Arora’s Cash Store

Business Plan

By: Sunil Markose and Biju Joseph

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 Table of Contents

Confidentiality Agreement ..........................................................................................................4

Executive Summary ....................................................................................................................5

Objectives ...................................................................................................................................6

Mission .......................................................................................................................................6

Keys to Success ..........................................................................................................................6

Company Summary.....................................................................................................................7

Company Ownership ...............................................................................................................8

Start-up Summary ...................................................................................................................8

Products ................................................................................................................................ 12

Market Analysis Summary ........................................................................................................ 13

Market Segmentation ............................................................................................................ 13

Target market segments ......................................................................................................... 14

Industry Analysis .................................................................................................................. 15

Competition and Buying Patterns .......................................................................................... 16

Strategy and Implementation Summary ..................................................................................... 16

Competitive Edge .................................................................................................................. 16

Marketing Strategy ................................................................................................................ 17

Sales Strategy ........................................................................................................................ 17

Sales Forecast........................................................................................................................ 17

Management Summary ............................................................................................................. 20

Personnel Plan....................................................................................................................... 20

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Financial Plan ........................................................................................................................... 20

Finances ............................................................................................................................ 20

Expenses per year .............................................................................................................. 21

Important Assumptions ......................................................................................................... 21

Break-even Analysis ............................................................................................................. 22

Projected Profit and Loss ....................................................................................................... 22

Projected Cash Flow.............................................................................................................. 26

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 Confidentiality Agreement

The undersigned reader acknowledges that the information provided by Arora’s cash store in this

business plan is confidential; therefore, reader agrees not to disclose it without the express

written permission of Arora’s cash store.

It is acknowledged by reader that information to be furnished in this business plan is in all

respects confidential in nature, other than information which is in the public domain through

other means and that any disclosure or use of same by reader may cause serious harm or damage

to Arora’s cash store.

Upon request, this document is to be immediately returned to Arora’s cash store.

___________________

Signature

___________________

Name (typed or printed)

___________________

Date

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 Executive Summary

Arora’s cash store is the convenience store of the 21st Century future, fulfilling a need that will

continue to exist into the future - the need for speed. Arora’s cash store will be the first fully

automated 24 hour convenience store that is more like an enormous dispensing machine than the

traditional store.

The company expects to capture market share by becoming the low cost leader in the

convenience store industry by significantly reducing one of the primary expenses, which is labor.

Through our completely automated shopping experience, customers will have the chance to shop

for everyday items at reduced prices. The possibilities for expansion are excellent not only in the

local area, but in neighboring communities as well.

The company is a start-up company operated by Sunil Markose and Biju Joseph. Arora’s cash

store will sell the same products as other convenience stores in the same packaging sizes, quality,

and quantity as other stores. This includes newspapers, magazines, soft drinks, fruit juices, sport

drinks, hot and cold snacks, a limited number of grocery items such as canned soups,

microwaveable meals, condiments, bread, auto products such as fuel additives and cleaning

supplies, pet supplies, paper products, toothpaste, etc.

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 Objectives

These are the goals for the next three years for Arora’s cash store:

 Complete refurbishment

 Get energy efficient fridges and freezers

 Modernize interior/ exterior

 Increase revenue by 25%

 Achieve profitability by July Year 1;

 Start up second store by Year 4.

Mission

Arora’s cash store's primary objective is to create a new and revolutionary distribution outlet that

will significantly reduce prices for its customers and provide greater services with an equal level

of quality. The company seeks to be first to market with this daring new idea so as to capture

market share and create greater than average profits.

Keys to Success

In order to survive and expand, Arora’s cash store must keep the following issues in mind:

 We must attain a high level of visibility through the media, billboards, and other

advertising.

 We must establish rigid procedures for cost control and incentives for maintaining tight

control.

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  We must expend a significant amount on R&D in order to constantly be able to offer

better and greater products and services.

Company Summary

Arora’s cash store is connivance store located in the Cardiff neighborhood of Canton that has

been serving its local community for over 50 years. Being the only shop in the local residency,

the target market ranges from students to families. There is a great opportunity to expand the

store with the aid of the Premier franchisee model. This would allow an easier way to purchase

stock, while also improving the overall look of the store, inside and out. This would allow

shopping to be made easier for customers, giving a increase in revenue and profits. Currently,

Arora’s cash store offer a range of fresh, organic produce, staples, packaged foods, drinks

(alcoholic and nonalcoholic), prepackaged fresh meals and pastries, newspapers, pet foods,

medicines, health and beauty items, etc. Majority of the revenue coming from sale of cigarettes

and alcohol. In addition there is also a Hermes pick up and drop off point which provides a
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service in which the community can send and receive parcels for a low price, which also drives

footfall to the store.

Arora’s has a competitive edge due to its location and its focus on customer service and the

experience and knowledge of its owners.

Company Ownership

Previously owned by a couple, the shop served the community for 50 years, although this

secured customer loyalty from the local community, the shop is dated and cluttered. It is now

owned by Sunil Markose and Biju Joseph. This is a well working business partnership as Sunil

has over 10 years experience in the food industry which allows a good link to product purchasing

and demand. Biju has extremely good customer service skills from many years as a taxi driver.

They both run the store day to day full time with the assistance of two part time workers.

Start-up Summary

A £40,000 loan would allow the switch to Premier, which improves the presentation of the store

and the prices of the products which would increase footfall, revenue and profits.

Our start-up expenses which are largely single time fees associated with opening the store. These

costs are financed by both private investors and the investment of Martin-Bower.

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Start-up

Requirements

Start-up Expenses

Legal £2,400

Pre-sale advertising/marketing £8,000

Land location and finder’s fee £8,000

Consultants £4,000

Insurance £1,780

Rent £12,000

Research and Development £10,000

Expensed Equipment £50,000

Initial store facilities £150,000

Other £3,000

Total Start-up Expenses £249,180

Start-up Assets

Cash Required £113,820

Start-up Inventory £10,000

Other Current Assets £8,000

Long-term Assets £72,000

Total Assets £203,820

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Total Requirements £453,000

Start-up Funding

Start-up Expenses to Fund £249,180

Start-up Assets to Fund £203,820

Total Funding Required £453,000

Assets

Non-cash Assets from Start-up £90,000

Cash Requirements from Start-up £113,820

Additional Cash Raised £0

Cash Balance on Starting Date £113,820

Total Assets £203,820

Liabilities and Capital

Liabilities

Current Borrowing £15,000

Long-term Liabilities £100,000

Accounts Payable (Outstanding Bills) £8,000

Other Current Liabilities (interest-free) £10,000

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Total Liabilities £133,000

Capital

Planned Investment

Private Investors £150,000

Martin-Bower management £110,000

Other £60,000

Additional Investment Requirement £0

Total Planned Investment £320,000

Loss at Start-up (Start-up Expenses) (£249,180)

Total Capital £70,820

Total Capital and Liabilities £203,820

Total Funding £453,000

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Products

As the most progressive company in the industry, Arora’s cash store plans to offer a greater

number of products and services in the future so as to create another dimension of competitive

advantage. So that our customers will feel secure, we will subscribe to the security services

offered by the shopping center of which we are a part.

Arora’s cash store will sell the same products as other convenience stores in the same packaging

sizes, quality, and quantity as other stores. This includes:

 A range of fresh, organic produce

 Staples

 Packaged foods

 Drinks (alcoholic and nonalcoholic)

 Prepackaged fresh meals and pastries

 Newspapers
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  Pet foods

 Medicines

 Cigarettes

 Alcohol

 Health and beauty items, etc.

Market Analysis Summary

Our market is booming. Convenience store industry sales rose 8.6% for 2019. Overall UK retail

sales grew by only 6.3%, and grocery sales followed with 2.4% growth, proving once again that

the convenience store industry has become a powerful force in UK retailing.

Convenience stores serve the entire purchasing population of its geographical area but focuses on

customers who need to purchase items outside of normal working hours such as swing shift

employees and quick shoppers looking for snacks and related items. Therefore we have

segmented our market into night shoppers, quick shoppers, and others. Growth rates for these

three segments match the population growth for the surrounding area.

Market Segmentation

Our target market for our test store encompasses a five mile radius. The majority of the residents

in this area with occupations classified as professional/technical, homemaker, or retired. The

majority of household incomes range from £20,000 - £30,000 (50.3%), yet there are also affluent

household incomes ranging from £50,000 - £100,000 (15.4%).

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The median income in this area is £48,096, compared to the whole area which is £34,248. The

typical "head of household" age is 25 - 34 (22.4%) or age 34 - 44 (23.1%) with a median age of

44.4 years old and an average age of 32 years old.

Target market segments

Convenience stores serve the entire purchasing population of its geographical area but focuses on

customers who need to purchase items outside of normal working hours such as swing shift

employees and quick shoppers looking for snacks and related items.

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Growth CAGR

Customers

Late night 3% 78,000 80,340 82,750 85,233 87,790 3.00%

shoppers

Quick shoppers 2% 42,000 42,840 43,697 44,571 45,462 2.00%

Other 3% 30,000 30,840 31,704 32,592 33,505 2.80%

Total 2.68% 150,000 154,020 158,151 162,396 166,757 2.68%

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Industry Analysis

Convenience store industry sales rose 8.6% to £86.3 billion for 2019. Overall UK retail sales

grew by only 6.3%, and grocery sales followed with 2.4% growth, proving once again that the

convenience store industry has become a powerful force in UK retailing.

Pre-tax profit margin in the convenience store industry was the highest since 1988 (1.8%). The

2018 results confirm that a new, upward trend is emerging. This upward trend is based on several

factors, and occurred along with a slow rebound in the general economy.

Merchandise sales per customer increased 7.4% in 2017 suggesting that convenience stores are

placing higher priority in filling the customers' needs. Companies that align themselves properly

to fill those needs will be successful in the future.

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Competition and Buying Patterns

Competitors hold approximately 30% of the industry market, and in 2019 their net income was

£160 million.

Strategy and Implementation Summary

Arora’s cash store competitive edge will be the lower prices we will charge our customers and

the novel purchasing experience that will draw shoppers.

The most critical element of Arora’s cash store's success will be its marketing and advertising. In

order to capture attention and sales Arora’s cash store will use prominent signs at the store

locations, billboards, media bites on local news, and radio advertisements to capture customers.

Many of the initial customers will be drawn to the unique nature of the store and will then have

the opportunity to realize the cost savings of Arora’s cash store. We expect an average 27%

increase in sales from year to year. This may seem very high, but considering the level of initial

sales and the growth possibilities, management actually considers this to be conservative.

Competitive Edge

Arora’s cash store competitive edge will be the lower prices we will charge our customers and

the purchasing experience that will draw shoppers. In the convenience store industry, low cost

and availability are the two success criteria. We plan to create these advantages in a new, high-

tech environment that will retain customers.

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Marketing Strategy

The most critical element of Arora’s cash store success will be its marketing and advertising.

Convenience stores serve the entire purchasing population of its geographical area but focuses on

customers who need to purchase items outside of normal working hours such as swing shift

employees and quick shoppers looking for snacks and related items. In order to capture attention

and sales Arora’s cash store will use prominent signs at the store locations, billboards, media

bites on local news, and radio advertisements to capture customers. Many of the initial customers

will be drawn to the unique nature of the store and will then have the opportunity to realize the

cost savings of Arora’s cash store. Since automated shopping is still in its infancy, the firm

expects to invest a great deal of its available cash and revenues in marketing efforts.

Sales Strategy

Since our store will be a stand-alone, remote facility, there is little in the way being able to

directly influence how we close the sales other than to have an attractive storefront with our low

prices and easy-to-use system. We believe that this in itself is its own seller. One critical

procedure to ensure top customer service and reliability will be establishing a method

for keeping enough inventories of all our products. We will be using industry data on inventory

for other convenience store chains to assist us.

Sales Forecast

Based on a 20% mark-up, our forecasted sales for years one, two, and three respectively are:

£2,480,106; £3,149,735; £4,000,163. This gives us an average 27% increase from year to year.

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This may seem very high, but considering the level of initial sales and the growth possibilities,

management actually considers this to be conservative.

These sales figures are based on a conglomerate of commuter and walk-by traffic with an

average £3.00 purchase amount conforming to industry averages. The target profit margin was

defined as an average net profit of all merchandise.

Sales Forecast

Year 1 Year 2 Year 3

Sales

Drinks £978,070 £1,242,149 £1,577,529

Snacks £873,277 £1,109,061 £1,408,508

Magazines/newspapers £209,586 £266,175 £338,042

General grocery items £279,449 £354,900 £450,723

Other £139,724 £177,450 £225,361

Total Sales £2,480,106 £3,149,735 £4,000,163

Direct Cost of Sales Year 1 Year 2 Year 3

Drinks £753,114 £956,455 £1,214,697

Snacks £672,423 £853,977 £1,084,551

Magazines/newspapers £161,382 £204,955 £260,292

General grocery items £215,175 £273,273 £347,056

Other £107,588 £136,636 £173,528

Subtotal Direct Cost of Sales £1,909,682 £2,425,296 £3,080,125

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 Management Summary

As stated earlier, Arora’s cash store will be previously owned by a couple, the shop served the

community for 50 years, although this secured customer loyalty from the local community, the

shop is dated and cluttered. It is now owned by Sunil Markose and Biju Joseph. This is a well

working business partnership as Sunil has over 10 years experience in the food industry which

allows a good link to product purchasing and demand. Biju has extremely good customer service

skills from many years as a taxi driver. They both run the store day to day full time with the

assistance of two part time workers.

Personnel Plan

Initially the company will only have a small staff including upper management, an operations

technician and office manager. All other services, such as bookkeeping, will be outsourced.

Financial Plan

The following tables illustrate our financial projections over the next three years. Please note that

we expect to be operating at a loss for the first six months before advertising begins to take effect

and draw in customers.

As retained earnings increase, a debt retirement fund will be established to encourage early

repayment, thus relieving interest expense. Also, a 30-day payment period for purchases will be

used to avoid incurring liabilities.

Finances

 current revenue - £442,000

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  current gross profit £123,760

 current net profit - £97,240

This should increase by 25% after we receive loan and refurbishment

 current operating cost - £35,360

 currently paying off £40,000 loan £1000 a month

 cost of freezers - £15,000

 cost of refurbishment £10,000

Expenses per year

 payroll - £30,000

 marketing - £1000

 rent - £12,000

 insurance - £700

 accounting - £1500

Important Assumptions

Arora’s cash store is basing its assumptions on a stable growth market using average interest

rates over the past ten years.

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

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Break-even Analysis

The following table show our Break-even Analysis. Although our break-even point seems quite

high, we are expecting to have higher than average fixed costs during the period of this plan due

to customer "creation costs," R&D costs, higher rent in a premier spot, higher percentage of

payroll costs to overall fixed costs with a small company, and the need to import and pay for the

store facilities. We expect to have a more reasonable positive retained earnings point around year

5.

Break-even Analysis

Monthly Revenue Break-even £165,326

Assumptions:

Average Percent Variable Cost 77%

Estimated Monthly Fixed Cost £38,025

Projected Profit and Loss

The following table explains our itemized costs and determines gross and net margin. Please note

that these predictions are weighted toward having higher costs in comparison to revenues in case

unexpected hidden costs arise. The charts give a visual representation of the data.

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Pro Forma Profit and Loss

Year 1 Year 2 Year 3

Sales £2,480,106 £3,149,735 £4,000,163

Direct Cost of Sales £1,909,682 £2,425,296 £3,080,125

Other Costs of Goods £0 £0 £0

Total Cost of Sales £1,909,682 £2,425,296 £3,080,125

Gross Margin £570,424 £724,439 £920,037

Gross Margin % 23.00% 23.00% 23.00%

Expenses

Payroll £167,400 £214,000 £238,000

Sales and Marketing and Other £60,000 £130,000 £130,000

Expenses

Depreciation £7,200 £7,200 £7,200

Leased equipment £50,000 £60,000 £60,000

Rent £84,000 £84,000 £84,000

Utilities £28,800 £30,000 £30,000

Accounting/bookeeping £6,500 £9,000 £9,000

Insurance £14,400 £14,400 £14,400

Payroll Taxes £0 £0 £0

Other £38,000 £45,000 £45,000

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Total Operating Expenses £456,300 £593,600 £617,600

Profit Before Interest and Taxes £114,124 £130,839 £302,437

EBITDA £121,324 £138,039 £309,637

Interest Expense £16,250 £16,400 £14,650

Taxes Incurred £29,362 £34,332 £86,336

Net Profit £68,512 £80,107 £201,451

Net Profit/Sales 2.76% 2.54% 5.04%

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Projected Cash Flow

 cash sales - £198,000

 bill payments £600 per year

 inventory - £40,000

Arora’s cash store will be receiving periodic influxes of cash in order to cover operating

expenses during the first two years as it strives toward sustainable profitability. Almost all of this

funding has been arranged through lending institutions and private investors already. We do not

anticipate any cash flow problems during the next three years.

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