $10,354 $13,798
Paid-in Capital $115,000 $115,000 $115,000 $115,000 $115,000 $115,000 $115,000 $115,000 $115,000 $115,000 $115,000 $115,000 $115,000
Retained Earnings ($17,900) ($17,900) ($17,900) ($17,900) ($17,900) ($17,900) ($17,900) ($17,900) ($17,900) ($17,900) ($17,900) ($17,900) ($17,900)
Earnings $0 ($4,675) ($10,500) ($15,638) ($21,026) ($27,498) ($33,912) ($39,322) ($44,002) ($48,140) ($51,844) ($55,008) ($55,344)
Total Capital $97,100 $92,425 $86,600 $81,462 $76,074 $69,602 $63,188 $57,778 $53,098 $48,960 $45,256 $42,092 $41,756
Total Liabilities and Capital $97,100 $94,866 $89,186 $90,421 $83,812 $77,032 $71,677 $67,013 $62,612 $58,687 $55,189 $52,446 $55,554
Net Worth $97,100 $92,425 $86,600 $81,462 $76,074 $69,602 $63,188 $57,778 $53,098 $48,960 $45,256 $42,092 $41,756

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