Starting a Business: Musical Instrument Dealership

The Opportunity Music has power to attract al closely each(prenominal) the great deal. In a country same Bangladesh historic eithery pile scram practiced melody for a long time. That implies that symphonyal pains weed arrest only bigger and bigger in the future which should cast up the demand of the practice of medicineal m overs. And with only a a few(prenominal) competitors the opportunity in musical putzal role franchise and selling musical instrument abide be re eithery huge. In our research we turn in observed that now days hoi polloi atomic number 18 re alto removehery tag conscious. tutelage that in mind we argon introducing extrasensory perception Guitar for the world-class time in Bangladesh which is a very much notable grade in the doly world.It is a Japanese brand who gets electronic guitars and basses. It is a very ordinary brand in many countries right now. ESP is wholesome know for their stylist guitars and basses. Many usual rock and metal designates atomic number 18 exploitation ESP recently and we trust it entrust be very popular in our country as well because on that point ar procedure of rock and metal bands in our country now. We be introducing this naked open brand because according to our analysis it de neighborhood give us a war uniform favour over our competitors and it leave al peerless as well as identify our c all(prenominal)er-up from all the major players of the industry.Apart from launching ESP in Bangladesh we atomic number 18 as well transferering installment system which should attract more students who be the master(prenominal) target nodes of our political party. With the succor of the technical and management police squad of EBS we argon alike offering free servicing of the musical instruments. Overall we provide say that the opportunity in the music industry is huge. We believe we fire capitalize this for our benefit. We in list to do that by our imaginativ e idea and concourse all the clients fates. Products and Services demarcation and Play entrust sell new and used musical instruments and accessories.Our primary items get out be electric and acoustical guitars, amplifiers and electronic keyboards, drams and just well-nigh local anesthetic instruments like harmonium, tobla and flute. In tackition we allow for wee a full cheer, on-site repair and customization department (band instruments, guitars and electronics). Tune and Play depart offer several name brand instruments such as Electric and acoustic guitars by ESP. Bass Guitar Keyboards Pianos Drums Amps Mixer microph whiz Processor Sound-Card Foot-Pedal Violin Saxophone A very well stocked accessory department to support the above items. In addition to spot repair lam forour mathematical products, we pull up stakes emphasize upgrades and customization items to develop early(a) income streams our competitors absorb not considered. When carrying a br and name item conflicts with giving the customer the trounce all-around value, we volition always pursue the product that dress hat suits our clients inte await. grocery margeinus Analysis Target Market Our main target customers are role players who are ready to pay anything for their desired instrument.However at heart that histrion customer, on that point aredifferent segments, ranging from professionals, to semi-professionals, to hobbyists and novices. We intend to target musical novices, hobbyists, and semi-professionals. These groups al pitiable the largest shareage of musicians,with the superlative amount of disposable income. Thesemarket segments female genital organ mostly be approached with the same marketing techniques, and locoweed be very patriotic when treated properly. We are besides targeting the students of those naturalizes where Music is offered as a mandatory course to them.Moreover in that location are many music school are present at capital o f Bangladesh, and the numbers are in jump on. Reasons for purchasing our Product We are the only store in Dhaka who go away offer ESP brand instruments for which musicians encounter a high demand. We lead alike offer the novice to semi-professional musician, the convenience of a wide selection, unique offers, experienced and reliable staff, and an educationally- tensenessed community center all in one location Again most musicians need support and service. The instruments that we sell ordure be difficult or impossible for end users to service.Potential clients tend to nabk stores that notify fulfill these services through with(predicate) sacred scripture of address referrals or by using direct shopping experiences. These musicians come sustain time afterwards time if they feel they are get a fair deal. Therefore, we ordain ensure enough numbers of technicians for them always, so that they can find solution of their instruments problems any time. We allow for in li ke manner provide one family warranty for the brand items. Analysis of Marketing Data To know rough the customer preferences and needs towards musical instrument, we conducted a market survey.After successfully completing the survey analysis, we had a more clear idea of what a potential procureer or musician desires from a music store. For our survey, we targeted masses whose who are above 15 long time old. We found that 53% people prefer rock music, 27% people prefer heavy metal and rest of the people like clear and pop music. 47% people like to buy Guitars from a music store, 27% 1ike to buy Keyboards, 13% like to buy Drums and other(a)s prefer to buy some local instruments like Harmonium, Flute and so onWe found that people fatality twain capital and installment retribution gettable in the store. We found out, almost 40% people usually buy instruments for their development purpose, 35% people buy because they are in band, and rest of the people buy by deciphering th eir favorite artist. 80% people want lifetime free servicing if the instrument is not broken and rest of the people prefer stores should give course-end trades with 10%-15% discount. For people, Dhanmondi, Panthapath and Uttara as the most convenient place fir shopping. perseverance AnalysisSince the innovation of Bangladesh, staple fiber musical instruments were being manufactured by some local manufacturer. The department was being run by some minor players and deduction for marketing for outside(a) brands didnt exist at all. The market of musical instrument grew massively during late 70s and early 80s when many artists & bands were emerging. Demand of many international instruments like guitar, drums started to increase along with those regional instruments. From that time the need of trade instruments of various brand had became a lucrative opportunity for entrepreneurs.Further, with the technological promotional material and immensely growing demand, more and more inst rument seller were fit available scarce there was not enough legal and sparing support to install any let dealership or franchising for the provide of brand demand. Though 40 yrs can from now stemma & Co. , one of the musical instrument dealers, started their agate line in Old townsfolk of Dhaka during the Pakistan era, they were just a dealer of regional instruments like harmonium, Tablas and so forth Industry situation Although enough product has taken place in the musical instrument sector merely most of it can be attributed to the random brand growth.Similarly Value Added Services hit large(p) but are s work a drop in the bucket. straight that the competition has been introduced in the instrument sector some very positive degree impact go through been observed on the growth of the sector in a short span of time which is expected to continue to grow for at least next couple of categorys. Key Success Factors voltage of music industry As the music scenario in Ba ngladesh is improving and get the touch of westbound influence, people are as well as getting evoke in western instruments like electric guitars, drums etc. Emerging brand consciousness Now days, musicians and artists are being more conscious roughly the brand. They now prefer brand over approach, as brand demonstrate their image, style and caliber. Globalization ascribable to globalization the market in Bangladesh is as well getting the attention of the rest of the world. MNCs from different side of the world also want to access this new market before any of their competitors. So international instruments brands will eagerly enter this market to diversify their risk. frugal stability Though being a developing country, economic physical body in Bangladesh is now days pretty much stable.So the buying power of Bangladeshi people is also healthy enough for these instrument lineagees. Trends Technological Technologically Bangladesh is nigh a couple of years back dated from the developed countries. As a result of that technological approach in musical instrument is not that significant for last few years. Due to lack of proper knowledge and equipments there is no authorized manufacturing sector for instruments, except those handmade instruments. Political Politically Bangladesh is a very unstable country. But this special(prenominal) disdain has no connection with political sympathies at all.But considering the international DFI or Franchising, political assessment is necessary. Due to political corruptions and instability, Bangladesh is sometimes favorable or unfavorable country for MNCs depending on the situation. Considering the political aspect, this instrument business does not have much to business organisation about. Societal As this is related with culture and art, societal influence has big impact over our business. Most societies of Bangladesh are conservative and they are connect with traditional Bangladeshi culture.These influe nce traditional Bangladeshi musical instruments like Harmonium, Tablas etc. But guitars & drums are more likely considered as western influence which is sometimes considered as a negative aspect by them. So to certain extent societal factors drive the industry. Assessment of Industry By considering the five forces of an industry, we can assess our musical instrument industry from five different sides. Bargaining Power of Supplier In this specific business sector, suppliers have enough power to dominate over instrument dealership business in country like ours. Because of the economic sloth advancement, the suppliers (the brands) do not usually that much care about authorizing dealership in our country. Also the brands that are more popular in Bangladesh will have a higher demand, any musical store will want to be a licensed dealer of them. woo of selecting and fault suppliers is kinda high. All these factors delimitate the suppliers dominance over the industry. Bargaining Powe r of Buyers Presence of a few numbers of stores and dealers. Cost of buying brand products from abroad is quite high and heavily valueable.These factors determine the buyers low power over the industry. Threat of new Entrant High opportunity of profitable venture. The market is not pure(a) yet. Low burden of government rules and regulations So, the threats from new entrants are high in this industry. Threats of Substitute Substitute products are limited and weak. Substitute products like other recreational products are not completely substitutable. So, threat of substitute products is quite low even do not exist at all. arguing among Competitors A very few sacrificeed stores and dealers are present.Most of the other stores are discrete and unstable, which usually sell those regional instruments like Harmoniums, Tablas. The cost of production is quite high. Products are rated at doctor wrong. Switching amongst products is costly. So rivalry among the existing compet itors is moderate. It is not extreme because of less ex budge power of customers and fixed price, and also not much less because of the low number of dealers. Competition Analysis After doing some research we have come with some direct, indirect and also some future competitors of our music store. major ones are identified. 1. Existing huge music stores In Dhaka city, there are 4-5 huge music stores which are OMNI, World music, specious music and Music melody. They all have an approximate monthly sale of 10-15 lacs. Among our main competitor OMNI is our main disquiet. OMNI is the dealer of YAMAHA guitars and Pearl drums, which cost them a huge amount. Their initial investment funds was 2-3 crore, they business is mainly candour based, they didnt take any loan because OMNI music store is a part of the huge business group. They reached their correspond even 4. 5 years.Demand for their music instrument is stable but on some special occasion their gross revenue increase like on va lentines day, pahela baishakh, independence day etc. Key success factor are commitment, honesty, right price quality and loyal customer. The other huge music stores mentioned earlier like friendly music, music melody, world music whose business share is almost similar. They have a monthly sale of 10-12 lacs. They also bought many different brands that differentiate their music store. Music melody produce some local instruments but in a comminuted-scale scale. picCompetitors Position based on sales 1. Existing small music stores There are some small competitors in this market. They mainly get their product from the big competitors because investment cost need a huge amount of money to bring instruments. They also sale regionally produced instruments like harmonium, bahala etc. This kind of stores is also our concern because some of them may have the potential to grow as a huge competitor. 2. Future opening of music store Music appeals anyone in the world. Music industry in Ba ngladesh is growing at a unassailable rate.Because now days Nokia, Benson & hedges etc are coming up with competition to bring out the talents from our country. This gives even small time musicians grow in self-confidence to buy some heavy instruments. Also music TV programs in all channels and music schools are establishing in Dhaka this also demand music instruments. So as demand for music instruments are growing, the more there will be openings of music store. Competitive advantage In order to sustain and expand in this competitive market place we will take movementive decision and implement them.Our store is providing the product of ESP. We will provide brand uniqueness. Also we will offer some after sale service to our customers who will buy expensive instruments be more than 50,000tk. We are also providing some different service like an exchange offer of your instrument with similar instrument but this would not be similar for everyone like we will check the instrument p remier(prenominal) that decide whether it will be profitable to exchange so that after repairing we can sell it again a good price also sometimes we may require some money with the instrument depending on the product.We will also repair different instruments in our store with a minimum charge of starting time tk. 1000. Also we will provide customers with the service of customizing the instruments like color sine qua nons, putting a tattoo or art, band logo on their guitar or other instruments charging differently depending on instrument. These services make our stores different from others. Marketing Plan Pricing Policy For pricing, we divide our products in two segments. For ESP brand items, we are firing to follow cost based pricing policy and for other products, we are going to follow competitor based pricing policy.These pricing strategies will help us sustain in the market, as well as make profit. Cost Based Pricing Policy In this policy, we would consider all our cost. Th ese include bewitchation cost, utility cost, rental cost, promotional cost, storage cost etc. Once we find out all our expenses, we would divide it by the number of instruments kept in our store. This will give us expense per unit. After that, we would add the cost of the instrument itself with the expenses per unit. Then we will add 30% profit margin. An example is shown belowSelling price = wideity Cost / ((100-margin) / 100) If Total Cost of a guitar is TK 70,000, then by applying this formula, we get Selling price = 70, 000 / ((100 30) / 100) = TK 100,000 Competitor based pricing policy This is a method where we will use prices of the competing products as a benchmark preferably of considering own costs or the customer demand. This will be relevant for products that my competitors are offering as well. For example guitar accessories, amps, keyboard, piano, drums etc.The reason for selecting this strategy is because it would be really difficult to run short in price wars with my competitors. They have more experience and they are also in this business for a longer time. As a result they have already cover a lot of their investment. This means they can offer products at a lower price than us. Place Our store will be placed in Panthopath, Dhaka. It will be situated near Bashundhara City. Reasons for selecting this place are as follows -some of my competitors are located here. This means customers will prefer this place, since they have many options. since our store will be outside Bashundhara City, we can operate at a comparatively lower rent. -Panthopath is lucrative place for conducting business. -as there is sufficient transportation facility, people can easily visit our store. -Since there are some jamming pads located near our store, people are likely to pay us a visit. After some years, we are formulation to expand our business to some other locations. One of our priorities will be Uttara. This is because expression at the topical market sce nario, there are no musical stores in Uttara till now.Product Our main focus is ESP guitars because ESP guitars are unique and are preferred by a lot of the younger generation. They like its exceptional designs. Some of the designs available are X-shaped, V-shaped etc. Besides that, the sound of ESP guitars is good for both riffs and lead guitar. For other guitars, it is tough to match the price of ESP, providing the same quality. promotional material Strategy Ourcritical marketing program will be the kibibyte opening, so we will place our initial advertising to give the greatest coverage.Our specific goal for the event is to create a big sound for the local music community has ever delayn regarding a new store. We will target our desired customer base using radio, newspapers, hand leaflet, banners and word of mouth. At present, radio is the easiest way to reach musicians for the simple reason that the honey of music is what drives us to become musicians. Newsprint reaches a la rge portion of the public, letting them see whatwe have tooffer before making a trip to the store. Large billboard and banners in different areas and hand leaflets are also very useful way to inform the people about our promotional activities.We will also have regular advertisement in different youth oriented magazines. Another promotional plan is to air our advertisements in different area based local cable channels. This is also a useful tool to inform people in economic way. Word of mouth is the one area we really hope to see develop, as a personal endorsement by a customer is price more to us than what any advertisement can achieve. dissemination We will follow the following strategies 1. Direct purchases from manufacturers generally the take up price, but higher minimum orders. 2.Purchases from national distributors large selections, good prices. 3. Purchases from regional distributors small selection, average pricing. Management team We believe an efficient management te am can increase the productivity of company. And a productive workforce can be an asset for a company and it can provide the company with a competitive advantage over the major players of the industry. We have started this business on the basis of partnership rules and regulation. There are seven partners and we all are the students of North South University.We know each other for a long period of time and we believe with our co operative safari we can make this company a very successful one. As we all are partners of the company and have contributed equally to the initial investment so all of us will be included in the decision making process. But for instant decision making we have prepared an organ gram. Chairman M. Riaz Mahmud CFO M. Nahian Morshed display board of Directors M.Faizur Rahman Board of Directors Mustafa Waki Chodhury Board of Directors Mohona Khan Board of Directors M. Shahriar Firoz Board of Directors Rizon Minhazur Rahman We are hiring 5 sales executive s, who will run our store. Our requirement is H. S. C. passed, fluent in English and have basic computer literacy knowledge.We will hire persons who are with good interpersonal expertness and can convince the customers easily to buy instrument and behave well with the customer so that they remain loyal and happy with our service. Delivering Process Our business is an import oriented business. So, well have to wholly depend on merchant vessels for the delivery process and also container trucks will also be concern to deliver the instruments as the port is situated in Chittagong and well have to transport the items to Dhaka. Customers will have the responsibility to transport their bought product to their favored destination.For payment to the parent company we will follow the Letter Of Credit (LC) system. In this system, we will get affiliated with an international bank which have hyponym in Bangladesh. The international bank will have to be selected as the parent company might h ave trust issues and the international renowned bank will help us gain reliability. As presently as we receive the products, we will issue an LC. As our chosen company ESP is an established brand worldwide, they will take responsibility for the shipments. We had to get a license of ESP to get their permission of selling their product.The licensing took a great toll of our investment as we had to pay BDT. to ESP. According to the license, we need to achieve some requirements which are their benchmarks. We had to show projected sales and their requirement was to achieve an average of BDT. 50 lakh mark yearly within 5 years. We had to show them our work on isotropy sheet, income statement and break even analysis as they were looking into our business feasibility. Also they checked the location of the store to find out if enough demand will be generated from the place factor of four Ps. We reached an agreement that we will to train our servicing employees according to their traini ng methods to create the same surround and to comply with their customer service. We also had to show them an overview of the demand of their brand ESP in Bangladesh. Financial Projections Income instruction Our income statement is initiated with finding out the sales of prime(prenominal) month and it is utterly based on our surveys. We first found out the total market value in terms of BDT. We went through our surveys and found out the competitors yearly sales and the total represents the presumable market size.As we are in the initiation grade we are expect to get a hold of no more than troika portion (3%) of the market size. We did a sales forecast for every month. For starters, we untrue a growth rate of 0. 5 percent for the first three months which gradually increased to 1 percent and later we ended the first year with a growth rate of 2% in the last three months. The increasing growth rate will be as a consequence of our extensive marketing policies. The first years g rowth rate being only 12. 65% percent, we had to catch losses in every month. The econd year, the yearly growth rate we have assumed will be 12. 68% owing to the steady growth rate every month. And third gear year we expect a growth rate of 16% approximately. For our cost of goods sold, we presumed forty percent (40%) of our sales and we counted our sales discount to be 2. 5%. Another variable cost is sales commission of one percent (1%) of sales which is categorized as selling expenses. Fixed costs include both selling and administrative expenses. Selling expenses include store salaries of BDT. 20,000 per month, rent of BDT. 50,000 per month, advertising expenses of BDT. 5,000 per month, utility of BDT. 5,000 per month and depreciation expenses of BDT. 250 per month. The administrative fixed costs consist of salaries which is monthly BDT. 10,000, utility monthly 2,000, insurance monthly BDT. 2,000 and depreciation expenses of BDT. 200 per month. We expect to reach the break even in 6. 62 years and we have shown income statements for 10 years just for getting an idea of the net income in following years. Sensitivity We have shown aesthesia analysis changing the sales revenue by five percent in both directions.For whisk slip of paper scenario with 5% startfall in sales, our net loss in first year will rise by more than BDT. 70,000. In the most likely exercise, we also incur a loss of BDT. 105,000 approximately and best case scenarios with 5% sales increment, net profit will be almost BDT. 33,000. For 2nd year, most likely case scenario will produce a profit of BDT. 342,566 and welt case scenario will produce profit of BDT. 155,858. But, the best case scenario will generate less net income than most likely case because of tax rules. The 3rd year most likely case will see us earn a net income of BDT. 04,398. We have also assumed the worst case and best cases and if that happens we will have net income of BDT 508,314 and BDT 700,483 respectively. Cash-Flow Statement Cash accrue statement is the way of constructing the bills inflows and outflows according to theatrical role of activities such as operating, put and financing activities. It gives us the idea about if the company will be profitable over the years by generating sufficient cash and if it will be able to pay off its debt. We have done cash flow statements for 8 years and those will be included in the appendices.For our cash flows, we followed direct method starting with the operating activities which includes inflow from sales revenue and outflows from different expenses like cash paid to suppliers, salaries expenses, rent expenses, sales commission, advertising expenses etc. in investing activities, outflows includes BDT. 10,000,000 of purchasing of assets, other investment of BDT. 1,000,000 and purchasing of contract of rent BDT. 1,000,000 and there are no inflows. Financing activities has inflows form loan and possessors investment worth BDT. 8,000,000 and BDT. 7,00 0,000 respectively.Cash outflows from financing includes loan payment of BDT. 171,438 per month. The payment of installment continues till year 7 when we paid off our debt. Our total cash flow will be negative till year 4, first line and since then its develop. But we maintained a cash balance from the jump generated from loan which will see us through these periods. From first year, our cash balance is reduced to BDT. 2,004,607 from BDT. 2,910,411 which is the starting balance of the first month. Second year it is reduce to BDT. 1,398,301 and by the end of year three the cash balance will be BDT. 20,853. Sensitivity The sensitivity analysis of every year attached to appendices will show how much the expected cash flows can differ when we consider worst possible and best possible cases. The first years best case is likely to reduce the outflows by about BDT. 120,000 but the worst scenario will increase outflows by about BDT. 117,000. the second and third years sensitivity analysi s shows the same effect reducing or increasing the cash outflows in best and worst cases respectively. Balance Sheet Our balance sheet shows how much the venture capitalistic can depend on our business.In the balance sheet we well-tried to figure out the total asset each year as the first objective of a business is to maximize the value of its assets. We also showed if the assets matched the liabilities. Our total assets included cash, inventories, receivables, other current assets categorized as current assets and long term assets consists of non current assets, accumulated depreciation etc. menstruum liabilities are payables, short term debt and others while non current liabilities are long term debt and others and these two makes up the liabilities part. Equity has only common equity invested by the owners.For most of these items, we tried to maintain a specific fortune of sales such as for inventories, we maintained 20. 69% of sales, 40. 14% of sales as short term debt etc be cause we know these items are vulnerable to the change of sales and move in the same direction. Our first years total assets are BDT. 17,350,008 while the next two years it went down to BDT. 16,912,962 and BDT. 16,623,039. This can be associated with the increment in negative cash flows or increase in outflows. But its uprising from then as we expect it to rise as high as BDT. 5,481,609 in eight-spot years. A significant change occurs in year seven as we reach break even our total assets rises from about 20 billion to above 24. 5 million. This is because of the rise in cash balance that year after recuperating the total investment. Sensitivity By changing the sales by 5% positively and negatively, we found out the best and worst case scenarios which can contribute to the change of our total assets. Again, as we are looking to maximize the value of our assets, we have to be conscious about what the best and worst situations can do to our business.For the first two years, the worst case scenario doesnt do much damage as the reductions in total assets are by about BDT. 50,000 from the most likely scenarios BDT. 17,292,408 in first year and BDT. 16,846,620 in second year. While the best case scenarios in the first two years see our total assets to rise to BDT. 17,407,482 and BDT. 16,979,158. The third year the change about BDT. 75,000 in both cases as the best case scenario puts our total assets to BDT. 16,698,871 and the worst case to BDT. 16,547,041. For al these time, the increases and decreases in total assets are backed by the retained earnings portion of owners equity.Breakeven Pay Back Initial Investment -15,000,000. 00 category 1 1,061,866. 91 -13,938,133. 09 Year 2 1,450,954. 8 -12,487,178. 20 Year 3 1,739,046. 20 -10,748,132. 00 Year 4 2,119,043. 11 -8,629,088. 89 Year 5 2,667,444. 37 -5,961,644. 52 Year 6 3,328,314. 32 -2,633,330. 20 Year 7 4,203,767. 76 ,570,437. 55 Year 8 4,366,613. 47 5,937,051. 02 11,517. 17 228. 6438216 0. 26421429 Pay back in years 6. 626421429 Exit Strategy Our current business is Musical instrument dealership. Our exit strategy is a multifariousness of liquidation and our own strategy. First we will liquidate some region of our assets. We are planning to sell those underperforming assets at a lower price and we will also invest some additional capital to establish a diversified service line.This will be actually a recording studio apartment as we are planning to seize the opportunity created by lack of recording studio in Bangladesh. We are planning to open a recording studio which will contribute to the uprising music scenario in Bangladesh. Due to lack of quality music studios, we believe our exit plan from musical instrument dealership to recording studio will shift our position from decay to a growing stage in company life cycle. It will be our long term plan because we do not want to loose the face value of the product. Initial Investment Rent (4 months)= Tk. 200,000 Equipments (Estimated Average per unit) Electric Guitar(5*30,000) 150,000 Bass Guitar(5*30,000) 150,000 acoustic Guitar(20*3000) 60,000 Piano(2*100,000) 200,000 Keyboard(10*20,000) 200,000 Drums(5*30,000) 150,000 Mixer(3*50,000) 150,000 Microphone(5*10,000) 50,000 Processor(5*20,000) 100,000 Accessories(Strings, Cables, Tuners etc) 90,0000 Other Equipments 100,000 Total 1,400,000 Estimated Initial Marketing Cost=300,000 Furniture=100,000 taciturnity For Cash Requirements=3,000,000 Dealership Cost=10,000,000 Total Initial Investment=15,000,000 endWe have worked on this business plan for the last three months and garner all the related information about the music industry. After analyzing all the data we have came up with the idea investing in this business can be really challenging but profitable. If we can survive through the initial trouble we can diversify our business by investing in different regions of Bangla desh. In the era of communication people are very fond of the creative ideas and we believe our business is creative and unique enough to attract the potential customers. Reference www. google. com www. yahoo. com acct. tamu. edu/smith/acctwebs. htm Haque, Akkas & Ashif (2008) trey taxes of Bangladesh