Berc-Tshirt will be a British based apparel manufacturing company. The company founders have drawn inspiration from entrepreneur Glyn Williams, who made a tidy fortune manufacturing T-shirts. Berc-Tshirt will employ the same design and quality standards Mr. Williams maintained for his business. Our company is targeting the mass market as opposed to the luxury market, which is dominated by more established brands. We have envisaged the mass market is low risk bearing the fact that we virtually unknown. We also feel the mass market gives us more flexibility to maneuver around. We expect intense rivalry from the already established traditional brands. Besides, we anticipate competition from T-shirt manufacturers in china and Vietnam. The two countries enjoy low labor costs, and thus the cost of producing a T-shirt is marginally lower.
Our desire in the long term is to grow into a British household brand. We desire to be part of British culture (Prange, 2016). With this in mind, we want to create British jobs and develop a corporate culture that can resonate with the average Briton. We are not just making T-shirts; we intend to make British T-shirts.
Berc-Tshirt is seta based on a business model that has been tried and tested before. The apparel sector provides immense opportunities, and the company can make a name for itself with patient development of the brand.
Berc T-shirt is a startup business that will be based in London. Operations will commence from 1st January 2017, which will mark the beginning of our financial year. At the very initial, the business will be a partnership. ( Harris, 2015). Later on, if the growth path follows the projections, the partners are at liberty to explore floating the company at the stock market as a way of injecting more capital.
Capital and capital expenditures
It is envisaged that the partners will raise half of the capital requirements internally while the balance will be in the form of a loan from the bank. The capital will be used to buy production machines and office equipment. Some £12920 will be spent on this. The partners intend to begin loan repayment in January, which means all equipment and raw materials will be placed.
The company will have one director who will be responsible for the daily operations of the company. He will report to the shareholders who will form part of the board. He will have three clothing designers to assist him with the production. Additionally, he will have an accountant who will handle the bookkeeping. Sales will be handled by one merchandiser who will be in charge of the entire sales department. He will report directly to the director. The director will earn £10, the accountant and the merchandiser will each earn £8. At the production plant, all workers will make £7 an hour. We shall mainly target young people between 21-24 who require internships. By doing so, we shall have a constant supply of students working for us and gaining experience.
Additionally, they will be employed on short term contracts, and these will ensure that we can keep our labour costs flat In the long run (Alexandrino, 2014). The number of individuals employed at the factory plant will depend on production needs. We desire to double production from 2000 T-shirts in January to 4100 T-shirts in December. Production doubling is achieved by increasing the number of staff every two months; therefore, over the year, we shall create six new jobs on the production line.
Our product will be composed of a T-shirt that is 90% cotton, putting us in the league of quality T-shirt manufactures. We have intentionally targeted the mass market as opposed to the luxury market. The reason for doing so was to maximize the large numbers of customers. Additionally, we feel that since the business will be carrying a loan, it will be in our best interests to maximize every opportunity provided.
Sales projections show that sales will grow nearly 2.5 times from £35,000 to £ 84,000 by the end of the year. While doing so, expenses will increase marginally from £38,000 to nearly £48,000. Cumulatively strict fiscal discipline will be required to achieve these modest targets (Piercy, 2016). The cost of raw materials is projected to take a considerable amount of money. The shareholders are comfortable with this because they feel this cost can be offset by making a quality T-shirt. Each T-shirt will be sold for £20.
In January, we don’t expect the sales to be high because of two reasons; we shall still be having late winter. T-shirts sales are very seasonal. However, as we approach spring, sales will grow by 10% each month. As the year approaches a close, sales will be projected to grow by a modest 5% each month. We only intend to produce what we can sell. We don’t want to keep dead stock in the warehouse. At the end of the year, we want to close with only 100 T-shirts that will form the opening balance for 2018.
We intend to keep the fixed price flat, and there will be no increase throughout the year. In our fixed costs, we will have our rent for the factory, 3000 per month, as well as utilities such as water, gas &electricity, 1000£ each month, and our office expenses such as paper, pen, printer colours, etc., 200£ per month. To advertise our products, we shall take advantage of the internet. The internet will give us extensive coverage at a relatively low cost.
For the first year, the company does not envisage to pay the shareholders any dividend. Instead, all the profits will be plowed back into the company (Brand Finance 2014), with the hope of improving the company’s balance sheet the following year.
Our vast social media presence will be our most significant advantage. We intend to interact with our customers actively and almost immediately incorporate their input to our product. Moreover, the two installments option for our T-shirts will be a game-changer.
Our greatest weakness is the uncertainty of Brexit. Economists cannot accurately predict the impact of Brexit on existing business, and thus, startups like ours are heralded on unchartered grounds.
The considerable market presented by savvy fashion millennial is alluring. No single brand can fully satisfy it. Besides, it is always looking for that eye-catching product. We do feel this presents an excellent business opportunity.
Our biggest threat remains cheap imports from China and Vietnam. A similar T-shirt from Asia will retail at half price. Also, cheap knock offs from popular brands have been smuggled from Turkey, and the same fate could befall us.
Table of assumptions
Time used to produce one T-shirt
Cost of one T-shirt heating press machine 320
Number of machines needed 5
Projected bank loan£
1st January – 31st December
Sales growth first six months
Berc-Tshirt is based on a business model that has been tried and tested before. The apparel sector provides immense opportunities, and the company can make a name for itself with patient development of the brand.
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Attached is a worksheet showing the projected financials.