A small advertising campaign will be started. This will include 3,500 being spent on advertising in the local papers, 4,500 for advertising on the local radio and 500 for the cost of leaflet drops. Another 1,500 will be set aside for advertising on the side of buses as a large number of them travel through Kingswood and into the centre. TV advertising will not be used, as it will be too expensive for a small company such as this one. It could cost up to 60,000 for a 30 second advert on prime time TV. Different amounts of advertising will be required at different times. This may be due to sales, or new seasonal ranges coming in etc. A fairly large advertising campaign will be required during the first few months. This will make people aware of this service.
Psychological pricing will be used. This means items will be priced at 29.99 instead of 30 etc. This gives the customer an impression that the items are a lot cheaper. Many of the prices will depend on the elasticity of demand. This can be either Price Elastic or Price Inelastic. An elastic curve means that a small increase in price will result in large loss in the number of customers. This would lose the business money. But a small decrease in price will result in a large increase in customers. An Inelastic Demand Curve is for a product that people will buy, no matter what the price, because they feel it is needed. So a change in price will mean only a small difference in the amount of customers. E.g. Petrol and cigarettes.
I don’t think that sports equipment is either very inelastic or very elastic. It is somewhere in between. Some people will buy the products whatever the price, but others would find alternatives or go without. Rent: The rent for the chosen premises will cost 24,000 per annum. Within the first three months ï¿½6,000 of this must be paid.
Business rates: The average business rates would come to around 14,000. Staffing Costs: The shop will be open for ten hours a day, from 9am until 7pm six days a week. It will be open from 10am until 4pm on a Sunday. Five staff will need to be employed. They will be paid 5 per hour. Also a supervisor will be required. They will be paid 7.50 per hour. This will cost a total of 100,000 per annum.
Opening Stock: 27,000 will be spent on purchasing stock for the first month. Decoration costs: The current layout of the shop is suitable, with a large open plan main area and two back rooms available for a stockroom and a staff room. A fitting room will need to be installed as well as small amounts of decorating that will need to be carried out but nothing very expensive. This will amount to approximately 1,500. Equipment and furniture: Things such as shelves and clothes stands will need to be purchased for the shop and stockroom. Total cost amounts to about 2,000.
In order to start the business, it has been calculated that an initial investment of approximately 35,000 is required. This will cover all the expenses for the first quarter if very few sales are made. There are a number of options available to raise the rest of the funds required. A loan could be taken out from the bank, or shares in the business could be sold to family and friends, therefore making it a private limited company. When taking out a bank loan, interest needs to be paid back as well as the loan. At present, interest rates at the bank are relatively low, meaning the owner will be paying less interest on the money borrowed.
When selling shares there is no interest to be paid. This may be beneficial to the business as it is starting up, as it reduces the risk of increasing debts before a profit is shown. Shareholders however, are owed dividends and in the long run the business may be paying out more in this way than if they had taken out a bank loan. On top of this, entering into a business relationship with family or friends may strain relations through disputes about the business.
There are many benefits to opening a Sports shop in Kingswood. These include the lack of competition in directly surrounding areas. Advertising is an essential factor in the success of the business. Due to the fact that there currently isn’t any sports shops in Kingswood people may not think of going there for Sporting goods so they will have to be aware of the shop through the advertising campaign.
I believe that the majority of the research conducted was as accurate as possible. The demographic information taken from the most recent Census was produced in 1991 and it can be assumed that the main difference in recent data would be an increase in population as more houses and flats have been built in the area. The 2001 Census was not available at the time of my research so the 1991 Census was used instead.
Comparisons between the 1981 and 1991 Census shows a huge increase in the size of the population and this is likely to continue into the 1990’s and 2000. But I believe that some of the results when carrying out my questionnaire may have been slightly inaccurate due to the lack of time. If I had more time to compile my research, I would have interviewed a greater number of people and a larger range. It must also be taken into consideration however, that regardless of the amount of research conducted, there may be many unforeseeable circumstances that could affect the profitability of the business, external factors such as a downturn in the economy etc.
Conclusions After conducting all relevant research and taking into account any anomalous data as well of examples of such businesses in the UK, I believe that there is a great chance of success for a Sports shop in Kingswood. From the research that I have compiled that the average amount one is willing to spend on sports goods is ï¿½50 and the average disposable income of the local residents can comfortably accommodate this.
The business may have the potential to be even more profitable if it was to be set up in Broadmead or Cribbs Causeway due to the amount of people that are attracted to the area, but there is much more competition in these areas to compete with. Summary After studying the various forecasted cash flow and break-even charts, it is evident that the business has the potential to be profitable, if all other factors run accordingly. Advertising will also play an important role in the success in the establishment to the business and advertising in the local paper and on the local radio will make many residents aware of the presence of the shop. Excess advertising is not required as the location of the shop is such that it is clearly viewed by many, as its location is optimal, in the centre of the high street.
Evaluation The main restriction that I experienced was that of time. If I had the option to redo the project, the main area that I would correct would be that of the questionnaires. I would take a much larger sample and over a wider range of times during the day.