Business Plan
Concept History
Marketing Plan
Legal Requirements
Form of Ownership
Organization, Management & Staffing
Special Considerations
Industry Analysis
Cornerstone Books and Gifts is a retail store selling music, books and gifts. The idea came about because I noticed a need for this type of store in town that was not being met. The store not only will be profitable but will provide employment and education opportunities for the community’s youth and contribute to the revitalization of downtown.
The marketing plan will be based on having a diverse product line that brings in a wide range of clientele. Prices will be fair. The store will be located in a high-traffic, high-visibility location. The location, product selection and service offering will be the key promotional components, but for the launch there will also be advertising in the local newspaper and participation in community events.
The business will be organized as a single-owner LLC, which gives the business the legal protections of a corporation will enabling the tax benefits of a partnership. This type of organization is ideal for this type of business. The store will have 5-6 part time employees with me as the only manager. Over time, however, an assistant manager will emerge from the staff and that person will be given greater responsibilities.
The business has strong potential because there is limited competition in our market. The big box competitors are too far away and surveys have indicated most locals would switch to a local store if one existed. There is some threat from online retailers but we feel our service and convenience will win out, especially given our contingency plan of local deliveries. We also have some degree of flexibility with respect to product offerings and have not ruled out a coffee shop component to help drive traffic. Overall, it is expected that Cornerstone will make around $10,000 profit on $60,000 revenues.
Concept & History
The business concept is simple — a book, music and gift store. The genesis of this project is an age-old truism in business. I saw a need in the marketplace and now I would like to fill that need. As with most good ideas, this came with an epiphany. I was having a discussion with a friend over coffee and we both stopped because we liked the music that we heard on the shop’s radio. We asked what it was, found out, but then we could not do anything about it. We realized — there is no place in town to buy music. I realized that the same thing had happened to me before, only with books. The idea for Cornerstone Books and Gifts began to form in my head.
I took my idea to a few of my friends and it turned out that each of that had similar experiences. The town’s library is small, and the selection is limited. Moreover, we realized that the young people of the town had limited access to books that they might be interested in. The highest form of literature available was the Wall Street Journal at the supermarket. I knew that the market was ready.
I began to look around town for storefronts I could use, ones that met strict criteria. The store needs to be in a high traffic, high visibility area. It needs to have ample parking. Ideally, it would be in a heritage building, to lend it some character. Furthermore, rent needed to be at a reasonable level. I was able to identify three sites that met my needs. It was at this point I realized that not only was there a need in the market but that I was capable of meeting that need. I then set about gathering information, entering into discussions and preparing the business plan. Cornerstore Books & Gifts is going to be the culmination of that dream and a valuable resource for the community.
Goals & Objectives
There are a couple of major goals for Cornerstone Books & Gifts — to make a profit, to provide education and opportunity for the town’s youth, and to contribute to the revitalization of the town’s downtown core.
The first objective of any business is to turn a profit, for without profit none of the other goals will ever be achieved. To this end, Cornerstone will have a wide variety of products for sale, to bring people into the store. We will meet dual market needs. We shall stock mind-expanding, high end books and music as part of our differentiation strategy but we will also provide ample mass market product as well, to drive sales and spur stronger customer relationships. It is the long-term relationships we built that will be key to establishing a sustainable, profitable business. We believe we will make, on average, about $10,000 in profit from around $60,000 in revenue each year.
Our product mix will reflect our desire to exposure the community, in particular the youth, to fine music and literature. These products are also in demand among the older contingent, as many of my friends have corroborated. We want to have a positive impact on the community. We will also be providing jobs for the youth. There are very few positive opportunities for youth in our community. Cornerstone will provide employment for 5-6 people besides me, mostly on a part-time basis.
The third objective is to contribute to the revitalization of downtown. The area is a central part of our heritage, and is in danger from nearby development that could possibly bring box stores. There are several great new businesses going into the area, which we feel will benefit from our presence and vice versa. We see the area improving month by month and we wish to be a part of this process.
Marketing Plan
The key to a solid marketing plan is the four Ps — price, promotion, place and product. With respect to price, we will price fairly. We cannot compete with discount stores on the basis of price, nor do we intend to. Our value will be in our convenience and service. Our prices will be higher than our nearest competitors — but the cost of getting to those competitors makes up for that.
Place will be one of Cornerstone’s biggest advantages. The location is essential. We need high visibility, not only to attract customers from the area, but to attract those passing through as well. The prospective site for Cornerstone has been narrowed down three sites, each of which has high visibility, ample parking and reasonable rent. The final component in our decision will be the details of the lease and the types of stores in the immediate vicinity. We understand that a block with an anchor, such as a popular restaurant, will be better for business.
There are two key product elements. The first is the physical product — books, music and gifts. The former will be comprised of a mix of high-end and mainstream selections, to bring in all elements of the local market. The latter will include local handicrafts and souvenirs, plus a few gift items that will appeal to the local market. We expect there will be strong seasonal themes to the gifts.
With respect to promotion, we will utilize our visible location primarily, and rely on word-of-mouth. The community is small enough that word-of-mouth can spread quickly. However, we must get that word out in the first place, and that means promoting the store for several months upon opening. To that end, we will advertise in the local newspaper, announcing our arrival in the community. We will also do some light sponsorship in the first year, such as church activities, to ensure that our commitment to the community is well-established.
Legal Requirements
There are few legal requirements that will affect our business. The legalities of business organization will be discussed later. The main areas of legal interest then are with respect to hiring and insurance/liability. With respect to the former, Cornerstone will undertake hiring within the legal guidelines set out in state and federal statutes. There will be a code of conduct, code of ethics and most importantly a clear code with respect to disciplinary issues. It is important that employees are treated within the bounds of the law, in order to avoid costly legal judgment.
Insurance and liability are also critical legal issues that must be dealt with. The store must be protected against fire, vandalism and other damaging events, in order to secure continued operations and income streams. The possibility of some liability insurance will also be explored. We wish to protect ourselves and our customers from unforeseen circumstances and such insurance could help avoid costly legal disputes. This is especially important because there will be times when I must leave the store in the hands of the part-time staff.
Forms of Ownership
There are five main forms of ownership that can be used to set up Cornerstone Books & Gifts. These are sole proprietorship, partnership (general or limited, LLC and corporation. The best choice is to set up a limited liability company — LLC). Partnership is not an option since there is only one principle. A corporation is too complicated a structure, since it necessitates directors, agents and shareholders. The company is essentially just one person.
Sole proprietorship has some advantages. It is the cheapest and easiest type of company to set up. There are many disadvantages, however. These include the fact that the owner’s personal assets are on the table if the business incurs losses. The owner is also personally liable for legal matters, even if conducted strictly on company business. In that sense, there is little separation between the company and the individual.
That is not worth the ease of setting up that business. The limited liability company, however, provides the opportunity to capture the benefits of both partnerships and corporations. The LLC provides that the owner’s personal assets are protected from use to pay company bills. This provides me with insulation in case the circumstances result in the business failure. The LLC also allows favorable tax status as well, making it the best of both worlds.
For this business, it will essentially be run by one person, but with employees, a physical space and inventory it is clear that the business is an entirely separate entity from the owner. However, because the owner captures all of the profits the tax setup of the LLC is both logical and advantageous.
Organization, Management and Staffing Plan
Cornerstone will be organized with me at the helm, as CEO of the company. I will probably choose a less intimidating title, however. The company will build a strong culture that promotes making Cornerstone a fun place to work, and an enjoyable place to shop. This will allow the store to attract quality staff. It is expected that there will be 5-6 staff overall.
These staff members will all work directly under me. Their activities will be loosely management once they have established their trustworthiness. I plan to be very active in the running of the business, at least for the first several months. At that point, I hope that a senior staff member will have emerged. This senior staff member will be handed additional responsibilities, pay and a full-time job as assistant manager, or similar title. They will represent the only management layer and will have little functional authority except in my absence.
The staff will be drawn largely from the local youth population. Youth unemployment is high in the area, so I feel confident about finding suitable candidates. Indeed, I have looked into workforce programs and grants designed to stimulate employment and I feel confident that one or possibly two FTEs can be covered by such programs, at least on a temporary basis. If the application is successful, the costs of hiring workers will be substantially reduced.
Industry Analysis
Retail is a difficult business. Stores that succeed typically do so by one of three means. The first is low cost structure, for example Wal-Mart. The second is high differentiation — a high fashion boutique for instance. The third is to have another offering that is difficult to match. In the case of Cornerstone, there is limited competition, and no direct competition in town.
The bulk of the competition is in other towns in the form of Wal-Mart, Borders and other outlets. These stores are able to sell at lower prices than Cornerstone and in the case of Borders will have larger selections. These stores are far away, however, so Cornerstone has a significant convenience advantage. Additionally, Cornerstone faces some competition from Amazon.com. A survey of potential customers reveals that most purchase their books, music and gifts through Amazon. It was also indicated, however, that many locals have misgivings about this, and would switch to a local bricks and mortar store if one was available. The same survey indicated that most would eschew far-flung competitors if a local store was available.
The lack of competition means that the industry conditions for Cornerstone are favorable. We will be able to set prices to a certain degree with our customers and build the business based on service. We will also be able to gain the sales volume required. Typically, small stores in this industry do not survive, mainly because they lose market share when larger stores enter the area. In our case, there is little likelihood of that happening and no such competitors have showed any interest. Online shopping is still a threat, but we feel that our service will help mitigate this threat. If it becomes apparent that customers are not switching to us, we have a contingency plan to institute deliveries within the area, giving our customers a level of convenience they cannot refuse.
Special Considerations
The project’s financing is likely of interest. I will be financing the opening and launch phase of Cornerstone. I had enough capital saved to operate for two years before turning a profit, an amount often recommended by small business consultants. There is also additional financing from family members available if an opportunity should arise that would require further capital investment.
Another consideration is the flexibility of the business model. I understand that a book, music and gift store is a risky venture in this day and age. However, the business model is highly flexible. There are many different models that I studied before arriving at what I feel is the ideal. There is also the potential, for example, to add a small coffee shop in order to better drive traffic. There is the potential for kiosks to be made available to download goods as well. The mix of products is not set in stone. I feel that the current model is the best possible, but am smart enough to know that reality may show otherwise.
The final consideration is that of growth opportunities. I think this model can be replicated. Remember that Wal-Mart began as a five and dime in a store that Sam Walton’s employers felt was too small. He knew that the market was not too small and pursued that market with vigor. This concept is strong, and there are other towns like ours that may be unable or unwilling to support box stores but will be perfectly willing to move forward with a small, independent store.
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