the travel necessities shop

Prepared byMs. Irene Tripp

123 Adventure AvenueMetro, Anystate 55555

555-5555

Date preparedJanuary 200B

The Travel Necessities ShopFeasibility Plan

Executive Summary 3

Product/Service 4Purpose of the product/service 4Stage of development 4Product limitations 4Proprietary rights 4Governmental approvals 4Product liability 4Related services and spin-offs 4Production 4

Marketing Plan 5Industry profile:

Current market size 5Growth potential 5Industry trends 5

Competition profile 6Customer profile 6Customer benefits 6Target markets 6Market penetration 7

Price and Profitability 8Price list 8Sales estimate 8Cost of product/service 9Gross margin 9Three-year operating expenses 10Three-year operating statement 13Start-up costs 13Start-up expenses 14Capital expenditures 15

Plan for Further Action 16Needed capital 16Entrepreneur's role 16Business plan 16License potential 16Corporate partners 16Proprietary rights 16Infrastructure members 16

The Travel Necessities ShopTable of Contents

2

January 10, 200B

Ms. Nan MeeksFriendship Bank4801 Rockhill RoadMetro, Anystate 55555

Dear Ms. Lender:I am submitting for your review a feasibility plan for The Travel Necessities Shop, which is a specialty retailstore that sells travel accessories targeted towards the leisure traveler. I am in the concept stage ofdevelopment with start up projected for October 200B. Travel can be difficult even when it is for fun, andhaving the right accessories can make a big difference in the travel experience.

The Travel Necessities Shop will be a small, well-organized retail store with well-seasoned travelers asemployees. You won’t have to fight the mall traffic, take your chance on a catalog order, or get lost in a largeself-service type of store looking for a specific travel accessory.

The travel industry is the third largest employer in this country. Globalization and the Internet are just twofactors that have contributed to an increase in travelers. A prosperous economy and the maturing of the BabyBoom Generation with discretionary income for traveling are fueling the boom. Metro is an ideal location forthis business with passenger enplanements (people getting on planes) having increased from 3,480,581 tenyears ago, to 5,586,637 two years ago. My target market is a U.S. pleasure traveler who has been identified tobe 35 percent of the Metro area population. This target customer is 35-64 years old, both male and femalewho leaves the Metro area to travel four to six times a year. I plan to locate in an area that has the highestconcentration of this target market and will reach them through different advertising methods with direct mailbeing a priority. I will also penetrate my market through targeted lifestyle magazines. I also plan to create tie-inpromotions with travel agencies.

The store will need $90,000 to open. I plan to obtain a $60,000 loan to purchase inventory and to coverexpenses during the start up phase. The remaining $30,000 will be funded by me personally and will be usedfor store displays, a computer, cash register, and leasehold improvements.

I will pursue a bank loan utilizing the SBA loan guarantee program.

I believe that the travelers of the Metro area are greatly underserved in their travel accessory needs and thatmy store will be well received in the market. Please continue to read the enclosed plan for more specificdetails to support my idea. I would be happy to meet with you to answer any questions that you might haveabout The Travel Necessities Shop. Thank you for your interest.

Respectfully Submitted,

Irene TrippMs. Irene Tripp, President

The Travel Necessities ShopExecutive Summary

3

Purpose of the product/serviceThe Travel Necessities Shop will provide customers with a convenient location to purchase travelaccessories. This will include, but is not limited to: carry on luggage, packing aids, day packs, electronicitems and small tools, health, safety and security items, auto travel products, games, books, and maps.Our small, well-traveled sales staff will be trained to answer questions about the items that we sell and tooffer suggestions based on the customer’s destination. I will offer a combination of the accessories carriedat sporting goods, luggage and book stores, and because of limiting products to just these types of itemswe will be able to offer a large selection of innovative and unique products. We also plan to focus onmanufacturers that give lifetime guarantees of their products. This will account for approximately 70percent of my inventory.

Stage of developmentThe store is currently in the idea stage. I plan on spending May, June, and July 200B researching storeinventory and arranging financing. I will spend August and September 200B locating a retail space,purchasing store equipment, contracting for leasehold improvements, and hiring the staff. My plan is toopen October 1, 200B.

Product limitationsThe store will be limited by space and money. In addition, many of the travel guides that are availablecould become out-of-date quickly and customers could choose to get information online; therefore, I mayhave to change my product mix slightly.

Proprietary rightsI plan on developing a specific packing system that can be used very easily by everyone. I possibly wouldcopyright the process.

Governmental approvalsMy business will not need any government approvals except for registering corporate status and salesand employment tax numbers.

Product liabilitySince I am a reseller of products, the manufacturers will carry all product liability insurance.

Related services and spin-offsThere are many opportunities for spin-offs for this venture. I would like to develop a Web page after thefirst year of business that will have travel stories, clever anecdotes, travel tips, and will, of course, sellproducts. Also I plan on setting up once-a-week seminars for international travelers. The topics couldinclude how to pack for three weeks in one carry-on suitcase, how to order food when you can’t read themenu, what to do with your valuables when traveling, how to exchange money when traveling to manycountries, and how to prevent jet lag. These educational seminars will help me get into the new market ofinternational travel. In terms of expanding my product mix, I could carry lifestyle clothing that is easy towear and pack. In three years I want to open a second location.

ProductionAs a retailer, we will not be in production. Our products will be purchased from a variety of manufacturersand distributors.

The Travel Necessities ShopProduct / Service

4

Industry profileCurrent market sizeThe Travel Industry Association of America provides the following information:1. Travel and tourism generated $519 billion dollars in total travel expenditures two years ago.2. In 200A the United States saw 1.01 billion total personal trips. Sixty-six percent of them were

considered pleasure travel.3. Travel and tourism was the third largest retail industry by dollar volume in the U.S.4. Baby Boomers registered more than 259 million trips, more than any other age group.

Passenger enplanements at Metro International Airport increased from 3,480,581 to 5,586,637 in the lastdecade. (From CERI, Economic Data Base File no.20-Transportation, Metro Metropolitan Airports.)

According to Zap Market Reports, 200A, utilizing the SIC code of 5948, which is luggage and travelaccessory stores, total sales in Anystate is $3,000,000.

The store will be located in Metro, Anystate. The Sourcebook Zip Codes, 14th Edition, gives three differentzip codes in this area a 105 to 165 spending potential index for travel spending (with 100 being theaverage). These three zip codes also have almost half of all travel agencies located in Metro. I will locatemy store in one of those zip codes.

Growth potential The growth potential for selling travel accessories will follow the growth of the travel industry. According tothe World Tourism Organization, four years ago U.S. residents took 1.16 billion personal trips of 100 milesor more from home. Travelers participate in a variety of activities away from home, which include stayingin a hotel, eating out, shopping, pursuing outdoor adventures, and visiting historic sites/museums. All ofthese activities generate a potential need for different travel accessories. According to the U.S. CensusBureau Economic Census, the number of retail luggage/accessory stores increased 11.5 percent in thelast decade. The sales at these stores increased 41.4 percent during the same time period.

Industry trendsMany trends will affect the travel accessory business. Those include:1. A retiring Baby Boom generation. This group has traditionally enjoyed travel as a major leisure activity.

They will retire with more disposable income than any generation before them.2. Globalization of Business. Four years ago, 257 million U.S. residents traveled for business.3. Internet use. Travel purchases are the second most popular purchase in e-commerce (behind

computer equipment/supplies) There is one major Internet supplier and the other sources that arecurrently available are difficult to find and have a very limited product offering.

4. Techno-savvy. Technology has helped make the travel experience less intimidating. People canresearch and book trips online, which should continue to bring new travelers into the market.

The Travel Necessities ShopMarketing Plan

5

Competition profileThe direct competition includes other retail stores and Internet businesses that sell travel accessoriesexclusively. These would include The Complete Traveler, Global Connections and Magellan’s. The indirectcompetition would be airport and sporting goods stores, exclusive luggage stores and departments withinbroad-based retailers. My competitive advantage over my direct competition will be an accessible location,close to where my target market lives. In addition the owner and sales staff will be seasoned travelers withextensive product knowledge. The majority of products that are inventoried will have lifetime warrantiesfrom the vendors. These warranties will be prominently featured to show customers that quality productsare being carried. My competitive advantage over my indirect competitors will be the depth of theinventory. We will focus only on accessories. Also the knowledgeable sales staff will be a key advantage.

Customer profileThe intended customer is 25-64 years old, both male and female. On the younger end of this group, theywill be in administration, management, sales, or hold a professional degree. The older group will beretired. Household income will be $45,000+. They will live in the targeted zip codes. This group is welleducated and considers traveling a hobby. They have high values and are comfortable trying new things.They like adventure but also seek comfort and security.

Customer benefitsCustomers will be able to purchase hard-to-find travel accessories that will make traveling moreconvenient, safe and comfortable. Travel experiences can be difficult, cumbersome, tiring and many timesunsafe if proper accessories and products are not used.

Staff is well traveled and will be required to personally use the store’s accessories in their own travels.They will be able to communicate effectively to the customer the advantages and benefits of the productsby sharing personal experiences.

Customers will be able to find items easily and quickly in a well-designed store layout. This advantage willsave customers time and make their shopping experience more enjoyable.

Target marketsAccording to the SRDS Life Style Market Analyst, the Metro area had an adult population of 1,487,611.The following groups were identified within that population:

U.S. pleasure travelers 35.4% (526,614)U.S. and International Business Travelers 20% (297,522)Frequent Flyers 16.6% (246,943)International Pleasure Travelers 10.9% (526,614)

I have identified the following target markets in order of importance:1. U.S. Pleasure Travelers2. International Pleasure Travelers3. U.S. and International Business Travelers


6

Market penetrationThe products will be sold through my retail store. I plan on penetrating my market in the following ways:1. I plan on sending a direct mail piece to households with a $75,000+ household income, that travel at

least four times a year, announcing my opening and telling about what is new, exciting and uniqueabout my store. In the mailing I will invite them to come in, and with every purchase of $25 or more, Iwill give them a free travel accessory with logo. (A clock, flashlight, etc) Initially, I will send out 2,000and they will cost approximately $2/each. If there are any additional costs I will choose 2-3 vendorsand feature some of their products. In exchange I would expect to get "market development" funds,which is extra vendor money.

2. I also plan on partnering with a travel agency to create a two-party promotion, where I will promote itsbusiness and it will promote mine. An example would be in an ad letting people know that with anypurchase over a certain amount that they would receive a certificate for $25 of free travel. The agencywould help pay for the ad, in exchange for getting its name mentioned. It would also promote my storein its ads with a similar offer.

3. I will place ads in the lifestyle magazines in Metro and target leisure travelers.4. I plan on starting a frequent buyer club to encourage customers to just shop with me.5. I would like to design a creative-looking ticket folder with information about my store to give travel

agents. Every ticket that they give out could be in this folder.6. I will give seminars to groups on packing and give away a small informational promotional gift, along

with a brochure with the packing hints.7. I plan on using co-op dollars from vendors to promote their brands as often as possible.


7

Price list

Products/services PriceLuggage (carry on) daypacks and packing aids $50-200Electronic Items and Small Tools $15-100Health, Safety and Security Items $10-75Local and Auto Travel $5-50Miscellaneous (books, games, toys, etc) $10-40

Price assumptions:Pricing will be figured by using a 50 percent markup, which is a standard retail keystone markup. I will bepurchasing products through manufacturers and distributors. The products chosen for inventory willgovern prices. The above ranges should cover the majority of products. Many of the vendors havesuggested retail pricing that we will follow if possible.

Sales estimate

Product/service Year 1 Year 2 Year 3Luggage (carry on, daypacks, packing aids) 69,000 72,900 76,500Electronic items and small tools 69,000 72,900 76,500Health Safety and Security Items 46,000 48,600 51,000Local and Auto Travel 23,000 24,300 25,500Miscellaneous 23,000 24,300 25,500Total sales 230,000 243,000 255,000

Sales assumptions:Sales figures have been developed using dollars per square foot ($255) based on a 1,000 square footstore. This was derived from travel trade association facts for average travel and luggagedepartments/stores. This average industry figure will not be attained until the third year, because we feel itmight be difficult to achieve that in the first year of operation. We have started out with a figure of 10percent below industry average per square foot, which would be $230/per square foot. An average item-selling price of $50 with a goal of 4,600 units sold per year or approximately 88 units per week. Initialinventory is $40,000, which will turn 5 times per year. We will grow the business slowly at 5 percent peryear. This is a very conservative growth; however, the travel industry as a whole has only projectedgrowth of 5 percent per year through 200L.

The Travel Necessities ShopPrice and Profitability

8

Cost of product/service

Product/service Year 1 Year 2 Year 3Product/service item 1 37,260 39,366 41,310Product/service item 2 37,260 39,366 41,310Product/service item 3 24,840 26,244 27,540Product/service item 4 12,420 13,122 13,770Product/service item 5 12,420 13,122 13,770Total cost of goods sold 124,200 131,220 137,700

Cost of goods sold assumptions: Cost of goods sold will be 54 percent of sales. This will include freight-in costs, early pay discounts, lessinventory shrinkage, and markdowns. Products are broken down based on different categories ofmerchandise to be carried.

Gross margin

Product/service Year 1 Year 2 Year 3Product/service item 1 31,740 33,534 35,190Product/service item 2 31,740 33,534 35,190Product/service item 3 21,160 22,356 23,460Product/service item 4 10,580 11,178 11,730Product/service item 5 12,420 13,122 13,770Total cost of goods sold 105,800 111,780 117,300

Gross margin assumptions:The gross margin that the store will try to achieve will be 46 percent. The industry average for specialtyretail stores with less than $500,000 a year in sales is 44.5 percent. A small shop that is paying attentionto detail will produce a higher gross margin. Products are broken down based on different categories ofmerchandise to be carried.


9

Three-year operating expenses

Marketing Expenses Year 1 Year 2 Year 3Salaries & wages - marketingBenefits & taxes - marketingCommissions, reps & contractorsAdvertising – broadcast (1) 1800 2000 2150Advertising - brochures/ postersAdvertising - direct mail (2) 4000 4100 4200Advertising – other (3) 1000 1250 1500Marketing – print (4) 2200 2300 2400Marketing - samples/trade showsOther marketing expenses (5) 2500 2500 2500Total marketing expenses 11,500 12,150 12,750

Marketing expense assumptions: Advertising and marketing are key to the success of this venture. I have allocated 5 percent of sales tothe budget, which is the standard percentage for retail.

1) I will run two radio schedules per year, one during Christmas and the other during the peakspring/summer traveling season. My schedule will be on a radio station that targets 35-54 yearolds. Average cost of radio spot will be $60. Each schedule will cost $900, with 15 spots running perschedule.

2) Direct mail will be a key strategy. I plan on printing 2,000 tri-fold information pieces that will have anoffer to come in and receive a free gift. I will send these to 2-3 zip codes that I can identify as high-income travelers. These pieces will cost approximately $2.00/each to produce including paper, design,printing, and copywriting.

3) I plan on designing and producing a plastic envelope that will have information about my store, anduseful travel tips. These will be used to hold airline tickets and other papers. I will distribute themamong the top travel agencies in the city, to give out to their clients.

4) I plan on running four half page magazine ads in the city’s top lifestyle magazines. They will beapproximately $550/each.

5) I am going to buy 500 promotional items in the $4-5 range with the store name imprinted onthe item. I will give these out as a gift with purchase.


10


Administrative Expenses Year 1 Year 2 Year 3Salaries & wages (1) 36,480 36,480 36,480Benefits & taxes (2) 2800 2800 2800Meals & entertainment (3) 0 470 600Dues & subscriptions (4) 1350 1350 1870Professional fees (5) 1550 1550 1550Accounting/bookkeeping (6) 800 800 1200Travel/automotive (7) 2650 3250 3500Other administrative expenses (8) 700 1300 2000Total administrative expenses 46,330 48,000 50,000

Administrative expense assumptions: Advertising and marketing are key to the success of this venture. I have allocated 5 percent of sales tothe budget, which is the standard percentage for retail.

1) Salary of $2,000 a month for the owner and $8 for 30 hours a week for part-time employees.2) Employer’s FICA at .0765. 3) Meals and Entertainment for second and third year.4) Dues to retail, travel, and community organizations. Subscriptions to travel industry magazines5) Legal and Accounting services.6) Bookkeeping services.7) Market expenses for two out-of-town buying trips. Also included is 32.5 cents a mile with 2,000 miles a

year projected for business-related auto trips. Adding an additional buying trip the second and thirdyears.

8) This category will include all additional incentives for employees, including travel coupons, freeproducts. This will also include any additional costs for in-store activities, contract help, and guestspeakers.


11


General Expenses Year 1 Year 2 Year 3Bank charges (1) 500 500 500Credit card fees (2) 5175 5470 55750Interest (3) 4800 4800 4800Insurance (4) 700 700 700Office supplies (5) 1200 1200 1200Other supplies (6) 600 600 600Postage (7) 500 500 500Telephone (8) 1200 1200 1200Utilities (9) 900 900 900Rent (10) 20,700 20,700 20,700Repairs & maintenance 0 0 0Taxes & licenses (11) 200 200 200Other general expenses (12) 2070 2070 2070Total general expenses 38,545 38,840 39,120

General expense assumptions: Advertising and marketing are key to the success of this venture. I have allocated 5 percent of sales tothe budget, which is the standard percentage for retail.

1) Approximately $40/month. I plan on keeping cash in an interest bearing account and makingtransfers to an operating account as needed. This will help offset some of the fees.

2) 3% credit card fee on 75 percent of sales.3) Based on a $60,000 loan for seven years at prime plus 2-3%.4) General business coverage for $40,000 of inventory and $20,000 of furniture and fixtures.5) Includes copier, fax, cash register, and computer supplies.6) Includes labeling, packaging, signage and price-marking supplies.7) Approximately 50 stamps a month, vendor returns and customer shipments.8) Estimated at $100/month for a two-line phone with answering service.9) Includes gas and electricity.10) 1000 square feet at $18/square foot and 15% triple net.11) Personal property tax on inventory.12) Based on less than 1 percent of sales. Any unforeseen increases in general expenses will go into

this category. Most of the general expenses should remain fairly constant for the first three years.


12

Three-year operating statement

Product/service Year 1 Year 2 Year 3Sales 230,000 243,000 255,000– Cost of goods sold 124,200 131,220 137,700= Gross Margin 105,800 111,780 117,300– Marketing expenses 11,500 12,150 12,750– Administrative expenses 46,330 48,000 50,000– General expenses 38,545 38,840 39,120= Net profit* 9,425 12,790 15,430

*Before taxes, amortization, and depreciation

Start-up costs

Start-up costs Year 1Petty cash (1) 50Register cash (2) 200Opening inventory (3) 40,000Rent (last month’s) (4) 1725Security deposit (5) 1725Telephone deposit 0Utilities deposit 0Other deposits and start-up costs (6) 140Total start-up costs 43,840

Start-up costs assumptions: 1) Cash for small incidental expenses.2) Cash to make change for customers.3) Based on 1,000 square feet of selling space for the store. I also plan on achieving five stock turns per

year, and with projected sales of $230,000, I will need this amount of opening inventory.4) Half of monthly rent5) Half of monthly rent6) Miscellaneous.


13

Start-up expenses

Start-up expenses Year 1Fictitious name costs 0Corporation filing fee (1) 300Corporate tax prepayment 0Activation fee 0Legal & consulting fees 0Accounting fees (2) 400Federal tax IDSales tax permitSalaries & wages -training/setup (3) 2,000Benefits & taxes - training/setup (4) 325Office supplies (5) 500Business supplies (6) 550Printing- cards, stationery, brochures (7) 490Pre-opening advertising (8) 2600Other start-up expenses (9) 24,093Total start-up expenses 31,258

Start-up expenses assumptions: 1) Attorney and filing fee to incorporate.2) Assistance in setting up accounts.3) Two months’ salary for owner and one week for each part-time employee for store setup.4) FICA. 5) Opening order of office supplies.6) Marking and pricing supplies, packaging, bags, etc.7) Estimated costs from printer for stationary, envelopes and business cards. 8) Direct mail piece that will go to select zip codes. These will be targeted to higher income and frequent

pleasure travelers. Also introductory mailer targeted to travel agents.9) Three months of operating expenses.


14

Capital Expenditures

Capital Expenditure Year 1 Year 2 Year 3Equipment (1) 3,230Furniture (2) 4,000Leasehold improvements (3) 7,500VehiclesBuildingsLandTotal capital expenditures 14,730

Capital expenditure assumptions:I expect to make all capital expenditures in the first year with none budgeted for years two and three.

1) Computer, copier/fax/printer, cash register and phone system.2) Fixtures and Furniture including counter, display shelves, racking system and seating area for

customers.3) Walls, flooring, lighting and paint.


15

Needed capitalThe business needs $90,000 to start this new venture. I plan on investing $30,000 of personal funds andthe rest needs to be obtained as a bank loan. I would like to investigate an SBA guaranteed loan for the$60,000 needed. I plan on trying to get as many vendors as possible to extend terms on merchandise,which in turn will help with may cash flow.

Entrepreneur's roleMy role will be the owner and manager.

Business planA business plan will be written to create an organizational structure, conduct in-depth market andconsumer research, and to prepare month-to-month operating budgets.

License potentialThere is no need to be licensed.

Corporate partnersI plan on trying to partner with a busy travel agency that specializes in leisure travel. That agency has notbeen identified at this time. This will be strictly for marketing purposes, not for a business partnership.

Proprietary rightsIn time, The Travel Necessities Shop will work to establish several exclusive territory distributorship rightsfor high-end accessories. Ms. Tripp has begun to establish the necessary contacts. Offering brands thatcan be obtained only at our shop will further distinguish us from the competition.

Infrastructure membersThe infrastructure support that I will have includes an attorney and an accountant. They will charge$150/hour and I will use them to set up the business. An accountant/bookkeeper will be used on amonthly basis. I also plan to have an ongoing relationship with my banker at no extra cost.

The Travel Necessities ShopPlan for Further Action

16

the travel necessities shop

Documents