East Side Interiors Business Plan
1 Emily Beuschel, Sarah Girard, Paige Fuller, and Keri Kovach
Introduction After researching the geographic area, market competition, and financial-related costs, Emily Beuschel, Sarah Girard, Paige Fuller, and Keri Kovach have decided to begin a home furnishings store that offers interior design services, entitled East Side Interiors. It will specialize in contemporary home furnishings, and will provide a variety of interior design services. Both of these areas will be discussed later. In addition, this magazine will provide a summary of the reasoning behind this decision in terms of market and geographic research. Finally, this magazine will list the financial aspects related to establishing East Side Interiors.
Table of Contents Description of the Business
Market Area Research
Description of the Business East Side Interiors provides both home furnishings and interior design services. Clients can come in and either purchase furniture or utilize the design services. However, if they use the design services AND purchase furniture, they receive a 15% discount off their total bill. This relates to East Side Interiors’ mission statement of “servicing the Grand Rapids area with quality, cutting edge furnishings at reasonable prices while providing exceptional customer service”. The furniture sales will be billed at cost plus 25%, while the interior design services will be billed at a rate of $75 per hour. The company’s projected income is expected to be $431,250.
Business Type East Side Interiors has chosen to become an SCorporation. It offers many benefits with a lesser amount of disadvantages. Advantages:
• • •
Shareholder protection in case of a lawsuit Personal assets cannot be taken to pay off a business debt Business does not pay federal taxes • Each shareholder files business income/loss on personal income tax returns Shareholders can file as company employees Easy transfer of business title to another person Requires a formal business commitment • Can establish credibility
One of the most costly business types • Fees for filing Articles of Incorporation and State fees Any errors regarding the tax paperwork could result in removal of title Limited to only one class of stock, which can limit investors IRS closely monitors all payments
However, the owners believe that it is in the best interest of the company to file as an S-Corporation.
The location selected for East Side Interiors is 946 East Fulton Street, Grand Rapids, Michigan 49503. This building, built in 1920, features 3 units with a total of 6,072 square feet with 46 feet of street frontage. This all brick building is located within walking distance from the downtown shopping district which will allow convenience for shoppers and also help with obtaining a lot of walk-in traffic. The building is currently being occupied
by Blue Door Antiques and includes a retail store space on the bottom floor and the top units include a loft/apartment that was recently renovated with a new galley kitchen and bath. The upstairs loft/apartment will be used for office space for the four senior designers and owners. The new kitchen will offer a space for a staff break room. The entire building features hardwood floors, brick walls, tall ceilings and large windows. This building also includes a lot of valuable parking lots,
including one on Fulton Street and three lots behind the building.
Fulton Street, Grand Rapids, MI 49503 Advantages: • • • • •
Proximity to the shopping district Amount of storefront frontage Office space Natural lighting Availability of parking lots
Disadvantages: • •
Located next to a tobacco store Across the street from a car repair shop
Employee Description (4) Senior Designers • • • • •
Sell merchandise Offer design services 40 hours/week $50,000 per year Health Insurance
(1) Receptionist • • • • • • •
Tidy showroom Answer phone File paperwork Update social media pages 40 hours/week $20,000 per year Health insurance
• Cashier services • Prepare financial documents • 40 hours/week • $50,000 per year • Health insurance
(2) Delivery Truck Drivers/Movers
• Deliver furniture • 30 hours/week • 3 days/week • $23,400 per year • Health insurance
Market Area Research With being ranked one of “America’s Top 100 places to live,” Grand Rapids is the perfect combination of small town warmth with big city excitement. In the heart of downtown, there are many shopping venues, restaurants, bars, museums, sporting events, and concerts, surrounded by residential neighborhoods. With the total population median age being 36 and over half of the population between the ages of 18 and 44, the greater Grand Rapids area is home to many younger adults. The Metropolitan Area Economic Overview states that the 2011 Population was 1,322, 233 and the average household income with $61,589. According to Wisinski of West Michigan’s article, West Michigan Advantage, “Grand Rapids-Muskegon-Holland, MI (MSA) 538,939 at 69% projected population increase between 2007 and 2020 (Top 40 MSA Absolute Population Growth & Percentage Population Growth 20072020).” With West Michigan being home to the office furniture industry, East Side Interiors, being a residential furniture design company, assists in giving clients diverse options for interior design.
Competitor Research There are not too many competitors in this area. Of all the furniture retailers in the area, about 1/3 of them are big box/discount stores, another third are more traditional styled furniture retailers, and the last third are direct competitors (Infogroup, 2012). As shown in Figure 1, the companyâ€™s direct competitors have the smallest share of the market. This creates less competition in this area. The strengths of the competitors include the fact that many of these stores are wellestablished. The family-owned stores have connections with members of the community, and the big box stores have steep discounts and a nationally established reputation. However, East Side Interiors can carve out a niche in this market. By focusing on selling contemporary furniture instead of traditional furniture, East Side Interiors can appeal to the young professional population of the Grand Rapids area. By establishing connections with a younger population, East Side Interiors intends to build relationships early on so these people can become repeat customers for life. In addition, East Side Interiors will build a good reputation based on quick delivery times and reasonable prices, so that eventually the Grand Rapids area will turn to East Side Interiors for all their contemporary design needs. As the target consumer base is a younger population, ages 21-40, the promotional strategy needs to match their lifestyle. By incorporating Web 2.0 techniques such as social media e.g. Facebook, Twitter, Tumblr, and Pinterest, the company can connect with this population on relatable platforms. Participating in community events will both increase company exposure and establish a good reputation with the surrounding community. These methods will also keep advertising costs relatively low, as opposed to placing ads exclusively in traditional advertising mediums.
Direct Competitors Big Box/Discount Stores Traditional Style Stores Direct Competiton, No Design Services Figure 1. Breakdown of furniture store competition in the greater Grand Rapids area.
Long-Term Expenses The building that East Side Interiors is purchasing costs $375,000. It is located in 946 East Fulton Southeast Grand Rapids MI, 49503. It includes valuable parking lots, one located in the back of the building and three in the front. East Side will be purchasing one delivery truck for the two delivery truck drivers. The business will purchase a used U-Haul truck from a company in Wyoming, MI. It is a 1997 17 foot box truck and the price of it is $3,495.00. Each designer and accountant will have their own desk which will be the Realspace Mezza “L” – Shaped Glass Computer Desk. The desk is 30” H x 61 ½” W x 61 ½” D. This stylish glass work area provides plenty of room to spread out. Each desk is backed by the manufacturer’s 3-year limited warranty. East Side Interiors will be purchasing this desk from Office Depot at the price of $159.99 each. The four owners decided they wanted customers to get a good impression when they walked in so they decided they would spend more money on the receptionist’s desk. The desk will be purchased from National Business Furniture and is a Marque Single Reception Station with Plexi-Panel at the price of $995.00. This desk is almost six feet wide and is perfect for a small reception area. The four owners, accountant, and receptionist will each have their own computer. The computer is the OptiPlex 99010 All-in-one from Dell. Microsoft Office Home and Business 2010, Intuit Quickbooks Pro 2013, Logitech MK7 Wireless Desktop Keyboard and Mouse, three year basic hardware service, and Energy Star 5.2 Category B were added accessories that the business owners found crucial to the business. The overall price for each computer will be $1,350.52. The four designers will need AutoCAD and SketchpUp for their computers. AutoCAD 2013 will cost $4,195.00 per computer and SketchUp Pro 8 will cost $495.00 per computer.
East Side Interiors will be purchasing one fax machine, copier, and printer from Staples. It is the Brother MFC8510DN Multifunction Copier and it costs $299.99. It is a cost-efficient monochrome laser all-in-one with printing, copying, scanning, and faxing. Product details include: hi-speed, two-sided printing, print from your mobile device, cost efficient performance (energy star rated), convenient walk-up printing and scanning, and advanced security features. The business owners will buy office supplies from Staples like stationary, which costs about $10.00. The designers have decided that a plotter will be an essential item for their business. The plotter to be purchased is a HP DesignJET T7 100 42â€? Large Format Inkjet Printer at $10,121.99. It prints jobs faster while keeping costs low and it requires little-to-no maintenance versus LED printing. It can produce low-cost CAD drawings and high quality color documents, it has built-in connectivity, security, manageability tools, and embedded job accounting that makes it easy to track usage and manage costs. East Side Interiors will be purchasing 100 sample books at $50 per book, so there will be a total cost of $5,000 for them. The four designers will consultant with a lawyer to have a startup meeting for their business and go over their business plan and then just consultant with him or her when necessary. The consultation with the lawyer will cost around $200.00 per hour plus any additional amounts for consultations later on.
Short-Term Expenses After conducting research, East Side Interiors has developed a list of expenses that will be paid out each month in order to keep the company running. The first expense is one of the largest, which is the mortgage on the building. Working with the RE/MAX realtor, Ceili Yablonsky (Remax.com), the company has been able to determine a monthly mortgage based on the total cost of the building, a $5,000 down payment, the 3.50% loan rate, and the decision to do a 20 year loan. The monthly payment for mortgage will be $2,145. The next short term debt the company will have will be a monthly telephone bill. Through AT&T, East Side Interiors is able to create a bundle package and save money. The bundle will include one local and long distance land line phone for the showroom. The bundle will also include high speed internet, which also includes free technical support, remote online data backup, and a website plan. The website plan will be very important to the business because this will be a major part of the marketing strategy. This bundle also will include wireless services for the four senior designers. These wireless lines feature a BusinessTalk plan, DataPro 2GB, and unlimited messaging. With today’s technology in the interior design field, East Side Interiors has decided that it is crucial for the senior designers to have iPhones in order to stay up-to-date with clients, installers, and each other. Choosing a bundle package has also eliminated startup fees associated with these services. For the following services listed above from AT&T the total monthly bill will be $483.97. The next short term debt includes the insurances required for East Side Interiors. First, it has been decided to purchase professional liability insurance for all four senior designers. This will include protection if sued for negligence, including errors and omissions. For the four senior designers the monthly charge for Professional Liability insurance will be $147.00. The next type of insurance the company will purchase is Business Owner Insurance. This insurance plan combines General Liability and Business Equipment Coverage. The General Liability will protect the business from third party claims for bodily injuries, associated medical costs and damage to someone else’s property, which will be up $1,000,000 per person. The total monthly cost for Business Owner Insurance will be $116.68. As required by law, the business will be required to pay out money for Worker’s Compensation. This will cover the business for statutory and legal obligations for employees that is a result of on the job injuries and/or illnesses. This will be required for all eight of the employees at East Side Interiors. The total monthly expense for Worker’s Compensation will be $333.36.
As mentioned earlier, East Side Interiors will be offering delivery services through the use of a U-Haul and two delivery truck drivers/movers. The U-Haul purchased will require auto insurance. This insurance will cost $315 per month. The final insurance that will be part of East Side Interiors short-term debt will be health insurance for each employee. The healthcare plan will be purchased through United Health One and features $35 copay for doctor office visits and a $15 copay for prescription drugs with no deductible. The total monthly cost per employee will be $53.88. So, for the total of eight employees that East Side Interiors has on staff, the total monthly cost for health care insurance plans will be $431.04. The next item for short-term debt will be the advertising expense. As mentioned previously, East Side Interiorsâ€™ on-staff receptionist will be responsible for updating the companyâ€™s social media pages, providing free advertising for the business. The website fee is included in the AT&T bundle package so no additional fee is required for that item of advertisement. The only physical advertising East Side Interiors will be advertisements in Hello West Michigan Brochure and Downtown Grand Rapids Visitor Guide. On average, this will cost the business $100 per month for these advertisements. The only other form of advertisement that East Side Interiors will partake in deals with sponsoring community events. The four business owners have decided to set aside $500 per month to sponsor a community event such as Art Prize, donations, and community service projects. This fund will allow East Side Interiors to get their name out to the public and also support the community of Grand Rapids. The final short-term debt that East Side Interiors will be responsible for paying out each month will be membership and travel fees. ASID Allied Memberships for all four senior designers will be purchased. The annual fee per designer is $430, which in total for all four designers will be $1,720 annually. As for travel, the four senior designers at East Side Interiors will be traveling annually to the High Point Market in North Carolina in order to stay up to date with the latest trends for home furnishings. High Point Market Tickets are free to interior designers so the cost of travel will be the only expense for this trip. The estimated cost according to Expedia.com will be $741.88 per person. This cost will include four roundtrip tickets, two hotel rooms for five nights total and also a 6-day rental economy car. The total cost for all four designers will be $2,967.50.
Executive Summary East Side Interiors has done significant research into what kind of business to start, where to start this business, what building to purchase, how many and what kind of employees, and what type of business organization to start as. The four business owners did significant market and competitor research. The market research shows that East Side Interiors should target the younger demographic, and that Grand Rapids is ranked in â€œThe Top 100 Places to Liveâ€? which shows that it has opportunities for economic success. The Fulton street location is a wise choice because it is exposed to vehicle and foot traffic. It is also surrounded by residential areas, which is a potential customer base. There arenâ€™t very many direct competitors to worry about because the majority of them are big business furniture stores or traditional-styled furniture stores. East Side Interiors will employ eight employees total: Four senior designers, one receptionist, one accountant, and two truck drivers. The total cost of these employees, including fringe benefits and overhead costs, totals $590,800. Therefore, to have a profit of 20%, the company will need to generate $432,250 in designer billable hours per year. Utilizing the DPE, East Side Interiors has determined the billable cost per hour for the senior designers to be $75. In order to earn the remaining $294,960 (remaining salaries, fringe benefits, and overhead expenses, plus a 20% profit margin), the company will have to generate that much in furniture sales. The company determined all long term expenses such as the cost of the building, vehicle expenses, computers and software, etc. Short term expenses for monthly items were also calculated into the cost and some of these include insurance, mortgage of the building, telephone and internet, and advertising. After determining that the market and competition research will lead to a positive growth in sales, East Side Interiors are confident that the company will be able to overcome the start-up expenses and will prosper in the downtown Grand Rapids area.
References BizFilings. (2012). S Corporations Advantages and Disadvantages. Retrieved from http://www.bizfilings.com/learn/s-corporationadvantages-and-disadvantages.aspx Infogroup. (2012). ReferenceUSA Search Results. Retrieved December 11, 2012, from ReferenceUSA: http://www.referenceusa.com/UsBusiness/Print/GetPdf/9a765e3e-759643fc-a280-b7f20fb3bebc Wiskinski of West Michigan. (2012). Grand Rapids, MI. Retrieved December 11, 2012, from Wiskinski of West Michigan Web Site: http://www.naiglobal.com/GlobalPubs/pubdownload.aspx?titleid=NAID 00001708 Wiskinski of West Michigan. (2012). West Michigan Advantage. Retrieved December 11, 2012, from Wiskinski of West Michigan Web Site: http://www.naiwwm.com/Default.aspx?tabid=9798 • • • •