Location and Layout
Location
Fujairah city has about 130,000 inhabitants. The majority of the people in the city are aged between 15 and 40 years. More than 55% of the population is made up of employees, business people and other expatriates.
Fujairah City Center is a shopping mall set to provide retailers with a good business environment. It has about 34,000 square meters of space for retailers. Therefore, the facility is a strategic position for 7E Sports Company because the facility targets high and middle-income earners, expatriates, tourists and other professionals.
Accessibility to businesses at Fujairah City Center is easy because the city has a good link with other regions in the city and the world. For instance, modern highways have been developed to link the city with Khor Kalba, Masafi, Kalba, Abu Dhabiand Khor Fakkan. Public transport charges AED 4 per journey. They provide an easy access to the facility.
The rent price for each stall depends on its size and facilities/equipments therein. The 7E Sports Company will apply for a standard facility that costs approximately AED 7,000 per annum. This price is reasonable because the facility provides a unique and strategic position that attracts younger generations, middle income and tourists, which makes the largest target group for the company.
The company will employ approximately 26 employees to carry out the daily chores. The public relation department will have 6 professional employees, finance and corporation department will have 12 employees while marketing department will take 8 employees.
Salaries and wages will be provided on monthly basis for all employees. The wage rate depends on the position held, which is subject to education levels, experience and profession.
Layout
The company will occupy about 3,860 square meters of space at the facility, which provides adequate position for business. This will include spaces for stock display, cash sections, offices and other requirements.
In addition, the facility provides enough space for all kinds of people, including the disabled. For instance, to comply with the Americans with Disabilities Act, it is necessary to provide adequate space for people using wheel chairs, walking sticks for visually impaired people and a spacious waiting bay that has comfortable seats.
Moreover, the facility provides ergonomic support for all people, which includes ergonomic seats and chairs, tables and spaces for standing while viewing and purchasing products.
Management Team
Omar Hamour will have the overall responsibility of a chief executive officer at the company, while also acting as the manager of public relations. Abduraheem and Ahmed Salah will be the marketing manager and finance and operations manager respectively. Hamour is an experienced business manager, having obtained a bachelor’s degree in business management from the prestigious American international University at Dubai.
Ahmed Salah is a graduate of the American international University in Dubai, where he obtained a bachelors degree in economics and finance. Abduraheem holds a bachelor’s degree in economics and finance from the same university.
In addition, the company will hire three assistants in each of the three executive offices to help in the daily running of the business. Other employees will report directly to the three assistants. The three assistants will be required to have a strong background in finance, marketing and human relations in order to run the business with success.
The company will hire a legal firm to provide legal support and advice. The purpose is to seek legal advice and representation in financial and economic dealings as well as in court procedures, given that none of the partners has a legal background. In addition, the company will hire a financial expert, which will act as the advisory board in matters relating to finances and financial dealings.
Financial projections
The company is a retailer of sport products for people seeking to obtain local and foreign shoes, jerseys, caps, jackets, sporting kits and other types of items within the wide range of sporting fashion.
The price of the products will depend on the quality, manufacturer, supplier price, important expenses and competitor’s retail price. Therefore, the company will set a reasonable and competitive price for each product in order to provide the customers with a price set comparably lower than that of the competitors.
In addition, the number of units for each product will depend on the client’s needs. For instance, some clients are retailers who want products in bulk. Such people will obtain the products at a reduced price and a quantity discount of 2% compared to customers who are consumers.
In the first fiscal year, we expect to have an initial stock worth $180,000 and make sales worth $324,000, which will translate to a gross profit of $240,000. We expect the expenses to be approximately 60,000 and the net profit for the year to be $180,000. We also expect to have a gross profit margin of 13.3%.
The initial cash flow statement is expected to be a simple financial statement that will contain cash flow from operations worth $40,000, cash flow from investing worth $24,000 and cash from financing worth $8,000. Thus, we expect to have a net cash flow worth $8,000 in the first initial year. Nevertheless, we expect it to grow by 12% per annum in the subsequent financial year.
The initial balance sheet will be a simple book of account because the company will have limited assets such as cash worth $60,000, accounts receivable worth $32,000 and tools and equipment worth $140,000.
In addition, the company’s initial liabilities will include notes payable worth $25,000 and accounts payable worth $45,000. The capital stock and retained earnings will account for $30,000. This means that the closing value of assets in the first year is expected to be worth $135,000, which will be adequate to finance its debts and other liabilities.
Loan and investment proposal
The company will request an initial loan worth $110,000 from banks, but it is expected that the financiers will agree on a lesser amount by providing the loan in terms of accounts payable ($45,000) and notes payable ($25,000). The company will obtain the rest resources from personal and family contributions by the three partners in equal shares.
The purpose of these funds is to set up the company because it is a start-up business venture. The funds will be used to meet all the expenses including monthly wages and salaries, electricity, rent, transport and communication, water and sanitation and other expenses.
Although we expect the business to be highly profitable and remain legal throughout the year, we have considered an unlikely case of exit. In case a partner wishes to exit the venture within the first year, he will have to wait till the end of the financial year in order to obtain repayments, which will be made according to the value of contributions and the profits made within the year.
The exiting partner will get 100% of the contribution and 1/3 of the total profit or loss for the year. In addition, in case of a total dissolution of the venture, all the assets and profits will be made at the end of the year and each partner will obtain profits and cash out depending on equal terms because the contributions will also be made on equal basis.