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Executive Summary

The Year 1 season will be a great one for women looking for distinctive outdoor clothing online. Liquid
Culture will eliminate the middle man and offer creative outdoor clothing that is both functional and
beautiful. The savings are passed on to our customers who will be paying a fraction of what they
normally do for current retreated fashion in stores.
Liquid Culture's Year 1 line consists of the best fabric, designs and styling on the market. Larry Wilson
and Maggie Granger, co-owners of Liquid Culture, have fifteen years of experience between them in the
outdoor garment industry. Maggie has been a senior clothing designer for Manic Woman Clothing for
the past seven years. Larry has been the website administrator for South Face the past eight years.
Another strength of Liquid Culture is that it will not maintain any clothing inventory. Liquid Culture has
contracted with Magic Clothing Company, located in Los Angeles, California, to produce and ship all
Liquid Culture clothing. Our design team will work closely with the Magic's Indonesian-based
manufacturing facilities. The Magic Clothing Company will maintain the inventory and will produce
sufficient product to meet the planned demand.

1.1 Mission
Liquid Culture's mission is to present consumers with designs, styling and clothes that energizes any
outdoor activity. Whether it be snowboarding, running along the beach, or drifting down a river, Liquid
Culture has comfortable, durable clothing that will look and feel wonderful.
1.2 Keys to Success
Accessible website that is entertaining to surf. Like a trip to your favorite store where you always
find something new that you want.
Establishing a strong advertising campaign in a traditional media vehicle; i.e. magazines.
Excellent vendor relationship that will facilitate quality manufacturing of Liquid Culture's clothing
and quick shipment of orders.
Acquiring an excellent design staff.

Company Summary
Liquid Culture will offer creative women's outdoor clothing, online, that is both functional and
beautiful. Larry Wilson and Maggie Granger, co-owners of Liquid Culture, will create a cost-effective
operation that will eliminate the cost of inventory by having a third-party, Magic Clothing Company,
handle all manufacturing and shipping of clothing to the customer. Liquid Culture will process the order
and collect the payment online. The order will then be sent to Magic Clothing Company to be filled and
shipped. Liquid Culture will focus on clothing design and marketing of its products.
2.1 Start-up Summary
Liquid Culture's start-up costs consists mostly of design and marketing. Liquid Culture has 260,000 in
investments and 200,000 in a short-term loan.

Start-up Funding
Start-up Expenses to Fund 58,500
Start-up Assets to Fund 401,500
Total Funding Required 460,000
Assets

Non-cash Assets from Start-up 0
Cash Requirements from Start-up 401,500
Additional Cash Raised 0
Cash Balance on Starting Date 401,500
Total Assets 401,500
Liabilities and Capital

Liabilities

Current Borrowing 0
Long-term Liabilities 200,000
Accounts Payable (Outstanding Bills) 0
Other Current Liabilities (interest-
free)
0
Total Liabilities 200,000
Capital

Planned Investment

Investor 1 130,000
Investor 2 130,000
Other 0
Additional Investment Requirement 0
Total Planned Investment 260,000
Loss at Start-up (Start-up Expenses) (58,500)
Total Capital 201,500
Total Capital and Liabilities 401,500
Total Funding 460,000

Start-up
Requirements

Start-up Expenses

Legal 1,000
Stationery etc. 500
Brochures 0
Consultants 5,000
Insurance 0
Rent 2,000
Leased Office Equipment 10,000
Computer
Equipment/Software
30,000
Website 10,000
Other 0
Total Start-up Expenses 58,500
Start-up Assets

Cash Required 401,500
Start-up Inventory 0
Other Current Assets 0
Long-term Assets 0
Total Assets 401,500
Total Requirements 460,000
2.2 Company Ownership
Liquid Culture is owned by Larry Wilson and Maggie Granger.
Products
Liquid Culture will sell women's outdoor clothing online. We will offer outdoor clothing for almost every
type of active use. We will focus on the seasonal clothing demands of our customers including the
following:
Fleece outerwear.
Rain gear, waterproof breathables, as well as coated nylon.
Synthetic clothing for outdoor activities.
Hats.
Shorts.
Pants.
Shirts.

Market Analysis Summary
In the past 15 years, women's outdoor wear has grown into a billion dollar niche in the clothing industry.
The popularity of the Internet has launched a number of online stores for women's outdoor wear but no
company is exclusively selling their products online. There are a number of reasons for this but the
strongest is that the concept is new and untested. Will customers buy something that they wear that
can only be seen online? We believe they will, if the process is fun and the products are great and
cheap.
The key is marketing our target customers in the traditional advertising medium for fashion, i.e. women
fitness magazines.
The ads will focused on the eliminating the middle man in your clothing budget and stepping up to the
distinctive style of Liquid Culture. The company logo will also be an important marketing tool in bringing
customers to our website.
4.1 Market Segmentation
Liquid Culture will be focusing on two distinct groups of women that purchase outdoor clothing:
Women 17-25 years of age: Youth drives the market so this is the important group to attract to the
website. They have less money than the older group so we must give them what they want for
less. The key is to have inexpensive selections in each clothing group that have the popular cut.
The company's logo attractiveness to this group can not be stressed strongly enough. The initial
small purchases will grow larger over time.
Women 26-40 years of age: They are the core group that will drive Liquid Culture's success. This
target group is responsible for the growth of outdoor women's wear. They will be harder to pull
into the website. Once there, the key will be promoting the quality, attractiveness and savings. In
addition, we will have to assure that the purchase will fit the way the customer wants it to. It will be
crucial that the return policy is hassle-free and speedy.



Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential
Customers
Growth

CAGR
Women Ages 16- 20% 6,000,000 7,200,000 8,640,000 10,368,000 12,441,600 20.00%
25
Women Ages 26-
40
15% 5,000,000 5,750,000 6,612,500 7,604,375 8,745,031 15.00%
Other 0% 0 0 0 0 0 0.00%
Total 17.81% 11,000,000 12,950,000 15,252,500 17,972,375 21,186,631 17.81%

Strategy and Implementation Summary
Liquid Culture will win market share in the women's outdoor clothing niche by aggressively pursuing
visibility with its target customers.
5.1 Competitive Edge
Liquid Culture's competitive edge is its focus on the process than on product. The website is just the
endpoint of an entire marketing program to drive customers' interest in Liquid Culture. Though we have
confidence in the quality and attractiveness of our products, we know that building the road to the
website is our most important job.
Larry Wilson's experience with South Face is pivotal to the success of Liquid Culture's website. South
Face's website averaged five million hits a year and is considered one of the most accessible and
attractive websites in the clothing industry. His experience is invaluable in assuring customers'
satisfaction with the shopping experience online.
Larry will introduce a new clothing measurement feature that is fun to use and will reduce customers
confusion on how the clothing will fit. This will increase customer satisfaction and reduce returns.
Maggie Granger will be in charge of the clothing design team. As senior clothing designer for
Manic Woman Clothing, she watched the Manic Woman's sales grow by 20% for the past five
years. Her clothing designs have been praised in the industry and have spawned many imitators. With
Liquid Culture, Maggie is ready to change how quality women's outdoor clothing is sold.
Liquid Culture's agreement with Magic Clothing Company is another strong competitive advantage. Our
design team will work closely with the Magic's Indonesian-based manufacturing facilities. The Magic
Clothing Company will maintain the inventory and will produce sufficient product to meet the planned
demand. This will keep production costs low for products and put a cap on Liquid Culture's overhead.
5.2 Marketing Strategy
Liquid Culture's marketing strategy is a simple one. In women's fitness magazines like Self, Shape and
Strive, Liquid Culture will introduce customers to their products and website. We will also advertise in
CosmoGirl and Ellegirl magazines.
For the first two months, Liquid Culture will offer 10% off for all purchases under 100 and 15% off all
purchases over 100. We will offer the same discount strategy three more times during the year when
new seasonal clothing is introduced.
5.2.1 Pricing Strategy
Liquid Culture's pricing strategy is to pass on most of the store mark-up to the consumer in reduced
price for clothing. This advantage has no negative impact on our sales profit and will also absorb some
of the initial cost of offering discounts during our first three months of operation.
5.3 Sales Strategy
Liquid Culture will launch a 245,000 ad campaign targeted at our core customer groups. The focus of
the ads will be to "keep the money you give to the middleman" and use it to get outdoors and enjoy
life. Liquid Culture's attractive logo will be heavily displayed in these ads. We estimate it will take most
of the year to build our sales to the point where we begin to show a profit.
Liquid Culture will offer discounts at various times of the year to even out seasonality and build initial
awareness of the website.
5.3.1 Sales Forecast
We expect sales to increase at a steady rate for the first year. It will begin slow as we open, but will
quickly pick up as our customer base increases. Liquid Culture will see a sales increase of 38%
between the first and second year. We feel that we can accomplish this steady goal and maintain this
amount of sales.





Sales Forecast

Year 1 Year 2 Year 3
Sales

Clothing 2,170,000 3,000,000 4,300,000
Other 0 0 0
Total Sales 2,170,000 3,000,000 4,300,000
Direct Cost of Sales Year 1 Year 2 Year 3
Clothing 1,249,000 1,800,000 2,580,000
Other 0 0 0
Subtotal Direct Cost of Sales 1,249,000 1,800,000 2,580,000

Management Summary
Larry Wilson will manage the marketing team, as well as the development and administration of Liquid
Culture's website. Maggie Granger will be in charge of the clothing design team. She will also manage
the production of the designs by Magic Clothing Company.
6.1 Personnel Plan
Besides Larry and Maggie, Liquid Culture will have a staff of eight:
Three member clothing design team.
Web administrator.
Two member marketing team.
Office manager.
Accountant.

Personnel Plan

Year 1 Year 2 Year 3
Marketing/Website Director 84,000 90,000 95,000
Design Director 84,000 90,000 95,000
Designers 144,000 156,000 166,000
Web Administrator 48,000 52,000 56,000
Office Manager 36,000 39,000 42,000
Marketing Staff 96,000 104,000 112,000
Accountant 39,600 44,000 48,000
Other 0 0 0
Total People 8 8 8
Total Payroll 531,600 575,000 614,000

Financial Plan
The following is the financial plan for Liquid Culture.
7.1 Break-even Analysis
Our break-even analysis is based on running costs, the costs we incur to keep the business running, not
on theoretical fixed costs that would be relevant only if we were closing. Fixed costs include payroll,
rent, utilities, and marketing costs.



Break-even Analysis
Monthly Revenue Break-even 177,248
Assumptions:

Average Percent Variable Cost 58%
Estimated Monthly Fixed Cost 75,228
7.2 Projected Profit and Loss
The following table and chart are the projected profit and loss for three years.










Pro Forma Profit and Loss

Year 1 Year 2 Year 3
Sales 2,170,000 3,000,000 4,300,000
Direct Cost of Sales 1,249,000 1,800,000 2,580,000
Other Production Expenses 0 0 0
Total Cost of Sales 1,249,000 1,800,000 2,580,000
Gross Margin 921,000 1,200,000 1,720,000
Gross Margin % 42.44% 40.00% 40.00%
Expenses

Payroll 531,600 575,000 614,000
Sales and Marketing and Other
Expenses
265,000 340,000 440,000
Depreciation 0 0 0
Leased Equipment 0 0 0
Utilities 2,400 2,400 2,400
Insurance 0 0 0
Rent 24,000 24,000 24,000
Payroll Taxes 79,740 86,250 92,100
Other 0 0 0
Total Operating Expenses 902,740 1,027,650 1,172,500
Profit Before Interest and Taxes 18,260 172,350 547,500
EBITDA 18,260 172,350 547,500
Interest Expense 17,574 13,281 8,801
Taxes Incurred 206 47,721 161,610
Net Profit 481 111,349 377,089
Net Profit/Sales 0.02% 3.71% 8.77%
7.3 Projected Cash Flow
The following table and chart are the projected cash flow for three years.



Pro Forma Cash Flow

Year 1 Year 2 Year 3
Cash Received

Cash from Operations

Cash Sales 2,170,000 3,000,000 4,300,000
Subtotal Cash from Operations 2,170,000 3,000,000 4,300,000
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 2,170,000 3,000,000 4,300,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations

Cash Spending 531,600 575,000 614,000
Bill Payments 1,590,840 2,541,460 3,387,998
Subtotal Spent on Operations 2,122,440 3,116,460 4,001,998
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
44,796 44,796 44,796
Purchase Other Current Assets 0 0 0
Purchase Long-term Assets 0 0 0
Dividends 0 0 0
Subtotal Cash Spent 2,167,236 3,161,256 4,046,794
Net Cash Flow 2,764 (161,256) 253,206
Cash Balance 404,264 243,008 496,214
7.4 Projected Balance Sheet
The following is the projected balance sheet for three years.

Pro Forma Balance Sheet

Year 1 Year 2 Year 3
Assets

Current Assets

Cash 404,264 243,008 496,214
Inventory 264,000 380,464 545,332
Other Current Assets 0 0 0
Total Current Assets 668,264 623,473 1,041,546
Long-term Assets

Long-term Assets 0 0 0
Accumulated Depreciation 0 0 0
Total Long-term Assets 0 0 0
Total Assets 668,264 623,473 1,041,546
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities

Accounts Payable 311,080 199,736 285,516
Current Borrowing 0 0 0
Other Current Liabilities 0 0 0
Subtotal Current Liabilities 311,080 199,736 285,516
Long-term Liabilities 155,204 110,408 65,612
Total Liabilities 466,284 310,144 351,128
Paid-in Capital 260,000 260,000 260,000
Retained Earnings (58,500) (58,019) 53,329
Earnings 481 111,349 377,089
Total Capital 201,981 313,329 690,418
Total Liabilities and Capital 668,264 623,473 1,041,546
Net Worth 201,981 313,329 690,418
7.5 Business Ratios
The following table shows the projected businesses ratios. We expect to maintain healthy ratios for
profitability, risk, and return. These ratios have been determined by the 5137 industry, Women's and
Children's Clothing, as found in the Standard Industry Code (SIC) Index.

Ratio Analysis

Year 1 Year 2 Year 3
Industry
Profile
Sales Growth 0.00% 38.25% 43.33% 10.40%
Percent of Total Assets

Inventory 39.51% 61.02% 52.36% 34.10%
Other Current Assets 0.00% 0.00% 0.00% 25.70%
Total Current Assets 100.00% 100.00% 100.00% 89.40%
Long-term Assets 0.00% 0.00% 0.00% 10.60%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 46.55% 32.04% 27.41% 40.70%
Long-term Liabilities 23.22% 17.71% 6.30% 9.00%
Total Liabilities 69.78% 49.74% 33.71% 49.70%
Net Worth 30.22% 50.26% 66.29% 50.30%
Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 42.44% 40.00% 40.00% 24.80%
Selling, General & Administrative
Expenses
42.42% 36.29% 31.23% 14.80%
Advertising Expenses 11.29% 10.00% 9.30% 0.90%
Profit Before Interest and Taxes 0.84% 5.75% 12.73% 2.00%
Main Ratios

Current 2.15 3.12 3.65 2.36
Quick 1.30 1.22 1.74 1.09
Total Debt to Total Assets 69.78% 49.74% 33.71% 49.70%
Pre-tax Return on Net Worth 0.34% 50.77% 78.03% 4.90%
Pre-tax Return on Assets 0.10% 25.51% 51.72% 9.70%
Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 0.02% 3.71% 8.77% n.a
Return on Equity 0.24% 35.54% 54.62% n.a
Activity Ratios

Inventory Turnover 10.91 5.59 5.57 n.a
Accounts Payable Turnover 6.11 12.17 12.17 n.a
Payment Days 27 38 25 n.a
Total Asset Turnover 3.25 4.81 4.13 n.a
Debt Ratios

Debt to Net Worth 2.31 0.99 0.51 n.a
Current Liab. to Liab. 0.67 0.64 0.81 n.a
Liquidity Ratios

Net Working Capital 357,185 423,737 756,030 n.a
Interest Coverage 1.04 12.98 62.21 n.a
Additional Ratios

Assets to Sales 0.31 0.21 0.24 n.a
Current Debt/Total Assets 47% 32% 27% n.a
Acid Test 1.30 1.22 1.74 n.a
Sales/Net Worth 10.74 9.57 6.23 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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