1.0 Executive Summary
The purpose of this business plan is to secure $125,000 for the development of a specialized sneaker reseller based in Bristol County, Massachusetts. Deutsch Shoe Emporium LLC (“the Company”) was founded this year by Matthew Deutsch. The business will launch its operations through its retail store as well as its ecommerce platform starting in the fourth quarter of this year.
Operations
The primary revenue center for the business will come from the ongoing acquisition and sale of rare and hard to find sneakers across a number of major manufacturers. The Company will source these inventories through numerous channels. On each sale, the Company will achieve substantial gross profits with the average shoe sale producing $300 a revenue with 60% contribution origins.
To complement these operations, the business will also deal in regular sneakers that are brand new. This will produce a highly predictable stream of revenue that will further contribute to the stability of the business.
The third section of this sneaker reseller business plan will further discuss the operations.
The Financing
As noted above, the Company is currently seeking a $125,000 business loan in order to establish these operations. Primarily, these funds will be used for the following:
• Location development in Bristol County
• Rare sneaker and streetwear apparel inventories
• Working capital
The Company may acquire a revolving credit facility in order to acquire a greater number of rare sneakers and hard to find streetwear apparel items that will drive expanded revenues. This document assumes that the Company will use its after-tax profits for the acquisition of larger inventories.
The Future
The Company will continue to expand the scope of its online operations as the demand for rare sneakers as well as streetwear apparel remains incredibly strong throughout the country. The business may also established additional sneakers store locations in other markets within Massachusetts if it is economically feasible to do so.
Market Overview
Revenue Forecasts
2.0 The Financing
2.1 Funds Required
The $125,000 of debt and $50,000 of equity capital will be allocated towards the following:
2.2 Management and Investor Equity
Matthew Deutsch is the 100% owner of Deutsch Shoe Emporium LLC.
2.3 Exit Strategies
Given the retail and ecommerce integration of this business, there would be a strong demand among entrepreneurs to acquire these operations as a result of the highly predictable nature of revenue. Additionally, the Company’s ability to source, rare footwear, and streetwear apparel will provide a significant price or earnings multiple for the business. The sale of Deutsch Shoe Emporium is not expected to occur for a minimum of ten years.
3.0 Operations
As discussed in the executive summary, Company will be actively involved with the acquisition and sale of rare and hard to find sneakers as well as streetwear apparel. The Company will work with wholesalers, distributors, manufacturers, and other entities are involved with the sale of shoes in order to acquire its inventories. The Company’s store will feature all items as well as through the e-commerce enable website.
In regards to the website, this platform will be a major source of revenue in the coming years given that many people search for rare sneakers and unique streetwear apparel through online channels. As will be discussed later in this document, the Company will use multiple forms of advertising to drive traffic to the platform.
The Company will maintain a moderate scale retail store in Bristol County. An assistant manager as well as two employees will operate the store seven days a week.
4.0 Overview of the Organization
4.1 Registered Name
Deutsch Shoe Emporium LLC. The Company is registered as a limited liability company in the Commonwealth of Massachusetts.
4.2 Commencement of Operations
The Company will commence operations in the fourth quarter of this year through its retail store and ecommerce platform.
4.3 Mission Statement
To provide exceptional, rare sneakers and streetwear apparel to the general public.
4.4 Vision Statement
To become a preeminent dealer of rare sneakers that is noted by enthusiasts of this apparel genre throughout the United States.
4.5 Organizational Objectives
• Develop ongoing relationships with companies that specialize in the wholesale investor of rare sneakers and apparel.
• Properly source a highly visible retail store within the Bristol County market.
• Implement fiscally sound operating protocols so that the business can remain profitable even during challenging economic climates.
• Provide strong financial incentives to sales team members that produce a significant amount of revenue.
• Use multiple forms of online marketing to drive traffic to the Company’s e-commerce platform.
• Potentially expand the number of retail distribution locations that Deutsch Shoe Emporium operates.
• Continue to work with numerous rare sneaker dealers in order to acquire inventories on a cost-effective basis.
5.0 Market and Industry Analysis
5.1 External Environmental Analysis
This section of a sneaker reseller business plan will focus on the current economic climate, the demographics, the competition, and the industry.
As of this year, the economic outlook within the United States is moderate. Inflation has increased significantly and at a much higher rate than what was initially anticipated. However, multiple federal agencies and Congress are taking the appropriate measures to reduce the rate of inflation.
Even during a challenging economic climate, the demand for the rare sneakers offered by the business will typically remain in demand given that these are highly sought after items among younger demographics. These individuals typically have a higher degree of discretionary income for making these types of purchases.
5.2 Industry Analysis
There are 22,000 companies that are actively involved with the sales of sneakers and footwear. These businesses generate $70 billion in revenue and provide jobs for 300,000 people.
As has been one of the major themes of this document is that the business will specifically focus on reselling rare sneakers, which are incredibly important part of apparel among people that have an interest in streetwear. The Company will leverage both its retail location as well as its ecommerce website to conduct these operations.
5.3 Customer Profile
Any individual that is under the age of 40 and has an interest in rare sneakers and streetwear apparel is a potential customer of the business. In regards to US based demographics, there are more than 30 million people that could become ongoing buyers or products that are offered by Deutsch Shoe Emporium. On a regional basis, there are approximately 50,000 people that fall into this demographic and would make ongoing purchases of sneakers and related to apparel from the Company’s store.
5.4 Competitive Analysis
The Company will face modest competition as establishes its operations. As a Company will principally deal in rare sneakers, provided as a Company is able to maintain inventory – the business will be able to continue it sales operations. The Company’s retail store will be complemented by an expansive e-commerce platform that will drive sales on a nationwide basis.
6.0 Key Strategic Issues
6.1 Sustainable Operations
Deutsch Shoe Emporium will have sustainable operations as a result of the following:
• The use of ecommerce will drastically increase the rate of inventory turnover.
• The Company is sourcing a highly visible retail location within the Bristol County market.
• An Owner, Matthew Deutsch, that has extensive experience with the development of apparel focused retail ventures.
• The rare sneakers and streetwear apparel that will be offered by the Company will be an immense demand on a nationwide basis.
6.2 Basis of Growth
The Company will expand via the following methods:
• Continued expansion of the Company acquisition program in order to gain substantial inventories of rare and hard to find sneakers and streetwear apparel.
• Continued expansion of the online marketing strategies that are used to drive sales.
• Development of additional retail locations within Massachusetts or the Northeastern United States.
7.0 Marketing Plan
7.1 Marketing Objectives
• Acquire a highly visible storefront with a mall facility.
• Maintain an expensive online platform that uses both search engine optimization and social media marketing.
• Use third-party platforms in order to drive sales of rare sneakers.
7.2 Revenue Forecasts
7.3 Revenue Assumptions
Year 1
• Deutsch Shoe Emporium will launch its operations in the fourth quarter of this year.
• Revenue will reach $677,000.
Year 2
• The business will expand its online sales operations.
• The Company’s revenue will reach $778,000.
Years 3-5
• The Company will continue to source inventories of rare and new sneakers.
• The business will generate total sales of $1.1 million.
7.4 Marketing Strategies
The Company will use a number of marketing strategies in order to create significant awareness for Deutsch Shoe Emporium and its wide range of rare sneakers and streetwear apparel that is available for sale. In regards to the retail location, this business will be located in a highly trafficked strip mall which will feature a significant exterior signage that complements the unique footwear and apparel that is offered by the business.
Of immense importance to the Company’s operations is the use of e-commerce. As the Company will have a number of highly in demand sneakers available, Management sees a significant opportunity to diverse these products online. This will be accomplished to the Company’s proprietary website, which will be powered by Shopify. The Company will also list these products on popular platforms that are specific for resellers of shoes and related apparel.
For social media, this will be an ongoing aspect of the Company’s marketing operations as many people within the targeted demographics use social media platforms on an ongoing basis. The Company will use targeted advertisements among individuals that are under the age of 40 that have an expressed interest in rare sneakers and streetwear apparel.
On a regional basis, the Company will also promote its standard footwear sales through ongoing advertisements to the general public that showcase the broad inventories carried.
8.0 Organizational Plan
8.1 Organizational Hierarchy
8.2 Personnel Costs
9.0 Financial Plan
9.1 Underlying Assumptions
• Deutsch Shoe Emporium will have a comp compounded an annual growth rate of 15%, which we heavily driven by the e-commerce operations.
• Matthew Deutsch will contribute $50,000 towards the development of the Company.
• The Company will acquire a $125,000 business loan.
9.2 Financial Highlights
• On rare sneakers and streetwear apparel sales, the business will achieve contribution margins of 60%.
• On standard footwear sales, the Company will achieve gross profits of 40%.
9.3 Sensitivity Analysis
As noted earlier, even during a challenging economic climate, the demand for rare sneakers will typically remain strong. The business focusing its marketing efforts on younger individuals that can allocate a larger portion of their discretionary income towards unique footwear and apparel purchases. The use of e-commerce to further sell rare sneakers and apparel will further contribute to the viability of the business.
9.4 Source of Funds
9.5 Financial Proformas
A) Profit and Loss Statement
B) Common Size Income Statement
C) Cash Flow Analysis
D) Balance Sheet
9.6 Breakeven Analysis
9.7 Business Ratios
SWOT Analysis
Strengths
• Limited competition within the greater Bristol County area among companies that specialize in the sale of rare sneakers and apparel.
• Use of multiple e-commerce platforms will further drive revenues while contributing to the ongoing economic stability of the business.
• The Company will have access to a wide range of rare sneakers and streetwear apparel through multiple wholesale distributors.
Weaknesses
• An extremely severe economic recession could impact demand given the higher pricing point of rare sneakers.
• This is very much a commoditized market and the Company success will be based on its ability to continually source in-demand inventories.
Opportunities
• Continued expansion of direct relationships with manufacturers that the Company will receive preferential treatment when acquiring collectible footwear and apparel.
• Potential development of additional Deutsch Shoe Emporium branded stores within the Northeastern United States.
• Expansion of operations to include other types of apparel.
Threats
• Severe inflation could cause many of the underlying operating cost to increase.
Risk Analysis
Development Risk – Low
Matthew Deutsch has already begun to work with numerous manufacturers, wholesalers, and distributors they will provide the underlying inventories to the business. The primary matter that needs to be addressed is securing the capital and sourcing an appropriate location for within Bristol County.
Financing Risk – Low/Moderate
A significant portion of the $125,000 sought in this sneaker reseller business plan will be used specifically for the acquisition of divisible inventories. The significant gross profits generated from each transaction will ensure that the business is able to remain profitable at all times.
Marketing Risk – Low
By operating through a retail store as well as numerous online sales channels, the Company will be able to quickly reach profitability while maintaining a significant degree of economic stability. The Company will make ongoing reinvestment into all marketing channels throughout the life of the business.
Management Risk – Low
Matthew Deutsch is a highly experienced retail entrepreneur that will be able to effectively manage this business on a day-to-day basis.
Valuation Risk – Low
The valuation risk is offset by:
• Very short inventory holding periods for rare sneakers and street rare apparel.
• The business will be able to operate on a nationwide basis through its ecommerce focused operations.
• The business will be able to source in demand in inventory across a number of manufacturers.
Exit Risk – Low
As noted earlier, there would be a significant demand among retail focused entrepreneurs to acquire the operations of Deutsch Shoe Emporium. A formal valuation would be conducted prior to marketing the business for sale while concurrently hiring a broker to source a suitable buyer.
Appendix C – Expanded Profit and Loss Statements
Appendix D – Expanded Cash Flow Analysis
Starting a Sneaker Reselling Business
How much does it cost to start a sneaker reseller business?
The cost of starting this type of enterprise can vary widely depending on the amount of inventory that you intend to acquire at the onset of operations. Generally, you can expect that your initial inventory will run anywhere from $10,000 to $50,000 depending on the availability of rare and hard to find sneakers as well as apparel. If you intend to open up a retail location, you can expect to add an additional $50,000 to $100,000.to the cost of establishing this type of business.
It should be noted that many entrepreneurs that engage in sneaker reselling will often start their businesses in an online capacity. Provided that you have the ability to source rare and hard to find sneakers in apparel, you can easily establish a website for as little as $2,000 to $5,000 depending on the features that will be integrated. In fact, many entrepreneurs often start in an online capacity prior to moving into a brick-and-mortar location.
One of the things that you should count for is having a substantial marking budget if you intend to engage in a significant amount of online marketing. This is especially important if you intend to use a significant amount of search engine optimization to drive potential customers to your website.
How has technology impacted the sneaker reselling industry?
Ultimately, there has been a net benefit among sneaker retailers for using state of the art technology. Through e-commerce channels, entrepreneurs in this field are able to quickly turn over their inventories, especially since the product lines are in significant demand among a large demographic that has a substantial amount of discretionary income. This provides a significant opportunity for entrepreneurs that are getting into this field.
One of the downsides to technology has been the use of programs that artificially inflate the value of sneakers and hard to find apparel. Many companies within this field will use numerous technologies in order to source the best deals possible for acquiring inventories on a cost-effective basis. As such, it is imperative that an entrepreneur in this field use multiple forms of technology in order to source hard to find inventories.
How is important is it to have a sneaker reseller marketing plan?
For any business, having a well-defined marketing plan is absolutely imperative to achieving significant success. Unlike other businesses, sneaker resellers operating a unique field given that they are dealing in hard to find and rare items. As such, this does lessen the burden somewhat in regards to having to spend significant amount amounts of capital in order to drive sales. Simply announcing that you have the inventory in stock and showcasing that to the general public typically drives a significant amount of sales demand. However, this is a competitive industry and there are numerous online sellers that are seeking to make the same sale. Most importantly, the use of third-party sales platforms has been instrumental in transforming the industry. Platforms such as GOAT and StockX have become widely used among people that have a desire for rare sneakers. As such, entrepreneurs can capitalize on these technological advances in order to reduce overall marketing expenditures.
In the event that a retail store is developed then a highly defined marketing plan that specifically targets a regional geographic area is an absolute necessity. Here, you can allocate a budget specific for maintaining a highly visible retail storefront while concurrently engaging in geo-targeted based online marketing strategies. This includes local search engine optimization techniques as well as geo-targeted social media marketing. To a more limited extent, brick and mortar focused retail operators will also use pay per click marketing, especially when specific searches are conducted for a specific type of rare footwear product.
How profitable are sneaker reselling businesses?
These entities can become highly profitable provided that they have ongoing access to sources of rare and hard to find sneakers and apparel. Generally, the markup on a rare item is typically 100% in a retail capacity. As has been one of the themes throughout this discussion, the inventory turnover that is achieved by sneaker reseller is typically significantly higher than that of traditional footwear retailers.
These businesses are also highly scalable. From an online standpoint, an entrepreneur can make ongoing reinvestment into their marketing campaigns in order to have the website become a central resource for people that are seeking rare footwear. From a brick-and-mortar standpoint, additional locations can be easily established.
How can an economic recession impact a sneaker reselling business?
Generally, sneaker reselling businesses do have a moderate degree of sensitivity to an economic recession. This is due to the fact that rare sneakers and rare apparel are purchased with discretionary income, and they are not in necessity. However, the individuals that tend to purchase these products typically are younger people that have a far greater degree of their income available for discretionary purchases. As such, as compared to traditional footwear retailers, the risk is somewhat lessened given the demand among this demographic. The contribution margins that are generated from each sale are able to fully support both the online and brick-and-mortar operations of a sneaker reseller.
What percentage of my operating budget should I allocate towards marketing?
During the early years of operation, most sneaker resellers will typically allocate 10% to 15% of their total revenue towards marketing expenditures. This will be on the higher band of the spectrum if you are operating solely in an online capacity given that it takes an upfront investment in order to achieve strong results through things such as cultivating a social media following as well as search engine optimization. For a brick-and-mortar business, this marketing budget range anywhere from 3% to 10% of revenue given that the substantial amount of signage on the retail location is able to reduce a significant amount of the marketing costs. However, this is addressed through the fact that rental fees are being paid in order to achieve this local in regional brand recognition.
What is the outlook for the sneaker reselling industry?
Overall, the outlook for this industry is positive. Although the world is experiencing changes as a result of adjusted trade policy, the demand of young people to have access to premium apparel goods and rare sneakers continues to remain strong. Additionally, the continued expansion of online communication makes it far easier to facilitate transactions not only domestically but internationally as well. The demand for rare sneakers not only is significant in the United States, but also among major European and Asian markets.
What are the positives of owning a sneaker reselling business?
Beyond the ability to be an entrepreneur, these businesses typically operate with minimal overhead and with a relatively low risk. As noted, since the business is dealing in rare items, there is always going to be a significant demand among buyers to purchase these goods. Additionally, the startup of cost associated with establishing this type of business are relatively low and most capital can be allocated towards inventory acquisitions of in demand items. For brick-and-mortar retail locations, these establishments typically do not require a significant amount of interior work in regards to the build out of the location. Simply having appropriate displays that showcase the rare sneakers and apparel is sufficient to drive a significant number of sales. These businesses also do not require a significant amount of retail space to conduct their operations.
What professionals should I retain when starting a sneaker reselling business?
It is absolutely imperative when you are starting any enterprise to work closely with a certified public accountant or enrolled agent that can assist you with the development of the business from an accounting standpoint. This is actually one of the more complicated aspects of a retailing business given that you are going to need to determine the cost for each type of rare sneaker that was sold to a potential client. These complexities can be compounded if multiple vendors are sourced specifically for obtaining the same product. Your CPA or enrolled agent will assist you in developing systems that will ensure that proper accounting for all sales as well as all inventory acquisition costs having properly addressed (generally through the FIFO or LIFO model).
Beyond having a certified public accountant or enrolled agent, it is also very important to retain the services of an attorney. They will be able to review legal documents and provide ongoing advice so that your sneaker reselling business operates within all applicable regulatory frameworks.
How will AI impact the sneaker reselling industry?
Ultimately, because this is a product retailing business there will be an absolutely minimal impact regarding the use of artificial intelligence within the field of sneaker reselling. However, specialized technologies that can assist with providing predictive analytics regarding which products will become popular, which products will maintain their popularity overtime, and trends in the industry can be more thoroughly analyzed through the use of this technology.
What are ways that I can expand my sneaker reselling business?
One of the key ways to expanding these types of enterprises is to integrate new types of inventory that can be sold through established distribution channels. This may include acquiring inventory of standard footwear that may not be as in demand as rare products, but will also provide a highly predictable stream of revenue. You can also integrate additional types of items that are rare and hard to find.
One of the key components to expanding these operations is the can you continually focus on creating brand visibility especially from an online standpoint.
Are the risks associated with starting a sneaker reselling business lower than that of a standard footwear retailer?
Yes, absolutely. These risks are significantly reduced by the fact that you are dealing in rare goods that carry a substantial profit margin. One of the downsides is that you must continually find ways to source inventory of in demand products. Limited editions and collectibles are produced in far less quantity, which necessitates maintaining an apparatus that can quickly source these in demand items to maintain proper inventory levels.