business plan

Submitted by:Aleksandr RyzhakovSaba KhalidOlga MuravykhEmeka ChukwuraYinka Ilori

Submitted to:

Hugh SamsonCourse Code:

MKPD 500

EL-Revolution

BuSineSS Plan

Smart Shopping Cart System

Humber Business School

unique Smart Shopping Cart System (SSCS)2

EL-Revolution

1. Executive Summary 3

2. Investment request 4

3. Business Overview 5

4. Corporate and Business-Level Strategies 7

5. The venture idea 8

6. Market analysis 9

7. Competitive analysis 13

8. Target Market 14

9. Location analysis 15

10. SWOT-analysis 16

11. Marketing Strategy 17

12. Marketing Plan Implementation 18

13. Financial Expenses 20

14. Organizational Plan 23

15. Financial plan 24

16. Contingency and Mitigation Plan 26

17. Growth Plan 27

18. Appendices 28

Contents

unique Smart Shopping Cart System (SSCS) unique Smart Shopping Cart System (SSCS) 3

Business Plan

executive Summary“EL-Revolution,” a new retailer of electronic products, will revolutionize and introduce a new and innovative approach to the shopping process. In order to succeed in that, the potential company will implement the unique Smart Shopping Cart System (SSCS). It is expected that this system will make the shopping process more comfortable and easier, and will also reduce salary expenses. To protect the idea from the competitors, the top management of the company will apply for a patent. It is expected to be opened in August 2015. The perfect location for the first store was considered at a place near the Humber Loop TTC station of streetcars and buses on Queensway (Etobicoke). To run the business, the sum of $2,099,100 CDN will be needed.

The key financial criteria are introduced below:

NPV: 3,330,950.67 (rate of discount: 10%)

IRR: 49.01

Payback period: 1.9 years

Profitability Index: 2.5

Other important financial figures are:

Net income by the end of the third year of company’s activity: $2,684,229.99 CDN

Net income according to the Common-Size income statement (end of third year): 9.36%

ROI: 158.68


EL-Revolution

investment RequestThe requested amount: $2,099,100 CDN

The investor will own 45% common shares of the company in return for his/her investments. The investor has a right to claim this amount every year or reinvest it, in order to sell the business for much higher cost in the long-term perspective.Estimated compound ROI: 158.68ROI per annum (3rd year of company activity): 50.14


Business Plan

Business Overview Name of potential company: El-Revolution, Inc.

Type: Private Corporation

Industry: Retail, e-commerce

Products: Consumer Electronics

Headquarters: Toronto, Canada

Top-management: Aleksandr Ryzhakov (President); Yinka Ilori (Finance VP); Saba Khalid (Marketing VP); Emeka Chukwura (HR VP); Olga Muravykh (Sales VP)

Opening Date: August 2015

Mission StatementMission statement of our company is based on three principles of excellence:1) To deliver an excellent service to our clients and to provide them with fast and convenient purchase of the world’s best electronic devices

2) To deliver an excellent and conducive work environment to our employees by providing them with jobs of their dreams

3) To deliver an excellent standard of performance to our partners by providing them with the best conditions of cooperation

Vision StatementTo become a pioneer of smart shopping experience and to continually provide convenience to the consumers by positioning ourselves as being innovative.

Positioning StatementEl-Revolution is a Canadian electronic appliance retailer for customers with an average and higher than average income who prefer making purchases in a smart and convenient way and interested in high-quality electronic devices. In comparison with other retailers, El Revolution gives an opportunity to buy items with an assistance of intelligent system that makes shopping process easy and innovative.


EL-Revolution

Core values and principlesEl-Revolution aims to be at the proactive stance in the spectrum of social responsibility while enhancing the com-pany with the long-term sustainability in Toronto and in the Canadian market as a whole.The company, value principles of honesty, dignity and respect to its customers, employees and clients. All mana-gerial decisions must be made with concordance of these principles. Each employee should follow the excellent standards to achieve the highest results in ones work. The mission statement must take the significant part in the share of mind and heart of everyone who works in the company.

Slogan: Simplest way to buy

Possible website: www.ELrevolution.ca

Logo


Business Plan

1. Market Penetration Strategy1.1. Net income must be equal to or greater than $3,000,000 CAD by the end of the third year of the company’s activity.

1.2. Rank among the Top 5 biggest electronic retailers in Toronto by the end of the third year of the company’s activity.

1.3 Operate at least two retail shops and one online shop by the end of the third year of the company’s activity.

1.4 Increase the average monthly amount of sales by at least 1.7 times per shop by the end of the third year in comparison to the average number of the first year of company’s activity.

2. Vertical Integration Strategy2.1. Make agreements with at least 5 top electronic brands with the aim of achieving a direct supply of the products (flow-through fulfillment) by the end of the third year of the company’s activity.

3. Geographic Expansion Strategy 3.1. Prepare the company for realizing a strategy for market development by the end of the third year of the company’s activity.

4. Business-Level (Competitive) Strategy Cost Leadership Strategy Implementation of the Smart Shopping Cart System will decrease the salary expenses by at least 20% in comparison with the average industry characteristics.

Corporate and Business-level Strategies


EL-Revoluti on

“EL-Revoluti on,” a new retailer of electronic products, will revoluti onize and introduce a new and innovati ve ap-proach to the shopping process. In order to succeed in that, the potenti al company will implement the unique Smart Shopping Cart System (SSCS). This device is a special tablet that will be att ached to each shopping cart.

Each of these tablets will be based on a special computer program that will operate based on GPS and Internet browser. For example, if a consumer decides to buy a Wi-Fi Extender, all one needs to do is type the name of that parti cular product in the SSCS device in order to get the right directi on in the store.

Moreover, the client will not only be limited to fi nding the locati on of the device, but will also have a chance to search and sort products according to his or her preferences and requirements. The program will also have an op-ti on to call a salesperson in order to get assistance or to close the sale. It is expected that this system will make the shopping process more comfortable and easier, and will also reduce the salary to be expensed. To protect the idea from the competi tors, the top management of the company will apply for a patent for the SSCS system.

El-Revoluti on provides unique shopping experience with the launch of its revoluti onary smart cart shopping device. It miti gates the complexity of shopping electronic products. Smart cart shopping device encourages customers to do competi ti ve analysis of products at real ti me by reading their reviews, features and prices. It has changed the whole shopping experience at electronic stores, at El-revoluti on store, customer’s sati sfacti on is number one priority. They are not infl uenced by sales people to make a purchase of something they do not want. The whole control is in their hand. However sales people are also present at store to help customers anyti me. Shoppers can call sales people just by noti fying them from smart cart shopping device.

El-Revoluti on believes in innovati on and comfort therefore it provides much enjoyable and reliable shopping experience as compare to conventi onal or online shopping, in fact it combines best of both. It reduces the salary to be expensed and allevi-ates hassle in shopping in order to gain high profi t volumes and positi on the company as pioneers in digital and in-store shopping world.

Customers can create their own profi les in smart cart shopping device in order to check their purchases, details of their choices, requests for likeable and also the details of their loyalty reward points, bonuses etc. Customers are treated like family at El-revoluti on by taking care of all their choices. Customers get rewards on each referral they make towards El-revoluti on; hence it not only increases profi ts of the company but also make competi ti on tougher for competi tors

The Venture idea


Business Plan

Competitive Advantages- Absolutely new and innovative concept of the shopping process;- One-of-a-kind smart cart shopping device;- Less involvement of salespeople; therefore, salary expenses will decrease;- Interactive, real-time and relevant product suggestions and comparisons, based on customer’s preferences.

Macro environment analysis

Canadian economy and housing marketAccording to the Euromonitor International, the Canadian economy and housing market indicated moderate growth. The Buy index for 2013, measuring large purchases such as household appliances, was equal to 92; this number has increased up to 100 in 2014 (point of equilibrium). As a result, it is possible to assume that these changes have come from renovations and upgrades.

Consumer electronics market Paying attention to the retail sales of consumer electronics, it is possible to see some significant trends. Even though retail sales of consumer electronics are expected to continually decline in 2014 and 2015, consumers will highly likely increase penetration in the market of value – added and typically higher-priced devices.Moreover, there is a particularly strong demand and high device usage rates among younger generations. As a result, it is expected that the demand for devices such as smartphones and tablets will continue to increase in the market. According to Marketline, “The Canadian consumer electronics market grew by 5.5% in 2012 to reach a value of $8,183.2 million. In 2017, the market is forecast to have a value of $11,687.6 million, an increase of 42.8% since 2012.” It is important to notice the compound annual growth of consumer electronics market in the period 2012-2017 is predicted to be 7.4%.

On the whole, the consumer electronic market value forecast in Canada is introduced in next page(see figure 1).

Paying attention to the particular product category, according to Marketline “audio visual equipment is the largest segment of the consumer electronics market in Canada, accounting for 80.4% of the market’s total value”.

Market analysis


EL-Revolution

Figure 1. Canada Consumers electronics market value forecast: $ million, 2012-2017

E - commerceAnother trend is the boom of ecommerce in the Canadian market. According to the eMarketer, in 2012, Canadians spent $21 billion on online purchases, which is 30% higher in comparison to the statistics from 2010. At the same time, paying attention to electronic retail stores, it is important to note that the retail sales from electronics and appliance stores are highly volatile and the amount of sales depends on the season.

M- commerceAccording to the secondary data analysis, there is an upward trend that smartphones are becoming more acces-sible to the Canadian population. This has become possible because of the introduction of more foreign compa-nies in the wireless telecom industry. As a result, m-commerce market is becoming a new opportunity for conduct-ing business. Currently, m-commerce has a small area in the Canadian market. Based on appendices 4 and 5, the m-commerce growth rate had a sharp increase from 2012 to 2013 with 70% and with this, it is expected that the growth rate will continue to increase.


Business Plan

Figure 2. Forces driving competition in the consumer electronics market in Canada, 2012

Paying attention to the microanalysis, it is important to consider Porter 5s Forces (see Figure 2)

The microenvironment has a huge impact on the business of a company therefore it is imperative to take a look at these factors. The Canadian consumer electronics retail market consists of large chains of retailers, as well as independent electronic outlets. Due to close similarity of the products, in a relatively competitive environment, rendering a superb service is the objective of the main players, and not their products; as this is a very important way to gain a competitive advantage over existing rivals in the industry.

Buyer power A considerably large volume of small buyers is a typical feature of the Canadian electronic consumer market, end-users or consumers. As the effects on a retailer of losing any particular consumer is considerably small, buyer power is said to be weak. It is difficult for retailers in this market to distinguish themselves. Complement this with the price sensitivity of consumers except high-end’ boutique and hi-fi specialists. Buyers’ power has a stronger view especially for ‘big ticket’ items like televisions and also due to lack of significant switching costs. However, one way a retailer can defend itself against this is by focusing on providing exceptional customer service.

Micro environment analysis


EL-Revolution

Supplier powerMajor retailers often purchase their stock directly from manufacturers such as Toshiba and Samsung. These are large multinationals that possess considerable bargaining power. According to market line research some manu-facturers run high street retail chains to sell their own products exclusively. However, it is unlikely that manu-facturers would ever extend themselves so far into direct-to consumer business that the pure retailers became unimportant for their sales. Where a manufacturer has valuable intellectual property, revenue can be generated through licensing agreements rather than defending exclusivity in order to charge high prices. For example, DVD player manufacturers must pay a royalty to the DVD format patent holders for each player they make. From the perspective of retailers, this will tend to weaken buyer power, as it means that a single supplier cannot monopo-lize a particular product category. Overall, supplier power is moderate; barriers to market entry are low.

New entrants Marketline research states that even in developed economies, where the high street tends to be dominated by a few large retail chains, survival of independent retailers of consumer electronics is possible. Entry on this scale is likely without the need for a large amount of capital, complex regulatory compliance, or the acquisition of intel-lectual property.

Threat of substitutesSubstitutes for consumer electronics, defined restrictively here as audio and video devices. For example, conver-gent devices offering audio and video operational features alongside computing and communication functions, such as tablet computers and smart phones are a substitute for dedicated devices. Another form of substitute is alternative distribution channels, specifically online retail as an alternative to bricks-and-mortar stores. Virtually all the major high street retailers of consumer electronics possess e-retail sites, but it may be a challenge for small independents outlets to set up such sites, therefore they are facing a greater threat.

Degree of rivalry The Canadian consumer electronics retail market has several large chain players, as stated in the Marketline research publication although these coexist with small independents. It is easy for customers to change from one retailer to another, thereby resulting in increasing the intensity of rivalry. Where the market is growing, rivalry will be reduced. Also, this market is fairly easy to exit, which also reduces competitive pressures. Overall, the degree of rivalry is moderate.

Overall, it is logical to assume that some threats will always exist. However, according to the factor that the market has indicated a steady growth, there are good opportunities to run the business. Moreover, consumers, especially youngsters, tend to spend more on electronic appliances. They do not want to spend a lot of time in the shop looking for necessary items. As a result, the SSCS can provide them with a fast and comfortable way to save their time and make the best purchase. Based on these facts, the management has come to conclusion that there are favorable conditions to run this particular business within Toronto area.More detailed information is introduced in Appendix 1.


Business Plan

Overall, competitors can be divided into two groups:

Competitive analysis

1) Brick-and-mortar competitors

2) Click-and-mortar competitors

Paying attention to the first group, it is important to note that the Canadian consumer electronics retail market contains a large chain of retailers and independent stores. The Marketline describes the environment as “relatively competitive.”A list of leading companies is introduced below:

a) Best Buy is consumer electronics and appliances retailing company. The company operates in the US, Puerto Rico, Canada, China and Mexico. The revenue in the fiscal year ending February 2012 was equal to $50.7 billion.b) The Source (Bell) Electronics is a retailer of consumer electronics based in Canada. The company has approxi-mately 700 stores in Canada and it also leads an online retail operation. The Source offers to its customers a wide range of consumer electronics products, including television and video products, portable and home audio products, computers, games, cameras, camcorders and phones. It is important to note that Bell Canada does not report the Source’s revenue separately. c) Canada Computers & Electronics has been existed for two decades and specializes in computer retail

N.B. Another leading company, Vision Electronics, has not been introduced in Toronto. Therefore, this competitor is not considered in the analysis.

At the same time, Walmart, Canadian Tire, Target and other large retailers also offer electronic devices in their stores. Moreover, there are also numerous small companies that should be taken into consideration as a potential threat.

In regards to click-and-mortars competitors, it is important to notice the following e-shops:a) E-Bay, Amazon – online shops of great variety of products including electronic devices.b) NCIX.com, Newegg.ca, TigerDirect.caNCIX – one of the leading Canada’s technology resellers. Newegg Inc. Is a leading online retailer, offers more than 10.5 million products, has an award-winning website, offer detailed product information, high-resolution photo gallery and extremely fast delivery. TigerDirect.ca specializes in brand name computers and their components at reasonable prices.The list of competitors is introduced in appendix 2.

Based on this analysis, it has made a decision to create an opportunity for customers to order items online. Deliv-ery is expected to be free (in compliance with distribution strategy) for all devices. The website is going to be easy accessible and comfortable. Each client will be able to make a purchase within few minutes


EL-Revolution

a) Demographic targeting Gender: Male and femaleAge: 1) 20-35 years old Young adults who are ready to spend money on electronic devices and follow fashionable trends 2) 36-65 years oldMiddle aged market includes baby boomer generation, who has the highest purchasing power and buys both small details and big expensive itemsIncome: $48,250 CDN annually and more People with average and higher than average income Location: 1) Urban dwellers of Toronto Area Those who live in Grand Toronto Area and are interested in buying various electronic products 2) Tourists Those who have a need in different items like batteries, chargers for cell phones, different kinds of accumulators, etc.Occupation: Professionals top and middle level managers, executivesEducation: College or University graduates

b) Psychographic targeting1) People who are following up-to-date trends in the electronic industry and eager to try new type of purchasing2) Consumers who prefer making purchases of products by themselves, rather than waiting for the assistance of salespeople3) Consumers who have limited knowledge about the desired product and want to compare several items4) People who do not feel comfortable in leading communications with unfamiliar salespeople (i.e. introverts).

c) Behavioral targeting Occasions:1) Make purchases frequently; buy mostly little and inexpensive items (video games, headphones)2) Make purchases rarely, buy significant and expensive items (laptops, refrigerators, etc.)3) Buy quickly and do not want to spend much time on buying process

Loyalty:1) Brand insisters who are interested in only a particular brand.2) Low level of brand loyalty, therefore need to compare characteristics of items and choose the best alternative.

Target Market


Business Plan

The perfect location for the first store was considered at a place near the Humber Loop TTC station of streetcars and buses on Queensway (Etobicoke). Etobicoke has a highly multicultural population of roughly 350,000 people and majority of them represent the middle class. It is also a home to a rapidly developing economy, led by manufacturing, retailing and the service sector. The unemployment rate is about 5.9% and a high average family income isapproximately $93,277. Moreover, the construction industry in Etobicoke has been booming for some years, with many new condominium towers being constructed.

This particular place is already occupied by a number of shops and cafes like Sobeys, Shoppers Drug mart, Pizza Pizza, LCBO and others. It is worth mentioning that there are currently no electronic stores on this territory. The location itself is very convenient with a high level of customer flow, especially in the evenings and on weekends.

location analysis


EL-Revolution

SWOT analysis

More details about SWOT-analysis are introduced in appendix 10.

Strengths Weaknesses

Opportunities Threats

• New management team• Lack of financial resources• High-level of dependence on investors’ funds

and decisions• New brand name• Technological difficulties

• The growth of Canadian economy and market• The growth of demand for expensive electronic

devices among young generations• Opportunity to expand the business in other

Canadian cities.• The growth of consumer electronic market• Opportunity to attract additional funds

• Tough competition with brick-and-mortar and click-and-mortar retailers.

• The growth of e-commerce.• Danger of consumer’s lack of loyalty• Appearance of direct competition

• The growth of Canadian economy and market• The growth of demand for expensive electronic

devices among young generations• Opportunity to expand the business in other

Canadian cities.• The growth of consumer electronic market• Opportunity to attract additional funds

Weaknesses


Business Plan

a) Product strategyThe company will utilize the strategy of market penetration. In order to be successful, the strategic objective is to run at least 2 retailers by the end of the third year of company’s activity.Each store must be located in the walking distance from the public transport (subway, buses).El-Revolution is going to provide the deep and wide assortment list of items, which will include such things as specific chargers for cell phones, different kinds of accumulators etc.

b) Price StrategyThe company is going to utilize the penetration pricing strategy. In order to be successful, El-Revolution will start its activity with prices that are slightly above the break-even point. However, the sustainable growth of product prices is expected. The chosen approach is the markup pricing method.

c) Marketing Communications StrategyThe main marketing communications objectives are:1) To build awareness and interest to El-Revolution. As criteria, it will be chosen next:• The number of viewers of the commercial in different social networks. For example, the minimum amount of YouTube views is estimated as 100,000. • The average amount of store visitors

2) Differentiate the company from others by presenting unique features and benefitsTo assess the effectiveness of the campaign, different types of surveys are going to be conducted during the second month of company’s activity.

3) Create goodwill and foster a positive public image.The main criteria of success are:• Amount of likes in social networks• Comments at different forums

To attract customers, it is necessary to organize a tremendous marketing campaign which will be primarily based on the following tools:Word of mouth: The company is going to raise awareness with the aim of increasing excitement among target groups and increasing the amount of potential customers who would like to visit the shop on its opening date. Social media promotions: Facebook, YouTube and Twitter will be actively used with the aim of increasing brand awareness and engagement. In order to be successful, opportunities of the content marketing will be actively implemented.Advertising: It will be necessary to organize a large-scale local advertising campaign that will include media, press and billboard advertising.

Marketing Strategy


EL-Revolution

Public relationships: A number of events will be organized with the aim of attracting potential investors, part-ners and other interested parties.

d) Distribution strategyDuring the first period of the company’s activity, the top management of the organization is going to conduct negotiations in order to sign an agreement about store fulfillment. It is expected that by the end of the third year, the company will realize flow-through fulfillment based on successful performance.

a. ProductThe retail will offer number of different electronic devices. The SSCS will help the customer find interested appli-ances and enhance comparison with analogs to make the final decision as regards purchases.

b. PriceThe average markup will vary for different electronic devices (in most cases the markup will be within the range of 10% to 35%). Compliance with the penetration strategy will be expected during the first quarter of the company’s activity.

c. Marketing CommunicationsEl Revolution, Inc. is going to organize a number of activities that will allow the company to achieve it marketing communication objective.

Main promotion and advertising activities:

1) Temporary recruitment of “company’s preachers”. This action must be conducted before the launch of the venture. “The preachers” must be informal leaders between youth generation and other authoritative people. Their aim will be leading conversations about the uniqueness of upcoming company. These actions are expected to increase the level of awareness and build interest to the company. “The preachers” will be active at different social places (cafes, restaurants, colleges, fitness centers etc.) 2) Professional gossip spreading about up-coming company. Gossip will be spread in different public places by specially-trained people (for instance, they will lead conversations with each other about the benefits that El-revolution will bring for them).3) Creating accounts in different social networks (Instagram, Twitter, Facebook, etc.) 4) Creating specialized Internet forums, webinars etc.5) Twitter teaser campaign “Smart Tweet”

Marketing Planimplementation


Business Plan

6) Posters at different colleges and other places; billboards at the main street7) Out of Door media 8) Creating content videos and downloading them on Youtube.com and on the El-revolution’s website.9) Organizing of the banquet in one of local hotels with aim to attract attention of business people. 10) During the opening day, the demonstration show of the new smart shopping cart system.11) Participation in different electronic exhibitions that should have the positive effect on the company’s image.

d. DistributionWhat will basically differentiate EL-revolution from other electronic retail stores is this Smart Shopping Cart Sys-tem (SSCS) to be introduced. Therefore, this will be the main point of attraction for the potential customers.

As a new Business in the retail industry, EL-revolution wants the consumers to feel and experience the uniqueness in the store without compromising the cost. Moreover, for the corporation to effectively manage it costs, the Flow through Fulfillment will be used. This is where products are picked and packed at distribution center (in the same premises with the store), and then sent to the store for pickup.

Retailers are the most common users of this fulfillment, as it provides a means to accelerate products through the supply chain and better respond to point of sales data. It also helps stores reduce inventory levels and enhance their ability to frequently refresh shelves. Therefore, the corporation’s fulfillment will strictly be based on Flow through fulfillment.

e. Marketing ResearchTo conduct market research, prior to starting the business and during the company’s operation is inevitable. Vari-ous types of marketing research would help the top management answer some specific questions such as assort-ment list to effectiveness of different campaigns.

f. Partnership and AlliancesIn order to realize the strategy of vertical integration, it is expected to sign contracts with top 5 leading distribution companies and manufactures that will provide El-Revolution with opportunity to use flow-through fulfillment approach.

g. Marketing Budget AllocationMonthly marketing budget is equal to $40,000 CDN. However, for initial promotion activities, it is expected to spend $80,000 CDN. The expected budget allocation is introduced in appendix 3


EL-Revolution

The sales plan for the 2015 year is introduced in table 1 below. The sales plan for the following 3 years is introduced in Appendix 4

ITEMS Aug Sep Oct Nov DecTVs (Plasma, LCD, LED, 3D)

185000.00 240500.00 252525.00 227272.50 363636.00

Mobile Phones 50000.00 65000.00 68250.00 61425.00 92137.50

Laptops/ Ipads 210000.00 294000.00 308700.00 277830.00 416745.00

Video games 35500.00 39050.00 41002.50 36902.25 55353.38Head phones/Ipod/ Mp3

64000.00 70400.00 73920.00 66528.00 99792.00

Electrical Toy Gadget

85000.00 93500.00 121550.00 109395.00 164092.50

Tracking Devices for cars

95000.00 104500.00 135850.00 122265.00 183397.50

Digital Cameras 90000.00 108000.00 118800.00 106920.00 160380.00Printer/Photocopier/Scanner

95000.00 104500.00 109725.00 98752.50 148128.75

Washing Machine 190000.00 247000.00 259350.00 285285.00 427927.50Microwave/Toasters/Blender

100000.00 110000.00 115500.00 103950.00 155925.00

Other electrical accessories

90000.00 99000.00 103950.00 93555.00 140332.50

TOTAL 1289500.00 1575450.00 1709122.50 1590080.25 2407847.63

Sales Plan (2015) Table 1

Break-even point is estimated as $1,590,600 per month for the first year of the company’s activity (more detailed information is introduced in appendix 5).

It is expected to sign a contract with top distribution and manufacturing companies. As a result, the structure of variable cost will be reduced by 3% during each of the two following years.

Financial expenses


Business Plan

Table 1

Year Variable costs, %

Margin, % Variable costs per an average item, $Cdn

Margin per an average item, $Cdn

Break- even point, units

Break-event point, $Cdn

1 80 20 240 60 5,302 1,590,6002 77 23 231 69 4,611 1,383,3003 74 26 222 78 4,079 1,223,700

For better understanding, it is introduced in the table below:

The pro forma of capital expenditure is introduced in the table 3. The information about monthly expenses can be found in table 4. Pro forma sales plan that is based on assumptions and average amounts for the stores like E-revolution is introduced in table 1 above.

Primary capital expenditureMortgage or Lease Deposit $277,500Inventory $1,031,600

Insurance $30,000

Store Fixtures, Signs & Equipment $80,000Office Supplies & Store Use Items $120,000

Professional Fees (Legal &Accounting) $80,000

Licenses, Permits & Registration Costs $25000Utilities Deposits/Connection $40,000Development and Implementation of SSCS $200,000Patent rights (including patent search, application, etc.) $30,000

HR costs $80,000

Other Fixed Start-up Costs (Website, Etc.) $25,000Marketing Promo $80,000Total $2,099,100

Table 3

Table 2


EL-Revolution

Monthly Fixed Expenses Rent/Mortgage Payment* $23,125 Wages and salaries** $180,000

Bonuses*** $18,000Marketing $40,000 Insurance $2000 Equipment Lease $25,000 Utilities $5000 Other Expenses (Web Hosting, maintenance of equipment and other miscellaneous expenses Etc.)

$25,000

Total $318,125

Table 4

*$18.50/Sq. Ft AnnuallyThe size of building is 15,000 Sq.Ft.15,000×18.5 = 277,500.00 annually or $23,125 monthly** The amount of employees is equal 38 people*** The average bonus amount is 10% from the salary


Business Plan

Figure 1.* One of foundersExpected wages and salaries are introduced in appendix 6. The examples of top management resumes are intro-duced in appendix 7.

Legal RequirementsThe corporation is duly registered with the appropriate Canadian authority; it was brought into existence by the general corporations act; therefore it has a legal existence. The Corporation is managed by the president Alek-sandr Ryzhakov who appoints the VP’s: Olga Muravykh, Yinka Ilori, Emeka Chukwura and Saba Khalid. The VP’s are responsible for the daily operations of the corporation and smooth running of the business.

Control and LiabilityThe president (Aleksandr) is responsible for ensuring the decisions he makes are aligned with the aims and objectives of the corporation, it is also his duty to keep the shareholders informed on an annual basis. He owes a fiduciary duty to the corporation. He is forbidden to conduct business for a profit motive at the expense of the corporation. In the case of bankruptcy the president will be personally liable for any amount of unpaid wages of the employees which were not covered by the sale of the corporation’s assets.

Organizational Plan


EL-Revolution

El-RevolutionBalance sheetAs at the first day of business

Assets Liabilities

Current Assets Current liabilitiesCash $1,000

Inventory 1,031,600Office Supplies & Store Use Items

120,000

Other current assets 365,000 Total $0Total Current Assets $1,516,600Fixed assetsStore Fixtures, Signs & Equipment

$80,000 Owner’s Equity

Smart Shopping Cart System 200,000 Common Stock $2,099,100Other Assets 25,000 Initial investments 1,000Building 277,500Total Fixed Assets $582,500 Total $2,100,000Total assets $2,100,100 Total liabilities $2,100,100

Table 5

Table 6

Characteristics

2015-2016 2016-2017 2017-2018

Q1 Q2 Q3 Q4 Semi 1 Semi 2 Year 3

Sales 4574072.50 5441147.29 6388382.15 6589967.16 13570844.30 14749746.05 33668228.86

COG 3659258.00 4352917.83 5110705.72 5271973.72 10449550.11 11357304.46 24914489.36Gross Profit 914814.50 1088229.46 1277676.43 1317993.43 3121294.19 3392441.59 8753739.50Other expenses 954375.00 954375.00 954375.00 954375.00 2099625.00 2099625.00 4619175.00Depreciation and amortization*

23500.00 23500.00 23500.00 23500.00 47000.00 47000.00 94000.00

EBT -63060.50 110354.46 299801.43 340118.43 974669.19 1245816.59 4040564.50Tax (22%)** 0.00 0.00 65956.31 74826.05 214427.22 274079.65 888924.19Net income (loss)

-63060.50 110354.46 233845.12 265292.38 760241.97 971736.94 3151640.31

Dividends (45%) 0.00 0.00 105230.30 119381.57 342108.89 437281.62 1418238.14Retained earnings

-63060.50 110354.46 128614.81 145910.81 418133.08 534455.32 1733402.17

* Include store fixture office suppliers, store items, SSCM intellectual program (estimated according the table 1)** More detailed information about the tax is introduced in appendix 8

Financial plan


Business Plan

Cash Flow (per one store) Table 7

Table 8

# Characteristics 2015-2016 2016-2017 2017-2018Quarter 1 q2 q3 q4 Semi-year 1 semi2 year 3

1 Cash flow at the beginning

0.00 0.00 -39560.50 94293.96 246408.77 415819.58 880952.66 1462407.98

2 Capital expenditure

2099100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

3 Net income 0.00 -63060.50 110354.46 233845.12 265292.38 760241.97 971736.94 3151640.314 Depreciation 0.00 23500.00 23500.00 23500.00 23500.00 47000.00 47000.00 94000.005 Investments 2099100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

6 Dividends paid 0.00 0.00 0.00 105230.30 119381.57 342108.89 437281.62 1418238.14

7 Cash flow at the end

0.00 -39560.50 94293.96 246408.77 415819.58 880952.66 1462407.98 3289810.15

* To maintain the company, the negative cash flow will be covered by founders’ personal expenses (55,517.04 is approximately 11,103. 41 per person)

NPV: 3,330,950.67 (rate of discount: 10%)IRR: 49.01Payback period: 1.9 yearsProfitability Index: 2.5In a case of realization the growth strategy and opening of the second store by the end of the third year of com-pany’s activity cash flow for the third year will have the next look

Year 3

1 Cash flow at the beginning 1462407.982 Capital expenditure* 2,200,0003 Net income 3151640.314 Depreciation 94000.005 Investments 0.006 Dividends paid (45%) 1418238.147=1-2+3+4+5-6 Cash flow at the end 1,089,810

* Estimations are based on assumptions. If it costs $2,099,100 CDN to run a store in 2014-2015, with 2.3% inflation rate in May 2014, then it will cost approximately 5% more in 2017-2018.


EL-Revolution

According to the SWOT analysis that was introduced in section 10 there are four major threats:

1) Tough competition with brick-and-mortar and click-and-mortar retailers2) The growth of e-commerce3) Danger of consumer’s lack of loyalty4) Risk of appearing of direct competitor

Each member of the team based on assumptions assessed the risk level and the possibility of each characteristic.

Characteristic Level of risk* Level of probability** Total

1 2 3=1×2Tough competition 8.2 0.8 6.56

The growth of e-commerce 5.6 0.54 3.024Danger of consumer’s lack of loyalty

7.4 0.48 3.552

Risk of appearing of direct competitor

8.4 0.68 5.712

Risk Assessment Table 9

* 1 is the lowest risk and 10 -the highest**0 is the lowest level; 1 – the highest

Based on the team’s assumptions, the major risk is tough competition. More detailed information about competi-tors can be found in the microanalysis and competitor analysis sections.To mitigate the risks, a huge marketing campaign will be organized. It is crucial to build customers’ awareness and interest for a new retail. For example, the Twitter campaign “Smart Tweets” will be run with an aim to increase the amount of customers who will visit the store during the first week of company’s activity. The main idea of cam-paign is spreading words about upcoming innovative retailer in a teaser format.

Another serious risk is the appearance of direct competition. To solve this problem, it is necessary to receive a patent that will protect the store from infringement. More detailed information is introduced in table 1 (Pro forma primary capital expenditures)

Company’s values, mission, vision and positioning statements will let employees create long-term, sustainable customers relationships and prevent the risk of customer’s lack of loyalty.

The growth of e-commerce can be considered as a threat. However, if top management of the company will cor-rectly use the strengths of El-Revolution, this threat will convert into an excellent opportunity. Moreover, customers will be able to make orders via the company’s website (expected name: www.ELrevolution.ca).

Contingency and Mitigation Plan


Business Plan

According to the classification that was given in the book “Marketing warfare” by Al Ries and Jack Trout, El-Rev-olution will lead “guerrilla warfare”. This means the company will have to use its financial resources as careful as possible. However, to achieve this success it is crucial to realize the growth strategy. As it is given in the corporate strategy section, one of the strategic objectives is to run at least two retail stores by the end of the third year of company’s activity. This strategy should be realized only if the following factors are favourable:

• Positive cash flow statement • High level of consumer loyalty • Favorable microeconomic situation in regions• Presence of investors who are interested in the development of the business

If all above factors are met, the top management of company should also start working on the market develop-ment strategy.

Growth plan


EL-Revolution

m-commerce in Canada (000,000)

Source EuromonitorFigure 2. M-commerce market in Canada

Appendix 1

Appendix 1 Continuation

Figure 3. Canada consumer electronics market distribution: % share, by value, 2012


Business Plan

Appendix 2List of competitorsOnline electronic retailers: NCIX.com, Newegg.ca, Tiger Direct.caOnline retailers (not only electronic): Amazon, eBay Electronic appliances retailers:BestBuy Canada Future ShopCanon Canada Sears.ca - Electronics Samsung Electronics Canada The Source Apple Store CanadaDell CanadaActive Surplus ElectronicsTeleCity ElectronicsSony StoreCanada Computers

Retailers (not only electronics):WalmartCanadian TireTarget


EL-Revolution

Marketing activity Expenditure, CDN Expenditure, %

Social Media 10,000 25.00%Out of Home Media 20,000 50.00%PR actions 5,000 12.50%Other actions 5,000 12.50%Total 40,000 100.00%

Marketing budget allocations (during the marketing activity) Table 11

Table 10Marketing activity Expenditure, CDN Expenditure, %

Tweeter teaser campaign “Smart Tweet”

15,000 18.75%

YouTube and Facebook promotions 15,000 18.75%Out of Home media 30,000 37.50%Banquet 10,000 12.50%Other actions 10,000 12.50%Total 80,000 100.00%

Appendix 3Marketing budget allocations (Initial promo activities)


Business Plan

Table 12 (A)Appendix 4Pro Forma Sales Plan (2015-2016)Appendix 3

ITEMS Aug Sep Oct Nov Dec Jan FebTVs (Plasma, LCD, LED, 3D)

185000.00 240500.00 252525.00 227272.50 363636.00 254545.20 356363.28

Mobile Phones

50000.00 65000.00 68250.00 61425.00 92137.50 46068.75 59889.38

Laptops/ Ipads

210000.00 294000.00 308700.00 277830.00 416745.00 291721.50 408410.10

Video games 35500.00 39050.00 41002.50 36902.25 55353.38 27676.69 35979.69Head phones/Ipod/ Mp3

64000.00 70400.00 73920.00 66528.00 99792.00 69854.40 97796.16


85000.00 93500.00 121550.00 109395.00 164092.50 82046.25 106660.13


95000.00 104500.00 135850.00 122265.00 183397.50 91698.75 128378.25

Digital Cameras

90000.00 108000.00 118800.00 106920.00 160380.00 112266.00 145945.80

Printer/Photocopier/Scanner

95000.00 104500.00 109725.00 98752.50 148128.75 74064.38 96283.69

Washing Machine

190000.00 247000.00 259350.00 285285.00 427927.50 213963.75 278152.88

Microwave/Toasters/Blender

100000.00 110000.00 115500.00 103950.00 155925.00 109147.50 141891.75

Other electri-cal accesso-ries

90000.00 99000.00 103950.00 93555.00 140332.50 70166.25 98232.75

TOTAL 1289500.00 1575450.00 1709122.50 1590080.25 2407847.63 1443219.41 1953983.85

Continued in next page


EL-Revolution

ITEMS Mar Apr May Jun Jul TOTAL AverageTVs (Plasma, LCD, LED, 3D)

391999.61 411599.59 411599.59 370439.63 370439.63 3835920.02 319660.00

Mobile Phones

65878.31 69172.23 69172.23 72630.84 72630.84 792255.07 66021.26

Laptops/ Ipads

449251.11 471713.67 471713.67 377370.93 377370.93 4354826.91 362902.24


107575.78 112954.56 112954.56 118602.29 118602.29 1112980.05 92748.34


117326.14 123192.44 123192.44 129352.07 129352.07 1384659.03 115388.25


141216.08 148276.88 148276.88 103793.82 103793.82 1506446.96 125537.25

Digital Cam-eras

160540.38 176594.42 176594.42 185424.14 185424.14 1726889.29 143907.44


105912.06 111207.66 111207.66 116768.04 116768.04 1288317.77 107359.81

Washing Machine

305968.16 321266.57 321266.57 337329.90 337329.90 3524840.23 293736.69


156080.93 163884.97 163884.97 172079.22 172079.22 1664423.56 138701.96


117879.30 123773.27 123773.27 129961.93 129961.93 1320586.19 110048.85

TOTAL 2159205.51 2275192.80 2275192.80 2157387.18 2157387.18 22993569.10 1916130.76

Appendix 4 ContinuationTable 12 (B)Pro Forma Sales Plan (2015-2016)


Business Plan

Items Aug Sep Oct Nov Dec Jan FebTVs (Plasma, LCD, LED, 3D)

370439.63 370439.63 333395.67 366735.23 550102.85 330061.71 429080.22

Mobile Phones

72630.84 72630.84 65367.76 71904.53 107856.80 64714.08 84128.30

Laptops/ Ipads

377370.93 377370.93 339633.84 373597.22 560395.83 336237.50 437108.75


118602.29 118602.29 106742.06 117416.27 176124.41 105674.64 137377.04


129352.07 129352.07 116416.86 128058.55 192087.82 115252.69 149828.50


103793.82 103793.82 93414.43 102755.88 154133.82 92480.29 120224.38

Digital Cam-eras

185424.14 185424.14 166881.73 183569.90 275354.85 165212.91 214776.78


116768.04 116768.04 105091.24 115600.36 173400.54 104040.33 135252.42

Washing Machine

337329.90 337329.90 303596.91 333956.60 500934.90 300560.94 390729.22


172079.22 172079.22 154871.30 185845.56 278768.34 167261.00 217439.30


129961.93 129961.93 116965.74 128662.31 192993.46 115796.08 150534.90

TOTAL 2157387.18 2157387.18 1941648.46 2151300.44 3226950.65 1936170.39 2517021.51

Pro Forma Sales Plan (2016- 2017)Table 13 (A)


Continued in next page


EL-Revolution

Items Mar Apr May Jun Jul TOTAL Average

TVs (Plasma, LCD, LED, 3D)

429080.22 429080.22 471988.25 377590.60 377590.60 4835584.83 402965.40

Mobile Phones

84128.30 84128.30 92541.13 74032.91 74032.91 948096.69 79008.06

Laptops/ Ipads

437108.75 437108.75 480819.63 384655.70 384655.70 5783681.51 410505.30


137377.04 137377.04 151114.74 120891.79 120891.79 1548191.40 129015.95


149828.50 149828.50 164811.35 131849.08 131849.08 1688515.05 140709.59


120224.38 120224.38 132246.81 105797.45 105797.45 1354886.89 112907.24

Digital Cam-eras

214776.78 214776.78 236254.46 189003.57 189003.57 2420459.59 201704.97


135252.42 135252.42 148777.67 119022.13 119022.13 1524247.75 127020.65

Washing Machine

390729.22 390729.22 429802.14 343841.72 343841.72 4403382.39 366948.53


217439.30 217439.30 239183.23 191346.59 191346.59 6808481.33 200424.91


150534.90 150534.90 165588.39 132470.71 132470.71 1696475.97 141373.00

TOTAL 2517021.51 2517021.51 2768723.66 2214978.93 2214978.93 28320590.35 2360049.20

Pro Forma Sales Plan (2016- 2017)Table 13(B)



Business Plan

Pro Forma Sales Plan (2017- 2018) Table 14(A)

Continued on next page

Products Aug Sep Oct Nov Dec Jan Feb MarTVs (Plas-ma, LCD, LED, 3D)

453108.72 453108.72 362486.97 434984.37 695974.99 347987.49 452383.74 452383.74

Mobile Phones

88839.49 88839.49 71071.59 85285.91 136457.45 68228.73 88697.34 97567.08

Laptops/ Ipads

461586.84 461586.84 369269.47 443123.37 708997.39 354498.69 460848.30 506933.13

Video games

53372.03 53372.03 42697.62 51237.15 81979.44 40989.72 53286.63 58615.30

Head phones/Ipod/ Mp3

145070.15 145070.15 116056.12 139267.34 222827.75 111413.88 144838.04 159321.84


158218.89 158218.89 126575.12 151890.14 243024.22 121512.11 157965.74 110576.02


126956.94 126956.94 101565.55 121878.66 195005.86 97502.93 126753.81 139429.19

Digital Cameras

226804.28 226804.28 181443.42 217732.11 348371.37 174185.69 226441.39 249085.53

Printer/Photocopi-er/Scanner

142826.56 142826.56 114261.25 137113.50 219381.59 109690.80 142598.04 156857.84

Washing Machine

412610.06 412610.06 330088.05 396105.66 633769.05 316884.53 411949.88 453144.87


229615.90 229615.90 183692.72 220431.27 352690.03 176345.01 229248.52 252173.37

Other electrical accessories

158964.86 158964.86 127171.88 152606.26 244170.02 122085.01 158710.51 174581.56

TOTAL 2657974.71 2657974.71 2126379.77 2551655.73 4082649.16 2041324.58 2653721.96 2810669.48


EL-Revolution

Products Mar Apr May Jun Jul TOTAL AverageTVs (Plasma, LCD, LED, 3D)

452383.74 452383.74 497622.12 497622.12 497622.12 5597668.82 466472.40

Mobile Phones

97567.08 97567.08 107323.79 107323.79 107323.79 1144525.50 95377.12

Laptops/ Ipads

506933.13 506933.13 557626.45 557626.45 557626.45 6742194.32 495554.71


159321.84 159321.84 175254.03 175254.03 175254.03 1868949.19 155745.77


110576.02 110576.02 121633.62 121633.62 121633.62 1703458.03 141954.84


139429.19 139429.19 153372.11 153372.11 153372.11 1635595.41 136299.62

Digital Cam-eras

249085.53 249085.53 273994.09 273994.09 273994.09 2921935.87 243494.66


156857.84 156857.84 172543.62 172543.62 172543.62 1840044.84 153337.07

Washing Machine

453144.87 453144.87 498459.36 498459.36 498459.36 5315685.09 442973.76


252173.37 252173.37 277390.71 277390.71 277390.71 2958158.21 246513.18


174581.56 174581.56 192039.72 192039.72 192039.72 2047955.69 170662.97

TOTAL 2810669.48 2810669.48 3091736.43 3091736.43 3091736.43 33668228.86 2805685.74

Pro Forma Sales Plan (2017- 2018)Table 14(B)



Business Plan

Based on assumptions and secondary data analysis, the price for the average items is equal 300. The variable costs that also include distribution are equal 80% of the final price Therefore, other 20% are consid-ered as margin. The variable costs will be equal 300×0.8 = 240Monthly fixed expenses are equal 318,125 (see table 2).

Break-even point = (Fixed costs)/(Price-Variable costs per unit)

Break-even point = 318,125/(300-240) =5,302 units

Break-even point = 5,302× 300 = 1,590,600 ($, per month) – first year of company activity.

Appendix 5Break-even point


EL-Revolution

Position Number of employees Hourly salary, CDN Monthly salary (per person)

Total monthlyexpenses

President 1 75 12,000 12,000Retail VP 1 75 12,000 12,000HR VP 1 75 12,000 12,000

Marketing VP 1 75 12,000 12,000Finance VP 1 75 12,000 12,000IT VP 1 75 12,000 12,000Retail manager 1 52.5 8,400 8,400Inventory manager 1 30 4,800 4,800Procurement manager 1 35 5,600 5,600Security director 1 40 6,400 6,400Marketing assistant 1 1 2,880 2,880Accountant 1 25 4,000 4,000IT managers 2 37.25 5,960 11,920Sales representatives 6 16 2,560 15,360Cashier 6 18 2,880 17,280Supporting staff 8 12 1,920 15,360Security 4 25 4,000 16,000Total 38 - - 180,000

The list of salaries is introduced below. Salaries and wages Table 15

Appendix 6


Business Plan

Appendix 6 Top management resumes Appendix 7

President: Aleksandr Ryzhakov

Finance VP: Yinka Ilori

Marketing VP: Saba Khalid

HR VP: Emeka Chukwura

Sales VP: Olga Muravykh

IT VP:

Aleksandr plays a key role in developing and implementing business strategy for EL revolution. He has already built an outstanding team that embraces innovation, focuses on results and effectiveness and share the Corevalues and principles of the organization. He will lead and motivate the team, control the performance and creative and efficient use of resources. Moreover, he will develop and maintain strong, trusting relationship with partners and attract potential investors.

The responsibilities of Finance VP will be financial planning, budgeting, financial forecasting and analysis ofexternal and internal factors which influence the profitability of the business. Moreover, he will develop the pricing strategies that will be in alignment with the corporate goals of EL Revolution.

Saba’s responsibilities include the development of the brand vision and strategy, build and support brand awareness in Toronto, establish a Marketing plan aligned with overall corporate strategy and goals. Saba will execute all marketing activities including advertising, communications, public relations, market research, events, promotional materials and offerings

Emeka will have a strategic and hands on role in the company’s day-to-day human resources function. He will continue to build the credibility of the team within the organization and create a strong corporate culture of engagement and results.

Olga will develop and implement a sales and growth strategy to drive revenue for EL Revolution. She will cre-ate and maintain a high level of customer service and will lead necessary negotiations with customers regarding products. In addition, she will be accountable for providing direction, leadership, coaching and motivation to the sales team.

This person will play a crucial role in the company by implementing, maintaining and controlling the Smart Shop-ping Cart System (SSCS).He will also be responsible for the management and coordination of all the IT-related systems and provide technical guidance and support to the employees.


EL-Revolution

Generally, corporations carrying on business through a permanent establishment in Ontario are subject to both federal and Ontario corporate income taxes. The tax rates apply to taxable income allocated to Ontario.

Basic rateThe Ontario basic income tax rate is 11.5%.

Lower rateThe Ontario small business deduction reduces Ontario basic income tax, resulting in a lower tax rate of 4.5%.For instance, according to the tax rates in effect as of January 1st, a corporation that qualified for the Small Busi-ness Deduction would pay income tax at the rate of 4.5% in Ontario, while corporations of other types in the same province would pay tax at a rate of 11.5%. The Small Business Deduction is one of the most beneficial of all income tax deductions available to Canadian cor-porations because it reduces the amount of Part 1 tax that a corporation would have to pay otherwise. However, “Canadian corporation” doesn’t mean any corporation operating in Canada. To qualify for the Small Business Deduction, a corporation has to be a Canadian-controlled private corporation (CCPC). To be classed as a Canadian-controlled private corporation, all of the following conditions have to be met accord-ing to Chapter 1 of the T4012 - T2 Corporation Income Tax Guide: • it is a private corporation;• it is a corporation that was resident in Canada and was either incorporated in Canada or resident in Canada from June 18, 1971, to the end of the tax year;• it is not controlled directly or indirectly by one or more non-resident persons;• it is not controlled directly or indirectly by one or more public corporations (other than a prescribed venture capital corporation, as defined in Regulation 6700);• it is not controlled by a Canadian resident corporation that lists its shares on a designated stock exchange outside of Canada;• it is not controlled directly or indirectly by any combination of persons described in the three previous conditions;• if all of its shares that are owned by a non-resident person, by a public corporation (other than a prescribed venture capital corporation), or by a corporation with a class of shares listed on a designated stock exchange, were owned by one person, that person would not own sufficient shares to control the corporation; and• No class of its shares of capital stock is listed on a designated stock exchange.

CCPCs that have taxable capital employed in Canada of $15 million or more do not qualify for the Small Business Deduction at all. CCPCs that have taxable capital of between $10 million and $15 million in the previous tax year are eligible for the Small Business Deduction but their business limit is reduced on a straight-line basis.

The information is introduced based on the following references:1) http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/prv/on/smllbsnssddctn-eng.html2) http://www.cra-arc.gc.ca/ctao/

3) http://turbotax.intuit.ca/tax-resources/sbt-small-business-deduction-qualify.jsp

Estimation of the tax amount Appendix 8


Business Plan

Common-Size Income StatementAppendix 8 Appendix 9

Characteris-tic/period

2015-2016 2016-2017 2018

Quarter 1 q2 q3 q4 Semi-year 1 Semi 2 year 3Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%COG 80.00% 80.00% 80.00% 80.00% 77.00% 77.00% 74.00%

Gross Profit 20.00% 20.00% 20.00% 20.00% 23.00% 23.00% 26.00%Other ex-penses

20.86% 17.54% 14.94% 14.48% 15.47% 14.23% 13.72%

Depreciation and amorti-zation

0.51% 0.43% 0.37% 0.36% 0.35% 0.32% 0.28%

EBT -1.38% 2.03% 4.69% 5.16% 7.18% 8.45% 12.00%Tax (22%) 0.00% 0.00% 1.03% 1.14% 1.58% 1.86% 2.64%Net income (loss)

-1.38% 2.03% 3.66% 4.03% 5.60% 6.59% 9.36%

Dividends (45%)

0.00% 0.00% 1.65% 1.81% 2.52% 2.96% 4.21%

Retained earnings

-1.38% 2.03% 2.01% 2.21% 3.08% 3.62% 5.15%

Table 16


EL-Revolution

Unique innovative technology.The particular technology makes shopping process easier and more comfortable compare with other electronic retailers. Consumers will be able to find the necessary item, at the same time it will be possible to check and com-pare characteristics of different devices.

Low HR-costsThe implementing of SSCS allows significantly reduce sales staff that positively influence on the profit margin.

Individual approach to clientsClients will be able to find necessary products in compliance with their own requirements and preferences.

The large stock depthThe implementation of SSCS makes it easier to increase the depth of stock items. The consumers will be able to find each even very little complex detail within a very short period of time.

Fast purchase processThe customers can buy a product with traditional pay desk or simply through the smart cart. Choosing the second option, they can buy it at any time without waiting in a queue.

New management teamAs far as it is a completely new company, the top management staffs are yet to recommend themselves in this particular venture. It requires time for the team to show positive results.

Lack of financial resourcesThe company is strictly limited with financial resources. Moreover, first year is expected to be below break-even point. It requires time to recompense invested money.

High-level of dependence on investors’ funds and decisionsThe entire business practically fully depends on the investors who contributed in the development of the com-pany. As a result, there are problems with flexibility of budget and decision-making process.

New brand nameThis company has not existed yet therefore consumers are not aware about this brand. It will be important to spend a lot of money and time to achieve the normal level of brand awareness and recognition.

Technological difficultiesThe company can face problems in a case of SSCS system failure. As a result, it will have negative impact on the entire business.

SWOT-analysis Appendix 10

Strengths

WeaknessesWeaknesses


Business Plan

The growth of Canadian economy and marketAccording to the market analysis, the Canadian economy has a trend to growth. Furthermore, Buy index has risen either. It means that more and more consumers can afford buying different electronic appliances.

The growth demand for expensive electronic devices among young generationBased on Marketline, the youth generation tends to follow the current fashion trends and, consequently, they spend a lot on high-priced electronic devices.

Opportunity to expand the business in other Canadian citiesIn a case of the growth of demand to the electronic items, there is an opportunity to expand the business in other regions that are not enough fulfilled with electronic stores.

The growth of consumer electronic marketIn 2017, the Canadian consumer electronic market is forecast to have a value of $11,687.6 million, an increase of 42.8% since 2012

Opportunity to attract additional fundsAfter opening the company, other potential investors will be able to see the uniqueness of the idea in the first-hand experience. As a result, there is an opportunity to attract additional funds.

Tough competition with brick-and-mortar and click-and-mortar retailersThere are a number of proved competitors that capture a large share of market and have a high level of customer loyalty.

The growth of e-commerceEven though the company will lead the business in e-commerce either, the main business activity is retail. As a result, the growing trend of e-commerce can be a significant threat of the venture activity.

Danger of consumer’s lack of loyaltyThere is a threat that consumers will not accept this innovation. As a result, the company will lose its main com-petitive advantage.

Risk of appearing of direct competitorThere is a risk that competitors will copy this system and start using it in their shops. Therefore, the company will lose its uniqueness.

Appendix 10 Opportunities

Threats


EL-Revolution

• 2013. “Join the e-commerce revolution.” Nova Scotia Business Journal, October. 21. Business Source Complete, EBSCOhost (accessed July 5, 2014)

• 2012. “Consumer Electronics Industry Profile: Canada.” Consumer Electronics Industry Profile: Canada 1-28. Business Source Complete, EBSCOhost (accessed July 5, 2014)

• n.d. “Consumer Electronics in Canada” Euromonitor International Passport, (2013) (accessed July 6, 2014)

• n.d.. Government of Canada. Ontario – Provincial corporation tax http://www.cra-arc.gc.ca/ctao/. Retrieved from http://www.cra-arc.gc.ca/ctao/ (accessed July 2, 2014)

• n.d. Turbo Tax. The Small Business Deduction: Does Your Corporation Qualify? Retrieved from http://turbotax.intuit.ca/tax-resources/sbt-small-business-deduction-qualify.jsp (accessed July 2, 2014)

• n.d. About Etobicoke, Ontario, Canada. When you want to know Etobicoke, Ontario. Retrieved from http://www.etobicokedirect.info/about_etobicoke (accessed July 10,2014)

References


Business Plan

EL-Revolution

Smart Shopping Cart Systemwww.elrevolution.ca