Garner Men’s WearBusiness PlanJanuary 2008

Business consultants:Stephanie PankratzAman BaggaAlykhan JessaAlbert MoMary Shaker

Table of Contents

Executive Summary…………………………...…………………………………………2

Operations Plan…………………………………………………………………………..3

Marketing Plan…………………………………………………………………………...8

Human Resource Plan………………………………………………………………….17

Finance Plan…………………………………………………………………………….18

Conclusion………………………………………………………………………………20

References……………………………………………………………………………….21

Exhibits attached

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Executive SummaryGarner is a small specialty menswear boutique in downtown Oshawa aimed at providing a one-stop shop for premium garments and services at premium prices to young-middle age professionals and middle-aged executives. Adam has developed and maintained positive relationships with clientele for over 20 years; this success is the foundation and building block of future growth in this business. Garner has developed a niche market that is relatively insensitive to economic and market changes given their level of disposable income. For this target group, fashionable, unique and quality men’s apparel is of high value due to their professional lifestyles which requires these individuals to be image conscious.

Garner’s critical success factors lie in its customer base, working capital efficiencies and revenue generating capabilities. Cash management and efficient working capital is critical to the success of this boutique and as such Adam must continually monitor inventory levels, collections on accounts receivable and ensure payables are paid within 10 day period to capture supplier discounts. Adam’s largest areas of risk is appropriate product selections to avoid obsolescence and mark downs on slow moving inventories to ensure future revenue streams and growth. Tapping into the nearby Toronto market through exhibitions and hotel showroom sales provides Garner with a new revenue stream without the high fixed start-up costs associated with establishing a new physical location.

Adam continues to run the day-to-day operations of this boutique, however, an in-store stylist will assist Adam in providing customers personalized wardrobe services and purchasing decisions to ensure garments purchased match customer’s needs. An on-site independent tailor will further increase value to Garner’s customers by providing customer fittings immediately after sale. Renovations to Garner’s interior boutique are aimed to stimulate brand positioning and move the image of the boutique from a retailer that sells high quality produces to a premium-end, full-service retail boutique.

Proposed changes to the business plan will improve profitability for Garner and will create an internal rate of return on investment of 28%. However, Garner’s financial performance is sensitive to changes in revenues and costs. Performance relative to projections needs to be carefully monitored using the new information system.

“Garner is a premium men’s apparel retailer that provides customers a one-stop shop with top quality garments and personalized services.”

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Operations PlanProposed Description of Business Objectives:

Garner Men’s Wear is a high-end retailer of men’s wear. It will continue to be a small and independent boutique located in Oshawa, Ontario, and build on its reputation that extends for over twenty years in menswear industry. Garner prides itself on superior service and targets middle-aged executives and young to middle-age professionals. Tapping into the Toronto market through exhibition sales will allow Garner to capture market share in neighboring cities while avoiding the high fixed costs associated with establishing a new location.

The company’s objective is to provide customers with high and premium quality garments and personalized services. Through an on-site stylist and tailor, Garner will offer its customers a one stop shop for all their apparel needs. Garner will charge customers a premium price to reflect the store’s high level of customer service and new, fashionable selections.

Organizational Structure:

Adam will continue to manage day to day operations of Garner and oversee three existing hourly employees to service customers, as he has developed good relationships with existing clients and is very knowledgeable about the business. Starting in 2008, Adam will employ a stylist to assist him with garment purchasing and sales. The current build-up of inventory indicates that Adam is not keeping up with fashion trends, and needs assistance in inventory selection to boost sales. The stylist will be able to support Adam in the new promotions plan, including attending fashion exhibitions of neighboring jurisdictions, including Toronto, and assisting with in-store promotions such as poker night to stimulate locate sales. As sales increase, Adam will employ one additional hourly employee to maintain positive customer relationships to ensure immediate and available staff to meet customer needs. See Exhibit 1.1 and 1.2 for Garner’s current and revised operating structure and flowchart, respectively.

Supplier Analysis:

Garner has been dealing with the same suppliers for more than twenty years and has, thereby established positive supplier relationships. As a result, Adam should capitalize on these relationships by managing payables through negotiating lower prices and optimizing on discounts by making payments within 30 day terms. Currently Garner is taking longer to pay bills with an accounts payable turnover from 29 days in 2006 to 37 days in 2007. This is resulting in a cost of 36.5% due to not taking discount terms of 2/10 net 30 by paying later. Improving working capital efficiencies will free up cash to pay suppliers on time or even early to optimize costs by taking discount terms. Implementing a change in immediate accounts receivable collection and payments of accounts payable will take at least three months to fully implement. Despite positive cash flow projections

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after 2008, Garner is currently in a cash shortage and requires immediate need for cash. Currently Garner has long term debt financing from the bank of $120,000 and to satisfy immediate operating cash needs, a $50,000 revolving line of credit is recommended. Given the cyclical nature of the apparel industry which peaks in fall and spring months, Adam’s cash demands are most apparent in the summer and winter months prior to order garments. As a result, having the line of credit available in these months ensures that Adam does not experience any cash crunches and allows for repayment of the line of credit in peak periods.

Adam will use the stylist’s assistance in purchasing selections and focus on purchasing high and also premium garment lines. The apparel production industry is large, saturated and relatively easy to tap into and this provides Adam with purchasing power to choose among a large group of suppliers.

Adam’s largest areas of risk regarding his purchasing strategy is appropriate product selections to avoid obsolesce and mark downs on slow moving inventory and the ability to negotiate good prices with suppliers. Given Garner is a small apparel industry suppliers are more likely to give larger retailers flexibility in prices due to large volume sales. To mitigate this, Adam must actively maintain relationships with suppliers and watch and negotiate prices to ensure that Garner’s current gross margin is maintained or improved.

Capital expenditures:

Adam currently owns the boutique that Garner is operating in, which is located in downtown Oshawa. Given Garner’s business strategy to maintain customer relationships, Garner will continue to operate its only in-store boutique in Oshawa close to his established customer base. To increase brand awareness and positioning of Garner, a revamp of the current store is required to appeal to high end customer groups. See below for a total cost of renovations and a revised floor plan of the 1,500 square meters boutique. In addition, to facilitate relevant and timely financial information, Adam must purchase and implement an accounting software system.

Current financing for capital budgets which will be implemented in 2008 will come internally from working capital efficiencies (through the collection of existing accounts receivable) and liquidation of obsolete inventory and additional external debt financing through a revolving line of credit.

Purchasing a Management Information System:Given Garner is a small private company, an off the shelf accounting software such as Quickbooks Premium can provide Garner with his immediate needs for financial information. Initial cost of the software is approximately $525, however, given Adam’s limited accounting sophistication, he will need to attend a two day Quickbooks help seminar to familiarize him with the software. Seminars are held in computer labs and aim to provide new users hands-on practice on features of the program as well as how to

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create meaningful reports to save time and better organize a business. The cost of the seminar is $345.By tracking sales by customers in QuickBooks, Adam can generate meaningful reports regarding repeat customers, what they are purchasing and on average how much key/preferred customers are spending in his store each year. This provides Adam with key purchasing information and provides a formal customer relationship management system which is monitored by Adam on a monthly and annual basis to ensure key customers is maintained.

Renovating the Physical Store:Garner tailors to individuals with high disposable income, image conscious professionals, and individuals looking for high quality, fashionable and unique garments. Given a business strategy aimed at this market group, Garner should emanate its premium quality and service through its store appearance and image. By creating a store atmosphere of high quality through décor and layout, Garner is branding its name as not just a retailer that sells premium products, but as a top end premium-high end retail boutique. An on-site tailor and stylist further increases customer service by providing a one-stop shop where clientele can get personalized advice on a suit and have the suit immediately tailored after purchase for an additional charge. Locating large chairs by the fitting rooms creates a space for wives and other influencers of the purchase decision to come in and contribute to the overall process. Installing new ceiling fixtures contribute to the overall mood of the store. In order to effectively compete in the high and premium end product lines, Garner must continually improve and update stock as well as store appearance to appeal to the changing trends of this specific market group. See Exhibit 1.3 for in-store layout, Exhibit 1.4 for a street view of the boutique and Exhibit 2.9 for renovations cost-breakdown.

Operating expenses:

As a result of marketing initiatives and increase human resources due to the addition of a personalized stylist, operating expenses have increased to fund proposals. Depreciation has increased as a result of renovation expenditures scheduled for 2008, which are amortized over the life of the furniture and equipment. The line of credit proposed will increase interest expense in the short term. However, given the nature of the business, Garner can repay the line of credit immediately in peak periods to avoid any material increase in debt costs. All other general expenses, including utilities, property taxes, insurance expense have remained constant with an adjustment for inflation. See below for a description of new operating expenses incurred as a result of this proposal.

Marketing Expenses: Toronto Exhibition & showroom: $4,500. These costs are incurred to participate in

the Clothing Show exhibition and Toronto and to set up a hotel show room twice per year. Adam and his stylist will advertise at these exhibitions through networking and distribution of business cards to promote upcoming showroom sales in a Toronto hotel.

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In-store poker nights: $1,830. To stimulate sales locally, Garner will host exclusive in-store poker nights to highlight and promote new fall season stock. Costs incurred to host this event include additional staff costs to work on these events, and costs to hire casino dealers and table rental.

Chamber of commerce newsletter: $1,085. Advertising in Oshawa and Toronto through the Chamber of Commerce newsletter stimulates awareness of the company through direct advertising to Garner’s target market: the business community.

Golf tournament sweepstakes: $11,000. To reach target groups, Garner will hold four sweepstake prizes at four major golf tournaments in Oshawa per year. Prizes will be gift to Garner and aim to increase awareness and image of the store and product lines. See Exhibit 2.6 for further detail on marketing expenses.

Depreciation Expense:Depreciation expense is made up of amortization of building, furniture and fixtures, and new accounting information system. Increase in depreciation expense is due primarily to renovations of the existing boutique which are anticipated to occur in 2008. See Exhibit 3.2 for further detail on depreciation expenses.

Salaries Expense:Increases in salaries are a result of hiring a full time stylist in 2008 to assist Adam with purchasing and selling garments. An on-site stylist will increase value to customers by providing them with personalized services to custom pick fashionable outfits. The stylist will also assist Adam in purchasing decisions regarding upcoming fashion trends to ensure Adam stocks premium garments that customers will buy.

Adam currently has three hourly sales assistants. As sales increase, to keep up with demand, Adam will have to hire an additional assistant to keep up with demand and ensure that customers receive immediate service.

Starting in 2008, Garner will have an in-store tailor to assist clientele with on the spot custom fittings. The tailor will be operated and run by an independent local tailor Adam has been referring his clients to for the past 20 years for tailoring services. As a result, the tailor is not an employee of Garner and Garner will not incur any additional costs to set up the in store tailor. Garner will charge the tailor annual rental charges at market rates of approximately $2,250; $15 a square foot for occupying approximately 150 square feet of the current boutique.

As sales increase, Adam’s salary will also increase. Currently Garner pays Adam an annual salary; however, in the future Adam should consider receiving distributions from the company as dividends. In the past, shareholder-managers preferred to bonus down to the small business deduction to pay less high combined corporate tax rates, and instead pay personal tax on the funds. With declining corporate tax rates across Canada, this is no longer becoming the norm. Shareholder-managers are finding it more beneficial for tax purposes to leave the extra earnings to be taxed in the company and to instead take out distributions of income through dividends. Dividends are taxed at a lower rate due to

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dividend tax credits which are aimed to level off the double taxation of income as a result of distributions being taxed in the corporation and then again in the shareholder’s hands. A salary-dividend combination will provide Adam with optimal tax savings. See Exhibit 2.7 for further details on salaries.

Working Capital Analysis: (Read in connection to Exhibit 3.4)

Accounts Receivable: Outstanding accounts receivable for 2007 will all be collected in 2008. All sales from

that point forward will be on a cash basis. Collection of accounts receivable should not be a problem based on the fact that Garner’s targeted consumer group has high levels of discretionary income and that Garner never had an issue with writing off receivables in the past.

Inventory and inventory system: 2006 provides us an appropriate level of inventory of approximately $50,000. Garner

has inventory build-up in 2007 due to outdated stock. This will be liquidated before March 2008 and a new fashionable spring collection will replace the outdated stock.

As old inventories are being liquidated Garner will begin replacing the old stock with the new fashionable spring menswear wear collection from new and existing suppliers. Although Garner will now purchase lower volumes from a particular supplier, this will not have a significant financial impact on the cost of inventory.

Inventory will continue to be maintained at $50,000 based on the saturated market of the menswear clothing industry.

To avoid future build up of inventory, Adam will need to monitor average days of inventory on the different collections of Garments every month. Average inventory in days should be approximately 45 days (approximately one and a half months).

Cash conversion cycle: Going forward, credit sales will be eliminated and Garner will be committed to timely

payment of suppliers within ten days. These changes will result in a cash conversion cycle is equal to average days in inventory.

Summary:

Store renovations, marketing initiatives, and information system are expenditures aimed at improving operations and stimulating growth and image of the company. Cash shortfalls in the past were a result of poor cash management strategies stemming from extending credit to customers, slow collections, and slow moving inventory. Through installation of an information system, Adam will be better able to monitor accounts receivable, payables, and inventory levels to ensure that working capital is efficient. Improving working capital while maintaining a $50,000 revolving line of credit ensures that cash is available in periods such as winter and summer of large purchase orders with the pay down of this debt in peak periods.

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Marketing PlanPast Performance:

Current market & sales initiatives: Middle age males (45 – 60 years of age) Executives and professionals with high disposable income Local business market - Sales are based on proximity of individuals currently

residing in Oshawa, Ontario 1,500 sq foot boutique located in the heart of downtown Oshawa, Ontario Over 20 years in operations – indicating stable sales and customer base Focus on repeat sales - based on positive customer relations Personalized customer service – Adam knows clientele on a first name basis Word of mouth is the primary advertising mechanism Credit sales - Increasing receivable balances indicate that Adam is providing credit

opportunities to customers in an effort to maintain and build client relationships however this is tying up cash and decreasing probability of collections.

Current pricing & profitability: High quality at competitive prices: This operating strategy tightens profit margins as

the company tries to satisfy all customer needs. Low profit margins: With profit margins of 33.3% and 31.9% in 2006 and 2007

respectively, margins are not only lower than industry averages of approximately 35%, they are also decreasing indicating pressures to reduce selling prices to remain competitive or increasing costs from suppliers.

Increasing inventory & changing trends: Inventory turnover has increased significantly from 37 days in 2006 to 60 days in 2007, tying up cash flows. Low demand as a result of changing trends or consumer tastes may be the cause of slow moving inventory and as such the ability to sell old stock at a profit may not be possible.

Limited brand positioning: Garner has not established a brand image or perception within the industry, limiting the ability of the company to differentiate itself in the minds of consumers from competitors.

The business environment:

Political Government regulation: Retailers are provincially regulated in Canada; government

regulation is minimal in the North American retail sector. However minor variances are apparent between provinces.

Corporate taxation: Provincial tax rates in Ontario on Canadian controlled private corporations (CCPC’s) are among the highest across Canada in 2007 at 5.5% on active small business. Federal rates for CCPC’s are 11% resulting in a combined corporate tax rate on small businesses in Ontario in 2007 of 16.5%; signifying

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unfavorable tax consequences on retail outlets conducting business primarily in this region.

Economic Volatility of the auto industry: General Motors Canada is a major contributor to

Oshawa’s economy with head offices located in Oshawa providing a large source of the City’s employment as the current largest local employer. Recent drops in the auto assembly industry are contributing to the declining economy and any plant shutdowns will directly impact discretionary spending of residents of Oshawa.

The US housing market: Continued decline in the U.S. economy and housing market is directly impacting the Canadian economy with a slowdown in the construction industry and housing prices across Canada. Ontario remains above provincial averages, but slowdown in job growth will impact the local economy.

Unemployment rates: Unemployment rose in Oshawa, Ontario between 2000 – 2006 due to reduced activity in manufacturing, high energy costs and reduced exports resulting from the appreciating CDN dollar.

City development & growth in Oshawa. The downtown shopping core has not been very successful in the past. However, a recent government initiative to boosting interest in the downtown core and the opening of a new General Motors Centre is expected to revitalize interest in the City’s core.

Inflation rates: Increasing inflation rates in Canada are driving prices up. With an inflation rate of 3.2% in 2008, Canadians are experiencing a decrease in consumer purchasing power further decreasing their standard of living.

Social Population of Oshawa: In 2006, current population of Oshawa is 141,590 with 53%

of the total population between the ages of 20 – 59 years. Of this, approximately 49.3% of the population is male and 10.4% of the population is 65 or older. The Oshawa Census Metropolitan Area which includes neighboring cities of Whitby and Clarington has a total population of 330,594. The average household income is $80,161.

Proximity to Greater Toronto Area: Oshawa is located approximately 60 km east of downtown Toronto. GO transit trains and intercity buses connect the city with downtown Toronto for easy commute. The Greater Toronto Area has a population of approximately 5,113,149 not including the Oshawa-Whitby Metropolitan Area.

Growing population: From 2001 and 2006 Canada’s total population grew 1.6 million (5.6%) with half of the growth occurring in Ontario. The City of Oshawa grew by 10.6% in those years.

Image conscious market: Garner’s target market is highly concerned with image and quality. By creating a strong brand image Garner can establish a stronger customer base that are willing to pay more for superior quality and service.

Highly saturated market with little differentiation: Ease of entrance due to low start up costs, multiple suppliers and minimal specialization required in this market increases competition and reduces the ability of Garner to diversify it from its rivals.

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Low switching costs: All of the product lines offered by Garner can be found at rival retail outlets, decreasing customer loyalty and threatening the ability of the company to continue operations as its critical success factor is its loyal customer base.

Increasing foreign retail growth: U.S presence is increasing as big-box retailer outlets and specialty apparel retailers continue to cross borders and enter Canadian markets. This makes it harder for small specialty stores to compete and remain viable as larger more powerful retailers cut costs through bargaining leverage of large volume purchases with suppliers.

Technological factors Customer relationship management: Increasing competition is prompting many

apparel retailers to install software that track customers by location, age, frequency and type of purchases to develop, build and retain relationships with clients to increase sales through direct marketing initiatives.

Custom/off-the-shelf accounting software: Accounting software packages allow for easy tracking of products, sales, costs, aged receivables and payables. Immediate financial information from customizing reports provides managers like Adam with relevant information to make better informed decisions about selling prices, collectability, who to extend credit to and cost increases from specific suppliers.

Online shopping: Online shopping and surfing makes it easier for consumers to make price comparisons and increases competition.

Competition:

The retail industry is divided into few big players and several small players. The big players have created a niche for themselves by either competing on price or competing on quality; therefore it appears that there is no direct competition amongst the big players. For example, Harry Rosen competes on quality. Tip Top Tailors competes on quality at a mid level price range, and Moores simply competes on price. The big players only face direct competition from small players. Garner men’s wear’s competition includes 5 national stores (The Bay, Sears, Tip Top, Moores and Harry Rosen) and one local player (Churchill Crossings). The apparel industry has the five distinguishing features that companies use in determining their marketing strategy:

Price: Pricing of the product plays a large role in determining a company’s marketing strategy. Pricing policy of a company determines the segment of the market the company will compete in. If a company decides to distinguish itself from its competitor solely on price, then it will not be able to compete on quality.

Quality of the product: Price and quality of the product generally tend to move in the same direction in the formal men’s wear industry (higher quality generally means a higher price tag).

Convenience of shopping: (as determined by number and proximity of store locations) Convenience of shopping can be measured by the amount of time its takes the target customer to get to the store.

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In-store service: Generally, stores which sell high price merchandise also tend to distinguish themselves by providing an excellent in-store shopping experience.

Customer relationship management (CRM): This includes maintaining constant contact with the customer, and increasing sales by selling more to existing customers.

Tip Top is a direct competitor for Garner as it has a similar business model. Tip Top’s business strategy is to offer formal clothing in the mid price level range. The mid level collection includes brands such as Chaps, Bellissimo and Perry Ellis. Tip top offers competitive prices (suits starting at $299.99) and has regular sales to lure its customers in to stores. Tip Top employs knowledgeable sales assistants that have the ability to advise the clients on recent trends and styles. However, the CRM system is primitive, with no means of maintaining regular contacts with the customers. Tip Top scores high on convenience in shopping by having over 100 locations across the country, and having its stores in high traffic areas (malls, downtown etc.).

The second national competitor of Garner is Moores: “Well Dressed, Well Priced, Well Made”. Moores’ business strategy is to simply compete on price with minimal in-store service. The selection offered by Moores includes brands such as Joseph and Feiss International, and Alfred Sung etc. with suit prices starting from $159.99 and sales twice a year to liquidate inventory. Currently, there are no programs to maintain constant contacts with customers. Moores scores high on convenience in shopping by having over 100 locations across the country. Moores usually operates in medium traffic areas such as strip malls.

The third national competitor of Garner is Harry Rosen. Harry Rosen distinguishes itself from competitors by offering a highly personalized customer service, both in store and in the client’s home. Harry Rosen gives its customers the option of having a representative visit the client’s home to provide advice on how to co-ordinate existing clothes (closet– cleanup). The representative will then also recommend additions to the customer’s wardrobe. The collection offered by Harry Rosen consists of high-end brands such as Armani Collezioni, Harry Rosen “Made in Italy” and D&G with tailored suits, starting at $3,400. The CRM system at Harry Rosen is very extensive, with every sales representative maintaining a list of clients they service. Clients have the option of shopping by appointment, where the sales associate (who knows customer’s style) will pre–select the clothes that they believe the customer will be interested in. In this way, they act as personal shoppers and provide value to their customers by saving them time in searching for the right outfit. Harry Rosen also offers lifetime maintenance guarantee for their products, where Harry Rosen will provide minor repairs for its merchandise (free life time service for the original owner,) Harry Rosen scores well in convenience of shopping by having its 15 stores in downtown locations (near its customer base – executives) and by having programs such as shop by appointment and closet cleanup. Sales associates are very knowledgeable about their product and customers (by noting their preferred styles and likes) and will often contact the client if they think any new product might be of interest to the client.

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Garner faces direct competition from a regional company – Churchill Crossings (CC). Churchill Crossing has one of its three locations in Oshawa and has a business strategy which is similar to that of Tip Top. However, it distinguishes itself by offering specialized services to its clients. These specialized services include wardrobe consulting, where one of CC’s representatives will visit the client house, and provide advice on how to co-ordinate the current contents of the client’s wardrobe. The sales representative will also recommend on additions that will add value to the client’s current wardrobe. Customer relationship activities at CC include offering preferred customers a preview to the various collections (and an opportunity to shop before the selection is offered to the general public) a custom tailored event and golf tournaments. CC scores average on convenience of shopping by having only three locations.

Current situation at Garner: Garner tries to compete both on price and quality with its current marketing strategy of “providing superior service while offering high-quality men’s clothing at competitive prices.” Competing on price may not be one the features that the target groups of Garner value. The justification for this assumption is that Garner’s current target market is made up of middle-aged executives and professionals with high disposable income. This indicates demand is not overly sensitive to the price of the product. Garner scores high on in-store shopping experience and CRM as Adam Garner knows most of its customers on a first name basis. However, recent increases in inventory indicate that Adam has not done a great job of offering garments that its customers will be interested in. Garner scores low on convenience of shopping as it only has one location and it is far from its potential target market of executives living in Toronto (Oshawa being a 45 minute drive from Toronto). See Exhibit 1.5 differentiation curve, for Garner’s current and projected competitive positioning.

Customers:

The target customer for Garner’s is a man who holds either an upper management or executive position who is required to or prefers to dress in business formal for work. He is image conscious and appreciates personalized service. As part of his image consciousness, he is conscious of brand names and brand perception. Although he is not trendy, he wants to look current and fashionable.

To keep his wardrobe current, he updates his wardrobe every year. As he does not have a lot of time to spend shopping, he prefers to purchase his clothes through one to three major shopping trips a year as opposed to buying a few pieces several times a year. He is business-like in his approach to shopping and will often bring a second opinion such as his wife to help in the purchase decision. He also appreciates good service and assistance in deciding on which pieces he should purchase. He will return to a store where he has received good service and is willing to pay a slightly higher price for top service.

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Market Segmentation and Targeting:

The customers have been segmented by age and by geographic area. Based on these criteria, Garner’s target market is made up of the following four segments:

1) Oshawa, age 45-60This is the segment that is targeted by the current business model.

The following three segments will be targeted as part of the business plan proposal:2) Oshawa, age 35-443) Toronto, age 35-444) Toronto, age 45-60

Market Share:

The following is the projected market share for 2008:

Oshawa and neighboring cities

Greater Toronto Area excluding Oshawa

Total males between ages:45 – 60 years old***

35 – 60 years old38,390 males

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650,000 males% of total pop with university/college education 75% 75%Total target market 28,800 males 487,500 malesGarner’s share 400 males* 200 males**Garner’s market share 1.4% 0.04%

Note: Market share information is based on population statistics provided in the Business environment section of this paper.

*Based on estimated number of clientele Garner currently has obtained.**The Clothing Show exhibition has an attendance of approximately 10,000 people;

Garner is estimated to capture 100 customers from each show (two exhibitions per year on average).

***Although Garner is expanding its target market to address 35-44 year olds, in the first year it is assumed that some older customers will be lost which will be replaced by younger customers.

Product Features:

Garner currently sells high quality, brand name business formal wear and accessories by designers such as Hugo Boss and DKNY. This product line will be expanded to also include premium brands such as Giorgio Armani to address the brand and image consciousness attributes of Garner’s customers. The merchandise carried by Garner will be contemporary but classic and Garner will not carry any product that is overly trendy.

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Garner will differentiate itself based on its service. Customers will receive personalized service from the owner, stylist and the sales assistants. Shopping appointments can also be made to ensure individualized attention when the customer comes to the store and to ensure efficiency.

Channels of Distribution

Garner will continue to use its isotre in downtown Oshawa as its primary distribution channel. As Oshawa represents only a small part of the potential target market in Ontario, it is recommended that Garner establish a hotel showroom in Toronto twice a year to target business professionals in Toronto.

Pricing:

Garner has earned a 33% margin in the past and can expect to earn this in the future. Although Garner’s margin was lower in the past due to inventory that did not reflect his customers’ tastes and had to be discounted to sell, there are several factors that will constrain his margin:

As a small store, Garner does not have the buying power of larger retailers and cannot reduce his prices significantly by buying in bulk. However, his customers will only tolerate a small increase in price for good service before switching to a competitor so he is required to keep his sale prices close to those offered by his competitors for comparable products.

Although the new product mix will allow for Garner to sell a greater portion of its product at a higher price, it will also be offering several discount promotions to promote the store and grow the customer base so margins will remain the same. As the business grows, Garner may be able to increase its margins by offering less discount promotions.

Selling & Advertising:

The cost structure for the promotions is based around two key times in retail: fall and spring and the promotional activities are focused on these periods.

Toronto The clothing show exhibition will take place in September and in April. At the

exhibition, Garner will be able to promote the hotel showroom through networking and distributing business cards. Following the exhibition weekend, the hotel showroom will happen on Friday and Saturday. In the first year, Garner will only set up for one weekend following the exhibition. In the second year, Garner will set up for two weekends following the exhibition and in the third and following years; Garner will be set up for 3 weekends. The hotel showroom will be conducted by

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Adam and the stylist by providing appointment based meetings with clientele to provide them personalized services to custom pick outfits and suits.

Oshawa The poker night will coincide with the fall sales period and will happen in

September. In the second year and following years, Garner will host two poker nights a year -one in September and one in April. Poker nights are aimed to provide Garner’s preferred customer list with a sneak peak at upcoming product lines while providing a ‘casino’ style atmosphere

Golf tournament promotions are held at four golf tournaments per year through a sweepstakes and prizes to directly advertising to Garner’s target market. Prizes will be $1,000 gift certificates for and aim to increase awareness and image of the store and product lines.

Garner will set up a referral program where customers can refer new customers to Garner and receive a 10% discount on their next purchase.

Garner will locally advertising in both target markets through newspaper advertising in the local Chamber of Commerce paper. In addition, Adam will print business cards for general promotional needs. See Exhibit 2.6 for a cost breakdown of advertising initiatives.

Market opportunity & Sales objective:

Adam remains true to Garner’s strategic plan to maintain and build positive and long lasting relationships with its customer base. Adam’s previous success in the business is derived from informal customer relationship management. Based on this success, Garner will continue to satisfy local customers, while expanding into Toronto through exhibitions. Formerly a company divided on its strategic objective of whether to provide quality garments or competitive pricing, Garner has re-directed its focus on premium quality and service at premium prices.

Garner’s goal is to become a niche player in both the Oshawa and Toronto markets. Garner’s niche will be a boutique approach where customers are offered a range of high quality and premium brands and personalized service. The personalized service that can be offered by the store will be difficult to match in larger stores: Younger sales staff have less expertise and are not as able to give wardrobe advice. Higher turnover makes it difficult for these stores to build customer relationships

Garner has expanded its target market to include younger professionals through increased promotion and improved product mix. Garner will expand to nearby Toronto to increase market share through direct sales to this group through hotel showrooms without incurring significant fixed costs to establish a physical location in this area.

Entry into the Toronto market through a storefront would involve a large investment of capital as well as much higher operating expenses due to additional staff required. By distributing through a hotel two times a year, Garner will be able to tap into the lucrative

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Toronto market without a large investment. Although the sales that would be achieved through this method of distribution are less than those achieved by a storefront, the revenues represent an excellent secondary source of income and will also encourage Torontonians to visit the Garner store in Oshawa when they are in the area. In addition, this method of distribution will be easier to manage by the owner than running two stores.

Current economic conditions indicate a slow down in the Canadian market. Given that Garner targets individuals with high disposable income, they are less sensitive to market swings, however due to the economic slow down we anticipate minimal real sales growth in the next two years, apart from sales generated from liquidation of current inventory at cost. This is followed by larger growth potential thereafter as indicated in Exhibit 2.4. Oshawa and Ontario as a whole continues to experience increasing population growth in comparison with the rest of Canada, which further increases growth potential of the company. See Exhibit 2.4 on details regarding sales forecasts.

Sales & Profit objectives: Maintain customer relationships through implementation of a CRM software Establish direct contact with customer through email, phone or fax to let them

know about new styles, promotions etc. Grow revenues through repeat sales and new customers Charge premium prices for quality products and premium services

“Garner is a premium men’s apparel retailer that provides customers a one-stop shop with top quality garments and personalized services.”

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The Human Resources PlanThe main change to the human resources strategy for Garner will involve hiring a stylist.

The main responsibilities of this stylist include: To improve CRM at Garner Knowledge of the trends in the fashion industry Improving contact with the suppliers to ensure that Garner is able to offer the

products desired by its target market Provide training on fashion trends to the three current sales assistants

The first responsibility of the stylist will be to assist Adam in formalizing Garner’s CRM system. The marketing strategy of Garner includes promotions such as the poker night, wardrobe consulting, shopping by appointment, preferred customer previews etc. Therefore, the starting point of this marketing strategy will be to create a list of preferred customers and to determine their styling preferences, likes and dislikes. The stylist should be friendly and outgoing, and an individual with whom the executive can sense a connection in order for them to provide Garner with the required information.

The second responsibility of the stylist will be to keep up with trends in the fashion industry in order to understand the demands of the target market. The responsibility also includes of informing the client about the projected trends. The target market consists of young-middle aged professionals and middle-aged executives, which are generally faced with time pressures. Therefore, the stylist should provide value to the client by recommending in fashion merchandize that will be in line with client’s style and dressing preferences.

The third responsibility of the stylist is to maintain a constant contact with Garner’s suppliers to ensure that Garner is able to obtain the merchandise, which is demanded by its target market.

The last responsibility of the stylist includes training the existing sales assistants. This training needs to be conducted for the sales assistants to in order to allow them to provide an exception “in-store” shopping experience for the customer. This training should consist of relaying the information regarding the prevalent fashion trends and regarding what products to recommend to different customers.

Finally the performance evaluation of the stylist should be measured by improvements in the following:

- Improvement in CRM – examples include customer surveys- Improvement in inventory turnover - Incremental sales revenue

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Financial PlanFive year projections:

Currently, the financial model assumes that all earnings from the marketing plan will be retained in the company, while the debt and equity structure remains unchanged. Based on the above assumptions and incorporating the business plan into the financial model, Garner’s zero cash position in 2007 will increase to $111,451 in 2008; see Exhibit 2.2a & 2.2b. And over five years Cash will grow to $211,872 by the end of 2012.

Our recommendation is that Garner should maintain a cash balance of $20,000 for operating the business, and any amount in excess of this should be used to:

Pay down the current long term debt to reduce interest payment each year: This option is recommended if interest rates are expected to drop and stay at a low rate over the five years as a result of the recession in Oshawa.

Pay Adam a higher salary: Although any increase his current salary is deductible in Garner’s tax return, there will be personal tax implications for Adam. Currently, Garner pays Adam a salary of $80,000 which just moves Adam from the 22% tax bracket into the 26% marginal tax bracket; any amount in excess of $120,887 will be taxed at 29%.

Pay Adam a dividend: As dividends are paid out of the Company’s out of after tax dollars, he will include a gross up dividend in his income and dividend tax credit on his personal tax return. The advantage of paying himself a dividend is that he receives a dividend tax credit which reduces taxes paid on the dividend.

Sources of Financing:

Garner will require financing in 2008 due to a shortage of cash flow from having zero cash at the end of 2007 and the projected negative cash of $11,331 in January. To alleviate the immediate need for cash Garner will need a revolving line of credit and draw $12,000 to cover the first month’s expense from operations. Refer to the operating section for more detail on the revolving credit facility. As discussed before, Garner will improve on its cash position from liquidating its outdated inventory at cost and removing the credit purchase to customers.

Sensitivity Analysis:

To determine the sensitivity of the projected income to changes in revenues and costs, a sensitivity analysis has been performed with changes to the revenue and cost variables as follows:

Revenue Growth:

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2008 2009 2010 2011 2012Best Case 7% 4% 5% 5% 5%Base Case 7% 3% 4% 5% 5%Worst Case 6% 3% 3% 3% 3%

Cost of Goods Sold:Best Case: 69% of revenueBase Case: 67% of revenueWorst Case: 65% of revenue

Operating Costs:Best Case: Decrease of 1% from base caseBase Case: As calculatedWorst Case: Increase of 1% from base case

The NPV and IRR for each of the cases are as follows:Best Case Base Case Worst Case

NPV $68,569 $3,724 -$61,550IRR 164% 28% N/A**The IRR for the worst case cannot be calculated because in the first five years the net income is negative and in the remaining 2 years the net income is positive. IRR cannot be calculated when the cash flows change signs.

As shown above, the return from the investment is sensitive to changes in revenues and costs and small changes in any of these variables can have a significant impact on the return on the investment. This indicates a higher risk in the business and also indicates that income is very sensitive to changes in costs and revenues and these need to be monitored carefully to ensure an adequate return.

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ConclusionGarner is a small specialty menswear boutique in downtown Oshawa aimed at providing premium garments and services to young-middle age professionals and executives. Garner has developed a niche market that is relatively insensitive to economic and market changes given their level of disposable income. For this target group, fashionable, unique and quality men’s apparel is of high value due to their professional lifestyles which requires these individuals to be image conscious.

Garner’s sustainable competitive advantage is in its customer service. Adam has developed and maintained positive relationships with clientele for over 20 years and this success is the foundation and building block of future growth in this business. By re-directing its focus towards high-end as well as premium garments and offering a high level of service, Garner has an opportunity to be a premium end retail boutique. The marketing strategy aims to build and maintain relationships with target customers to boost sales.

Adam will continue to run the day to day operations of the organization but an in-store stylist will assist Adam in providing customers personalized wardrobe services and purchasing decisions to ensure garments purchased match customer’s needs.

Cash management and efficient working capital is critical to the success of this boutique and as such Adam must continually monitor inventory levels, collections on accounts receivable and ensure payables are paid within 10 day period to capture supplier discounts. As the performance of Garner is extremely sensitive to changes in revenue and costs, it is key that Garner carefully monitor its performance compared to projections. Adam’s largest areas of risk is appropriate product selections to avoid obsolesce and mark downs on slow moving inventories to ensure future revenue streams and growth.

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Whitby-Oshawa. Retrieved July 13, 2008, Web site: http://en.wikipedia.org/wiki/Whitby%E2%80%94Oshawa

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