Record Store Business Plan
HIDDEN TREASURE RECORDS L.C.
7145 Schilling Park Ave.
Northbrook, IL 60062
Identifying target customers is important for any business, and in this plan the entrepreneur actually creates a realistic hypothetical character sketch. The potential patron is clearly illustrated, providing evidence of the businessman's knowledge of his selected buyers. Entering into a niche market, the plan does an excellent job of illustrating the existence of demand and stating the desires of buyers, as well as how the business will fill the independent record label sales void in the area.
- PLAN SUMMARY
- PROBLEM STATEMENT
- BUSINESS DESCRIPTION
- MARKETING PLAN
- PROFIT AND LOSS FORECAST
- CAPITAL SPENDING PLAN
- FUTURE TRENDS
- RISK ANALYSIS
- PERSONAL GOAL STATEMENT
This plan discusses opening a record store catering to the import and independent music buyer. It supports a loan request for $50,000.
Continuing changes in the dynamics of downtown Northbrook have resulted in a large growth within recent years in the number of people of all ages who enjoy shopping here. Primarily though, there is a high percentage of young people who come to Northbrook that like to purchase music, movies, clothes, coffee, antiques, and gifts. There is currently no store in Northbrook that adequately caters to this group's needs for a record store with a fairly priced, wide selection of imported and independent music. I propose to open Hidden Treasure Records to fill this gap. My goal is simple: to sell a wide selection of competitively priced music products to the alternative music connoisseur, and to provide a comfortable atmosphere for customers to listen to certain artists before purchasing their work.
My qualifications include over four years experience as a music buyer and assistant manager at both Replay Records (previously in Northbrook) and Wagonhouse Records in Bloomington, Illinois. During my tenure at Wagonhouse Records, as the buyer for alternative import and independent music, I more than doubled sales from this department in less than two years. I achieved this by getting to know the market very well, catering to my customers' needs and pricing accordingly.
The funds I wish to borrow will be allocated to procure my initial inventory as well as equipment, fixtures, lease arrangements, advertising, and working capital as indicated in this proposal. I hope to open my store by May 1, 1997. I am committed both to serving the alternative music buying customers of Northbrook and beyond, and meeting my personal financial and career goals.
Many music consumers enjoy purchasing for collectability along with their passion for the music. I am one of these people. Many people have a hard time finding the things they want at existing chain and mall record stores. One major reason for this is that many record stores do not take the time to teach their employees to research the specialized nature of the market. These customers are also looking for convenience of location and fair market prices. Also, these people enjoy talking to someone who is knowledgeable, interested in the same types of music they want, and in what the store carries in general. In many cases, people will come from many miles away because there are few stores offering the same specific goods.
Hidden Treasure Records will be a retail music shop designed to serve the increasing number of consumers interested in import and independent music products. The store will buy music and accessories from a variety of distributors that provide good quality and dependable service along with fair return policies. Hidden Treasure Records will resell them "as is" to our target market. Hidden Treasure Records will specialize in new records and compact discs that are current, and some that are hard to find at existing music stores. The store will only carry a limited amount of used records and compact discs. We will carry accessories like stickers and blank audio cassettes.
Hidden Treasure Records will advertise occasionally in the regional weekly and monthly publications. These newspapers will be widely distributed, and cover an expansive and diverse reading audience. Hidden Treasure will advertise sale items, as well as promote specialized items, so as to broaden our customer base. We will rely heavily on walk-in and drive-by traffic as opposed to relying on advertising. Hidden Treasure Records will schedule occasional in-store appearances, along with promotions and giveaways as marketing devices.
Hidden Treasure Records will offer a relaxed atmosphere with personalized attention, and listening stations for compact discs along with a record player behind the counter so potential customers can listen before purchasing. Our store will be decorated in a simple, comfortable style, with chairs to sit in while reading a magazine or listening to a compact disc. Hidden Treasure's future employees will be knowledgeable about music in general, but even more so about the specific nature of what we carry. Hidden Treasure Records will be located in approximately 1,000-1,500 square feet in the downtown Northbrook district. The store will maintain regular hours of Monday through Saturday from 10:00 a.m. to 8:00 p.m., with the possibility of staying open later Thursday, Friday, Saturday night, and Sunday from 11:00 a.m. to 6:00 p.m. This location and these hours will be convenient to our customer base. Hidden Treasure Records will offer the opportunity for customers to special-order specific items if they are not in stock. Our store will also have a fax machine available to send and receive orders. We will also have a personal computer to offer goods through the Internet and, more specifically, the Hidden Treasure Records official web site where everything we have in stock will be posted and available for purchase by mail order. We expect it will take a little longer to generate sales through this method, as it will take longer to set up than the general store. Hidden Treasure Records will offer mail order service via UPS throughout the United States, and the world, for both computer and non-computer generated sales.
Owner, Hidden Treasure Records L.C., Northbrook, IL (1997)
- Started mail order business with intent to expand onto the Internet and start a retail store.
Assistant Manager, Replay Records, Northbrook, IL (1994-1997)
Assistant Manager of independently owned record store with modest sales and absentee owner.
- Conceived and carried out promotional in store appearances which resulted in higher sales goals for that day.
- Developed inventory list for web site which resulted in higher sales.
- Created advertisements that were placed in a record collector's magazine, which increased mail-order sales for a continued period of time.
- Responsible for condensing distribution contacts which made for better working relationships and created economics of scale, providing a higher profit margin. Processed orders on a regular basis.
- Developed basic accounting skills by completing daily sales reports, and was responsible for balancing books on a daily basis. Deposited money daily.
Import/Independent Music Buyer, Wagonhouse Records, Bloomington, IL (1992-1994)
Worked for chain retail record store with high-volume sales. Developed a comprehensive knowledge of import and independent music as buyer.
- Implemented efficient inventory plan for import and independent section which help minimize returns and maximize consistent sales.
- Increased sales in this department from 6% to 14% within two years. Maintained effective working relationships with many distributors.
- Processed orders and developed strong customer base, resulting in higher sales.
Assistant Manager, Wagonhouse Records, Bloomington, IL (1993)
Managed high volume sales store when other managers were absent.
- Responsible for completing daily sales reports, opening and closing store, and making regular bank deposits.
- Delegated responsibility to sales staff and achieved high volume sales skills through marketing devices such as key product placement.
Bachelor of Arts degree, Business Administration, University of Illinois, 1994
Typical Target Customer
Mike is 21 years of age with some college education. He is a cultured student, but works too, so he has plenty of money for entertainment: particularly music, books, movies, and shows. Mike is an intelligent, open minded, and unique individual, not your ordinary Top 40 radio music purchaser. Primarily, Mike spends most of his free time listening to music and reading magazines to keep updated on the music he enjoys. Although music is a hobby for Mike, it is something he takes very seriously. He collects rarities not only for listening pleasure, but also for their collectability and will search everywhere to find exactly what he wants. Mike likes going to shows frequently, and the best way for him to find out about them is to pick up the local alternative newspaper or visit a record store that posts fliers for upcoming music events. Mike also likes to give his business to independently owned stores whenever possible due to the comfortable, personalized shopping experience. Occasionally, Mike logs on to a friend's or the school's computer to search the Internet for other specialty shops carrying the items he is interested in.
Reaching the Target Customer
—Advertising in weekly newspapers
—Create mailing list for upcoming in-store appearances and periodic sales
—Enter notices in computer networks —Place announcements in weekly newspapers
—Possible free promotion in form of an article in the local daily paper
Marketing Budget Pre-Opening Promotion
|—Flyer-full page and quarter page to scatter throughout key metro areas||$150|
|—Advertisement in weekly newspapers||$250-$500ea|
|—Grand Opening publicity from the Chicago Chamber of Commerce||$195|
|—Regular newsletters to mailing list detailing new release listening parties, sale items, and upcoming in-store appearances||$50|
|—Advertising in weekly newspapers every other month or less||$175|
|TOTAL||$225 and up|
The northern Chicago area has four active record stores that will compete with Hidden Treasure Records.
- Replay Records: Although not located in Northbrook, its inventory competes most directly with Hidden Treasure's. Recently, it has suffered from high employee turnover. Replay also has high prices, and its quantity of current releases has been lacking, primarily because of a decrease in business due to its relocation. Hidden Treasure will differ from Replay by being in a highly visible location, offering a wider selection at lower prices, and having a friendly staff and atmosphere.
- Cool Beats: This record store has been a Northbrook staple for a number of years. It offers a wide selection of fairly priced items. It also contains listening stations for people to sit down and sample the music before purchasing. The main difference between Cool Beats and Hidden Treasure is that they do not specialize in the same product lines. Also, their interior space is limited. Cool Beats has recently moved from Schilling Park Avenue to First Street. This would make Hidden Treasure the sole record store on Schilling Park.
- Surrounded by Sound: This is also a very popular store in the northern Chicago area. Its basic problem is that it lacks a proficient sales staff. It also has a crowded, unorganized interior. Hidden Treasure will take particular pride in its customer friendly environment and knowledgeable staff. Hidden Treasure Records also plans to be very competitive with prices on items that are also carried by Surrounded by Sound. They, however, also cater to a different music consumer than Hidden Treasure—they do not carry the off-the-wall, hard-to-find, trendsetting products that Hidden Treasure will specialize in.
- Harmony House: This is a very convenient store for the one-stop shopper. They carry all types of music, along with having a Ticketmaster machine. Harmony House also has a computerized special ordering system, which is very helpful. A major fault of Harmony House is that they have high prices. One major benefit for Hidden Treasure is that they are not located in the downtown Northbrook area. Also, Hidden Treasure will offer much greater personalized service, and have an efficient special ordering system of its own that should satisfy the customer with the most particular of tastes.
PROFIT AND LOSS FORECAST
Profit and Loss Forecast-Year One
|Less COS 65%||-7,553||-8,632||-11,869||-11,330||-12,948||-11,330||-12,948|
|Gross profit 35%||4,067||4,648||6,391||6,100||6,972||6,100||6,972|
|Marketing & Advertising||250||250||250||250||250||250||250|
|Less: Total Fixed Exp||4,613||4,613||4,613||4,613||4,613||4,613||4,613|
|Dec||Jan||Feb||March||April||Year Total||As a %|
Profit and Loss Forecast-Year Two
|Inflation 2.8% added to each figure from year 1.|
|Less COS 65%||-14,407||-13,782||-13,155||-12,530||-13,155||-12,530||-13,782|
|Gross profit 35%||7,759||7,421||7,084||6,745||7,084||6,745||7,421|
|Marketing & Advertising||205||205||205||205||205||205||205|
|Less: Total Fixed Exp||5,389||5,389||5,389||5,389||5,389||5,389||5,389|
|Dec||Jan||Feb||March||April||Year Total||As a %|
Profit and Loss Forecast-Year Three
|Inflation 2.8% added to each figure from year 2.|
|Less COS 65%||-16,330||-15,620||-14,909||-14,199||-14,909||-14,199||-15,620|
|Gross profit 35%||8,792||8,410||8,028||7,646||8,028||7,646||8,410|
|Marketing & Advertising||180||180||180||180||180||180||180|
|Less: Total Fixed Exp||6,116||6,116||6,116||6,116||6,116||6,116||6,116|
|Dec||Jan||Feb||March||April||Year Total||As a %|
CAPITAL SPENDING PLAN
This is a list of all the necessary expenses for opening and operating Hidden Treasure Records L.C.
|Computer and Printer||3,200|
|Fixtures and Counter||3,500|
|City Permits and Fees||250|
Other capital items, such as furniture and the fax machine, have already been paid for.
There are two conflicting trends affecting my business. First, more consumers are purchasing through the Internet. However, there is still a percentage of the population without access to this technology. They prefer to personally visit stores and shop. Hidden Treasure Records L.C. will accommodate both types of consumers by having a retail store and a web site.
Second, large media and bookstores carry a wide selection of music. As a result, Hidden Treasure Records will concentrate heavily on the latest trends in music and the more obscure items not likely to be found in the larger stores.
Like every new business, Hidden Treasure Records L.C. faces risks. I believe I can overcome each risk with the actions discussed below, and Hidden Treasure can thrive for many years.
Here are the major risks I anticipate and how I plan to deal with them:
- Thin Capitalization
The primary risk we face is thin capitalization. This meaning our inventory may have to turn over more than the average record store. This will be compensated by the specialized nature of new products. This creates a sense of urgency to purchase goods before they go out of print and become unavailable to our consumer. A second problem with thin capitalization lies with sales volume projections. If these are not met for the first year, the small working capital reserves may be inadequate. On the positive side, we believe our sales projects are very conservative and we will have little trouble meeting and exceeding them. Also, we have had several potential customers express an interest in specifically shopping at our store. In addition, by starting with relatively modest capital, our loan payments will be smaller.
- Slow Times
A secondary risk is slow times. The proposed site experiences very slow times during the first few months of the year. Having worked in the area before, I am aware of this and will set aside money from profitable months to cushion against such down time. Also by keeping overhead low, primarilyin the number of employees, I should be able to reduce the effect of slow times.
There is a slight risk with competition, two records stores within downtown Northbrook. However, most of what Hidden Treasure will carry is unavailable at these other shops. Proper pre-opening promotion and regular advertising, along with a helpful, knowledgeable, and friendly staff will attract our target customers. A similar store, Replay Records, thrived at this location for six years, confirming a large existing market.
- Owner's Ability
I have never operated an independent business before, however, I have managed a similar store with an absentee owner. I can see no insurmountable problems resulting from being on my own. I already have an accountant, lawyer, and the advice of a retired family member who built a million dollar business. I have taken steps toward my goal by filing Hidden Treasure Records L.C. as a business, opening accounts with distributors, and achieving profits through a small customer base.
In short, I believe that I have addressed the major risks facing my business and have demonstrated that those risks are manageable.
PERSONAL GOAL STATEMENT
I want to accomplish a number of goals by starting Hidden Treasure Records. I want to prove that I can operate a successful and worthwhile business by drawing on my educational background and experience. I feel that choosing and selling alternative music at a fair price will be an honest service to my customers and the community in general. I want to spend my time working with customers and people in the music industry who share my values.
Finally, I want the chance to make a better living than I can make by working for others, along with the responsibility and freedom to be my own boss.n