Heath Pharr Business Plan- Quality Sporting Goods 4/11/2011

Executive Summary
Quality Sporting Goods (QSG) will be in the business of selling athletic equipment to people at every fitness level,
from aspiring college athletes to weekend warriors. With our knowledgeable staff we will provide an environment
where everyone feels comfortable coming in and asking for training advice and discussing equipment needs. 

Based Raleigh, QSG wants to be a renowned sporting goods store with highly trained sales associates. An exact
location has yet to be set, but owners are eagerly searching for a high foot traffic location. Ideally that location would
be in Raleigh where anyone can travel a 10-15 miles to find our store.

We fully expect to grow quickly. Many businesses start under the same assumption but due to work ethic, desire, job
enjoyment, QSG is expecting to make a profit in the early stages of its life. Sales are forecasted to be conservative in
the first month but are expected to increase by 3% each month thereafter, with a first year growth rate of 12%. This
assumption appears to be accurate given the fact that the sporting goods wholesale industry is growing at an 11.5%
annual rate.

Quality Sporting Goods will be filed as an S Corporation where owners will be protected from various forms of liability
and tax shields. In the early stages of business, we will be primarily debt financed through a local bank and the Small
Business Association (SBA). We have forecasted the need for 60% debt, the owner and operator will invest the rest.

Depending on the timing of financing, we expect to have the store open by January next year and to produce strong
profits by the end of that same year.

 Objectives
The primary objectives for the store are:

1. Brand recognition. QSG will be a recognized sporting goods and fitness store in Raleight. 
2. To be operating at a profit by the end of the first year of business.
3. Achieve a 15% growth rate in sales from years one and two, and then maintain no less than a 11.5% growth
rate thereafter.
4. Maintain a constant gross margin of 35%. If we are able to do this and keep costs fixed, sales will be able to
grow faster than total costs.

 Mission
QSG strives toward building long-term relationships with our customers and employees. Working within the
community, promoting community service, and encouraging the additional education of our employees will be
constantly emphasized by store management. We feel it is tremendously important to give back to the community
that supports our operations, while also maintaining an environment where our employees have the opportunity to
improve as individuals.
Heath Pharr Business Plan- Quality Sporting Goods 4/11/2011

Company Summary
QSG intends to provide customers with the quality products they need to maximize athletic performance and
accomplish their physical and mental goals. We will provide our customers with a knowledgeable staff that enjoys
working in an athletic atmosphere and helping others. We will be located in Raleigh where there is a high
concentration of health conscious individuals and a devoted following to both high school and college athletics.

 Company Ownership
With the intent to operate the store I will be considered the owner of Quality Sporting Goods. However, I will not be
the only one with a capital investment in the company. A local investor will have equal shares in the business. The
investor will receive dividends starting in year 2, until he has recouped his initial investment, at which time the owner
has reserved the option of buying out his shares.

Under these circumstances, and the fact that the investment is a relatively small undertaking, QSG will be filed as an
S Corporation. The ownership will be split up evenly between me and the other investor, and the rest will be debt
financed.

 Start-up Summary
Quality Sporting Goods will be financed through a combination of 60% debt and 40% equity. A local bank will provide
the debt while the equity will be provided by an equal combination of owner investment and an angel investor. A large
portion of the initial investment will be spent on beginning inventory (83%), which we forecast to be sold within the
first two months. Total assets will amount to 93.4% of the initial investment.

Start-Up Funding
Start Up Expenses to Fund…………………………………………………………………………………………$6,610
Start Up Assets to Fund……………………………………………………………………………………………..$93,390
Total Funding Required……………………………………………………………………………………………..$100,000

Assets
Non-cash Assets from Startup…………………………………………………………………………………..$84,901
Cash Requirements from Startup………………………………………………………………………………$8,489
Additional Cash raised……………………………………………………………………………………………….$0
Cash Balance on Starting Date…………………………………………………………………………………..$8,489
Total Assets……………………………………………………………………………………………………………….$93,390

Liabilities and Capital

Liabilities
Current Debt…………………………………………………………………………………………………………….$0
Long-Term Liabilities………………………………………………………………………………………………..$60,000
Accounts Payable (Outstanding bills)..…………………………………………………………………….$0
Other Current Liabilities (interest fee)…………………………………………………………………….$0
Total Liabilities…………………………………………………………………………………………………………$60,000
Heath Pharr Business Plan- Quality Sporting Goods 4/11/2011

Capital
Planned Investment
Owner Operator……………………………………………………………………………………………………..$20,000
Angel Investor.………………………………………………………………………………………………………..$20,000
Additional Investment Required…………………………………………………………………………….$0
Total Planned Investment………………………………………………………………………………………$40,000

Start-Up Expenses………………………………………………………………………………………………….$6,610
Total Capital……………………………………………………………………………………………………………$33,390
Total Capital and Liabilities……………………………………………………………………………………..$93,390

Total Funding………………………………………………………………………………………………………….$100,000

Products
Quality Sporting Goods will be a high quality fitness store that focuses on athletic performance and maximization of
athletic potential. In other words, QSG will be designed to supply athletes with the essential products that are
necessary for active lives.

The core products we will carry are:

 Shoes
 Apparel
 Athletic equipment

To complement these goods, we will also carry training equipment like:

 Polymeric boxes
 Medicine balls
 Health supplements
 Training literature

The Raleigh community is very active and has a great athletic heritage. It is the location of the University of North
Carolina State, home to many running and hiking trails, and has a growing youth athletics market. Raleigh also
happens to be a growing community that has always supported the small entrepreneurs. Taking these factors into
consideration, QSG will focus on three main groups.

 Young parents with children active in youth sports

 College students
 Active adults

These groups comprise the majority of athletes in the city, and we find them to be the ones with the disposable
income to spend on athletic apparel.
Heath Pharr Business Plan- Quality Sporting Goods 4/11/2011

Market Segmentation

 Parents (Elementary & Middle School)

 High School Athletes
 College Students
 Middle-aged Adults (35+)

Target Market Segment Strategy

Because there are so many different sports and levels at which to compete, there is a broad range of
markets for the company to target. At QSG, we will provide a marketplace that satisfies the needs of each
group. We will stock a variety of goods for the wide variety of our customers.
We strive to build long-term, personal relationships with our customers, in order to do this; we will need to
attract customers at young ages. Therefore, our primary target market will be parents with young children.
By building a trust relationship, we may be able to uphold a family right up through the child's college
years.
It will be important to target these groups because youth sports are growing at an incredible rate. Data
has indicated that youth sports have the highest growth rate of any segment within the athletic industry.
Capturing the market at a young age will lead to future sales when athletes spend more money on their
athletic needs.
Young parents and high school students will not be the only groups that we will focus on because they
also make up the smallest population. Focusing on college students and active adults will also be very
important.

Competition and Buying Patterns

To an athlete who is serious about achieving particular goals, having the correct athletic equipment is
essential. Somebody who runs many miles over the course of a week needs to have shoes that not only
last over time, but also protect joints from harm. It is the same for a basketball player who needs to wear
light clothing that allows him/her to move freely. In either case, the athlete is looking for the best
equipment and is always open to try new, innovative products that might help reach peak performance.
In the sporting goods retailing many companies compete in different ways. As a smaller company we
intend to provide customers the support and knowledge they need to fulfill their goals.
Heath Pharr Business Plan- Quality Sporting Goods 4/11/2011

Strategy and Implementation Summary

At QSG, we will use a marketing strategy of developing long-term relationships with our customers. Promoting at
various sporting events will be an integral part of getting our name out in the community. We want to be seen as a
business that cares for our customers and wants to see them accomplish all of their goals.

We want our customers to have complete trust in what our employees are saying. We want them to know all the
information about what they are buying and what is best for them. If customers have a good experiences with what
they purchase, not only will they more likely be repeat customers, but also they will tell friends about the quality of
operations at QSG.

 Competitive Edge
The number one competitive edge QSG enjoys is providing customers with supreme service. As a smaller operation
it will be impossible to compete with Dick’s Sporting Goods and Eastbay on a price basis. Providing a group of
knowledgeable employees who enjoy what they are doing is the only way that QSG can provide the best customer
service. Trust is a unique competitive advantage that is not easy to duplicate because it takes time to develop trust
with customers.

The type of equipment that QSG will provide will also be a source of competitive edge. Much of the equipment found
at Quality Sporting Goods will not be found at larger chain stores. For example, it is tough to find polymeric
equipment. In fact the only way one can buy high-quality equipment is through catalogs. It is the same for many types
of shoes. Stores like Dick’s tend to only sell shoes that are trendy. Trendy shoes are not a sign of high quality; they
are a sign of great marketing. QSG will provide quality equipment and will be able to educate customers on why
certain equipment is better than the typical mainstream brand equipment.

 Sales Strategy
Our sales strategy will be built around fully educating customers about their purchases. Many of the activities that our
store is promoting impact the human body. It is important for the customer to be fully aware of the repercussions of
the activity and how each piece of equipment affects him/her. With that in mind, sales people will take care of
customers on a first come first serve basis. We want to build customer relationships without discriminating other
potential future customers.

Employees will be paid on an hourly wage with no commissions at the beginning of operations. After the store has a
history, a commission package based on sales and education advancement can be implemented.

QSG will carry a relatively low amount of inventory and have frequent order repurchases in an attempt to maintain
minimal inventory levels and storage costs. Finally, all sales will be in cash to prevent the problems brought along by
late accounts receivable payments.

 Sales Forecast
The primary products at QSG will include athletic shoes and apparel. We will also sell equipment, supplements, and
health literature, but we forecast shoes and apparel to drive sales. We expect strong growth in the first year due to
intense marketing and exposure in the Raleigh market. Forecasted sales are expected to increase by 3% from month
to month in the first year and then grow at the industry average of 11.50% per year.
Heath Pharr Business Plan- Quality Sporting Goods 4/11/2011

Sales Forecasts

Sales Year 1 Year2 Year 3

Shoes…………………………………………………………….. $ 193,194 $201,105 $209,798

Apparel…………………………………………………………. $241,268 $251,669 $261,189

Total Sales…………………………………………………….. $434,462 $452,768 $470,387

Direct Cost of Sales Year 1 Year 2 Year 3

Shoes…………………………………………………………. $115,600 $120,484 $125,600

Apparel………………………………………………………. $143,864 $150,600 $157,110

Subtotal Direct Cost of Sales………………………. $259,464 $271,084 $282,710

Management Summary
The owner of QSG will also be the operator and decision maker. The philosophy behind the workforce will be one of
complete customer satisfaction and education. Since many customers are not aware of the many repercussions
brought on by athletics, employees will be encouraged to continually gain new knowledge and insight.

 Personnel Plan
Quality Sporting Goods will begin operations with a relatively small work crew with the intention to grow as the
business grows. The owner/operator will have a base salary of $3,000/mo and that will be a fixed expense.

We plan on starting with one full time employee who will be the store manager. The manager will work closely with
the owner. During slow hours, they will work closely implementing new strategies and making store changes. The
manager will work 40 hours per week, and will have the weekends off. The manager's salary, below, includes
benefits (paid sick time, holidays, and insurance coverage).

The owner will work the weekend with the other employees. Aside from the owner and manager, QSG will need an
estimated 51 man-hours over the course of the week. There is no estimated number of employees needed; we just
need to fill the extra 51 hours. Employees will make $8/hr, and will be looked upon as a vital part of the operation.
Heath Pharr Business Plan- Quality Sporting Goods 4/11/2011

Financial Plan
Quality Sporting Goods will regularly monitor all financial statements because they have a direct relationship with the
health of our business. We have forecasted into the future with a steady but moderate growth rate where sales will
grow by 3% every month. All sales will be in cash leading to positive cash flows whenever asset acquisition is
maintained. Profits will be reinvested into the business in hopes of future product and store expansions. If no
appropriate investment opportunities present themselves excess cash will be placed into the market through a
respected financial consultant.

 Important Assumptions
Key assumptions:

 Growth rate of 3% per month

 Daily sales: shoes six per day @ $80 each, and apparel 24 items/day @ $25 each
 Growth will be steady throughout the year.

Break Even Analysis:

Monthly Revenue Break-Even………………………………………………………………. $32,450

Assumptions:
Average Percent Variable Cost……………………………………………………………… 60%
Estimated Monthly Fixed Cost………………………………………………………………. $13,016