Children S Clothing Boutique Business Plan Essay

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Business Plan

Enfant is a children's clothing boutique in Park Slope, Brooklyn. The business model is to bring in unique lines of children's clothing, sourced from around the world if need be. Unique items, coupled with a focus on customer relationship management and social media promotion form the differentiation strategy. The target market is fairly wealthy, educated and stylish. They are willing to spend on their children's clothing as they see their children as reflections of their own style.

The shop will lose some money in the first year, but will be profitable in subsequent years, and be able to pay the proprietor a salary. The proprietor is 30% owner, with the uncle as a silent partner who contributes all of the capital in exchange for a 70% cut.

The clothing will be high end, not made in sweatshops, stylish in design and unique to the store in most cases. This allows the store to charge premium pricing, as it is basically skimming the cream of the children's clothing market. The industry is competitive, but Enfant will be sufficiently differentiated to excel, based on both its attention to customer relationship building and in the exceptional quality and uniqueness of its clothes.

2.0 Financial Objectives

This business plan is focused on the first three years of operation for the boutique. The reason for this timeframe is that small business owners often budget for losses in the first year, but by the end of the third year if the business is still not meeting objectives, then the business is often folded. The financial objectives for the clothing boutique, Enfant, are to break even in the first year, and then turn profits in the second and third years. These profits will be increasing. By the end of the third year, it is expected that the business will be strong enough that a second location can be considered. A key financial objective is that after the first year, the business needs to be sufficiently profitable for the owner to draw a salary for it. This is because the owner's opportunity cost is relatively high and there needs to be reasonable return on investment not just of money but of time as well.

3.0 Startup Funding and Costs

The startup financing required is less than the $200,000 that the uncle is offering. The startup costs are two months' lease, a damage deposit pursuant to the lease, one season's worth of inventory, three months' worth of wages for a part-time sales assistant, three months' worth of utilities, and a cash float of $5,000. The total startup cost will therefore be:

Startup Capital

Cash

Inventory

18750

Wages

Operating

Equipment

Expected Loss

41500

With the uncle able to commit up to $200,000 to this business, and the startup costs plus expected first year losses, there is no reason to take on debt. This is a positive for the business, because of the negative aspects of debt financing. First, it will actually be costlier than my uncle, who has no immediate demands with respect to payback. More important, avoiding debt means avoiding the sort of restrictive covenants that banks typically place on small businesses to whom they lend money (Investopedia, 2015).

4.0 Business Description

Enfant will be a children's clothing boutique, located at the edge of the Park Slope neighborhood in Brooklyn. The store will sell high-end children's clothing. The key point of differentiation with the store is that it will bring in lines that are sourced mainly from Europe, Canada, Australia and Japan. The clothing will therefore have fresh, sophisticated designs, will typically be produced in those countries so will be sweatshop free, and the lines chosen for the boutique will typically not be found in many other place in the United States, and in particular not in this part of New York.

The unique inventory will be a key point of differentiation. There are many competitors not just in New York but in this neighborhood, so it is important to offer the customer something unique. This goes not just for product but for service. It is almost more difficult to differentiate with service because anybody can do service well. The reality is that there will need to be a combination of strengths that put together results in a rare store.

High end customer service is going to be one such strength. The owner, who will be principally running the business, is an expert at customer relationship management, and social media strategy, so will put those competencies to good use. It is imperative that strong relationships are built with the customers.

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With the proprietor so active in the business, and a database of names, birthdates and past purchases, it will be easier to target customers directly with texts or emails when new collections arrive, or if there is a piece of clothing that is particularly well-suited to a specific child. That level of customer knowledge is easier to acquire when the proprietor is active in the everyday business, but also can be a function of effective customer relationship management.

Sourcing is another area where this company can excel. It is easy to forget that all over the world there are excellent designers working on children's clothing. Many are small shops looking for markets. With so many design hubs in the world today, the options are nearly limitless. For the owner, this is actually the fun part of the job, scouring websites from Cape Town, Stockholm or Vancouver -- wherever unique suppliers can be found. The ability to bring unique products to the boutique is not a sustainable competitive advantage -- with effort and a good eye anybody can do it -- but it is a competitive advantage that when combined with high-end service can differentiate the boutique from the host of other children's clothing boutiques in the city. Furthermore, charging premium prices, essentially skimming the high end of the market, is only a viable strategy when it is backed with quality clothing and high-end service, so it is important that these elements are combined. In terms of product positioning, this implies that the brand will slot into a zone on the product positioning map below the true luxury brands but above the pricier mainstream stores. This is classic boutique positioning -- such stores need to cultivate a certain amount of exclusivity, but the inability to spread fixed costs around multiple outlets makes it imperative that the product is accessible enough that the store can move volume. This is doubly important in clothing, where seasonality and fashion trends create considerable risk for old inventory.

5.0 Pricing Plan

There are several different pricing strategies. The most common one for a small business is cost-plus, where goods are marked up by a certain set amount over their cost. This is a simple method, and easy to work with.(NetMBA, 2010). Cost plus is most effective when the goods are differentiated and the buyers are not price sensitive. With the inventory that Enfant plans to carry, there will be few if any other stores to carry these lines. This means that the customers are not going to be able to comparison shop for the exact items. The benefit of this is that the store can set prices using cost-plus, which essentially ignores the prevailing market for the goods. Only where the goods can be purchased online is there any possibility of price competition. Thankfully, children's clothing is hard to buy online -- you need to size clothing and children are constantly growing. There is too much risk for most parents to buy high-end children's clothing online, so price competition is not expected to be a significant factor. Thus, cost-plus is a reasonable pricing strategy. It allows the business to ensure that its fixed costs are covered, first and foremost, and it is easy to implement.

This pricing strategy will result in high prices because of the nature of the products. That is why location is critical to the success of the business. Furthermore, it is important that the clothes live up to the promise implied by such pricing -- they have to be ethical, stylish and sweatshop-free. What this strategy also implies is that the company, on a macro-level, is skimming the cream of the market, the early adopters, the people who are legitimately willing to spend a lot of money on their children's clothing, and ultimately this is a niche market within the overall children's clothing market in New York; niche markets just happen to be perfect for the boutique store format when the niche is geographically-concentrated.

It is worth noting that discounts are unlikely. When you are basically skimming, discounts make no sense. That said, unsold merchandise that is out of season is a drag on working capital, so there does need to be a strategy to move those goods. Consignment elsewhere is one potential approach, online sales is another, and a third option might be to have a wholesale buyer for the goods, in order to at least recover cost.….....

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