Table of Content

    Do you want to start baby clothes business?

    Are you planning to start a baby clothes business? Well, it is undoubtedly a profitable business considering the fact that around 4 million babies are born each year in the United States. Secondly, the clothing demand of babies is far too much as compared to grown-ups hence the rate of return you will get after investing in this business is simply amazing.
    The biggest advantage in starting this business is that baby clothing is one of the basic necessities of people and it doesn’t experience a downfall at any time of year, as compared to many other businesses. Before you move on to opening a baby cloth business, you will have to prepare a comprehensive business plan which will establish the basis of your company’s future operations and decisions. It will help you determine the types of products you will be selling; who your target customers will be and how you will allocate your resources for the required equipment or inventory.
    If you are wondering how to write an effective business plan then here we are providing you the business plan for a baby clothes business startup named ‘The Baby Stop’.

    Executive Summary

    2.1 The Business

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    The Baby Stop will be an American organic and eco-friendly baby clothes manufacturer located in the Queens, the second most populous borough of the New York City. New York City is itself the most populous American city housing more than 8.5 million people. We will be strategically located in an ideal location for a baby clothing business.
    The business will be owned and operated by Carl Dan who has been serving in the clothing industry for the last 15 years. The business will be primarily involved in the large-scale production of baby clothes including regular as well as high end baby boutique clothes.

    2.2 Management

    The Baby Stop will be initially launched in two units, a production facility involved in the manufacture of baby clothes and a retail store for selling the products. The retail store will not only act as a display for encouraging sales but it will also oversee the distribution of clothes among other retailers. The retail store will be located in the central business district of the city at 45 minutes from the production facility, located in the industrial zone.
    Dan will manage and control the overall operations of both the production unit as well as the retail store. His father Kraig Dan, who has been serving at various managing positions in retail giants like Wal-Mart, will join his son in as the store manager and will also help him throughout the process.

    2.3 Customers

    The company aims to serve the residential and commercial zones of the New York City. Our customers will be either the local residents near our retail center or the people living in other areas of the city. The first group will buy our products directly from us while the other will buy through various retail stores scattered throughout the city.

    2.4 Target of the Company

    The company aims to manufacture and market unique, modern, and high-class baby clothes to our target customers. Dan’s target is to become the best baby clothes manufacture within next five years of the launch.

    Baby Clothes Business Plan Sample - 3 Years Profit Forecast

    Company Summary

    3.1 Company Owner

    Carl Dan, the owner of the company, studied Textile Engineering from the Auburn University, Alabama, and business administration from the Harvard University. After his studies, he worked in several clothing companies at various positions for more than 15 years. For the last 7 years, he had been serving as the production manager of baby clothing department in Dolce & Gabbana, US. Dan’s engineering, as well as management skills, are well-known among the high executives of the clothing industry.

    3.2 Why the Business is being started

    Dan had been serving at executive positions in clothing industries ranging from startups to multinational manufacturer. During his career, he had observed the environmental impact of the clothing industry, especially the toxin wastes generated during the production process. For many years he had been researching on his own to find out the best possible ways of environment-friendly production. He wanted his own place to implement the innovative ideas in his mind which could not be applied while working in some other company, even at executive positions. That’s why Dan had been planning this unique startup for the last couple of years. Furthermore, he settled on this business due to its extremely high market demand which will be discussed shortly.

    3.3 How the Business will be started

    The Baby Store will be initially launched as a small business clothing store mainly operating via a production facility and a baby boutique store. Dan has planned everything about his business and has hired experts from various fields to help him craft a detailed map about it. The financial experts have forecasted following costs for expenses, assets, investment group for business plan, and loans for the Start-up.

    Baby Clothes Business Plan Sample - Startup Cost

    The detailed start-up requirements, start-up funding, start-up expenses, total assets, total funding required, total liabilities, total planned investment, total capital and liabilities as forecasted by experts, is given below:

    Start-up Expenses  
    Legal $75,500
    Consultants $0
    Insurance $62,750
    Rent $22,500
    Research and Development $42,750
    Expensed Equipment $42,750
    Signs $1,250
    TOTAL START-UP EXPENSES $247,500
    Start-up Assets $0
    Cash Required $322,500
    Start-up Inventory $52,625
    Other Current Assets $222,500
    Long-term Assets $125,000
    TOTAL ASSETS $121,875
    Total Requirements $245,000
    START-UP FUNDING $0
    START-UP FUNDING $273,125
    Start-up Expenses to Fund $121,875
    Start-up Assets to Fund $195,000
    TOTAL FUNDING REQUIRED $0
    Assets $203,125
    Non-cash Assets from Start-up $118,750
    Cash Requirements from Start-up $0
    Additional Cash Raised $118,750
    Cash Balance on Starting Date $121,875
    TOTAL ASSETS $0
    Liabilities and Capital $0
    Liabilities $0
    Current Borrowing $0
    Long-term Liabilities $0
    Accounts Payable (Outstanding Bills) $0
    Other Current Liabilities (interest-free) $0
    TOTAL LIABILITIES $0
    Capital $0
    Planned Investment $0
    Investor 1 $312,500
    Investor 2 $0
    Other $0
    TOTAL PLANNED INVESTMENT $695,000
    Loss at Start-up (Start-up Expenses) $313,125
    TOTAL CAPITAL $221,875
    TOTAL CAPITAL AND LIABILITIES $221,875
    Total Funding $265,000

    Services for customers

    The Baby Stop will produce following types of baby clothing for our customers

    • Leggings and pull on pants
    • One-piece outfits
    • Pajamas and sleepers
    • Jackets and sweaters
    • Shirts and pants
    • Wearable blankets

    We will also sell other baby products in our store along with the baby clothes sale. These products will not be manufactured by us yet their presence will encourage the sales of our products. Some of those products include

    • Fleece-wears and snow-suits for babies
    • Shoes, socks, booties, and hats for babies
    • Baby bags, cradles, walkers, and feeders

    Marketing Analysis of baby clothes business

    The most important component of an effective business plan is its accurate marketing analysis that’s why Dan acquired the services of marketing experts to help him draft a good baby boutique business plan. After identifying the local market trends in the New York City, the marketing experts and analysts also helped him to select the best site for opening the baby boutique store.
    The success or failure of a startup totally depends upon its marketing strategy for business which can only be developed on the basis of accurate marketing analysis. There are four main steps to carry out an accurate marketing analysis which are to identify the current market trends of your business, identify your target audience and potential customers, set out the business targets to achieve, and finally set the prices of your products or services in accordance with the first three steps.

    5.1 Market Trends

    The clothing industry is one of the few industries which has seen a tremendous increase in revenue with time. The U.S. clothing market is the largest in the world and was valued at a staggering amount of $359 billion in 2015. The clothing manufacturing industry employed around 90,000 people in the United States in 2015. The most interesting aspect of this industry is its dynamic nature. This industry is always changing, trying to adapt itself to the latest customer trends and new technology that will allow their shopping experience to be more ergonomic and enjoyable.
    The clothing market is subdivided according to the various age groups of its consumers, with the most dominant being baby clothing. The main reason behind the increased demand for baby clothing industry is that babies need a lot of clothes, contrary to grown-ups since their clothes frequently get dirty and need to be changed time to time. Moreover, the population is always on rising thus creating an ever-increasing demand for baby clothing products. For instance, the birth rate in the New York City was 13.6% as of 2015. These stats show a baby clothing store business can be immensely profitable provided that you market it successfully.

    5.2 Marketing Segmentation

    For developing a good boutique business plan it was crucial to analyze the market segmentation of the future consumers of our baby products. A successful and efficient marketing strategy can only be developed after we completely know our potential customers. Our experts have identified the following type of target audience which can become the future consumers of our baby clothes:

    Market Segmentation - Baby Clothes Business Plan Sample

    The detailed marketing segmentation of our target audience is as follows:

    5.2.1 Individual Customers

    One of the biggest consumers of our products will be the community living in the residential zone of the New York City, especially the residents of the Queens borough. These individual customers will buy our products directly from our store which is located in the main commercial market of the neighborhood. These customers are pretty well-off and will thus contribute a substantial portion of our sales hence they have a major role in deciding our strategies and policies. We will also develop various sales packages to attract these customers.

    5.2.2 Departmental Stores

    The Baby Stop will also supply its products to various departmental stores and mega malls located throughout the New York City. There are thousands of retail malls and departmental stores in the New York City and most of them also sell baby clothes of various brands. These departmental stores will display our products along with the products of our competitors and will be our second-biggest consumer after the individual customers.

    5.2.3 Orphanages

    We will also target the hundreds of orphanages located in Queens. These orphanages house thousands of babies each year and are constantly in need of their clothes and other necessities. To encourage a bulk sale, we will offer discounts on various packages and will also provide them transportation facility to deliver clothes to them.
    The detailed market analysis of our potential customers is given in the following table:

    Market Analysis
    Potential Customers Growth YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 CAGR
    Individual Customers 34% 11,433 13,344 16,553 18,745 20,545 13.43%
    Departmental Stores 48% 22,334 32,344 43,665 52,544 66,432 10.00%
    Orphanages 18% 8,322 9,455 10,655 12,867 14,433 15.32%
    Total 100% 42,089 55,143 70,873 84,156 101,410 9.54%

    5.3 Business Target

    We aim to become the best baby cloth manufacturing company of the New York City within next five years of our startup. Our main business targets to be achieved as milestones over the course of next three years are to achieve the net profit margin of $25k per month by the end of the first year and to balance the initial cost of the startup with earned profits by the end of three years.

    5.4 Product Pricing

    On average our products will be 10-15% cheaper than our competitors. The reason behind our pricing policy is to achieve the minimum attractive rate of return while attracting maximum customers towards us.

    Strategy

    Dan carried out an extensive research before developing an effective sales strategy for the company. Being experienced in this industry he knew how to start a baby clothing business yet he took help from the experts so as to make this venture successful.
    The sales strategy developed by our experts is as follows:

    6.1 Competitive Analysis:

    Clothing and apparel is one of the biggest industries of the United States and nearly all major clothing giants are US-based that’s why we have a really tough competition ahead of us.
    But we will not come unprepared. Dan has made all preparations to shake the clothing industry from its very basis by his environment-friendly methods of production, releasing zero pollutants. Dan’s idea has gained widespread attention and appreciation not only from the United States but also around the world. Our second biggest competitive edge is that our products will be 100% organic, high-quality and will cost lesser than our competitors’.

    6.2 Sales Strategy

    Our experts have come up with the following brilliant ideas to advertise and sell ourselves.
    • We will carry out a large-scale social media campaign for our advertisement.
    • We will allow our customers to buy our products online through our Facebook page. Customers can also pay online.
    • We will carry out seminars to emphasize the importance of environment-friendly production methods that will encourage customers to buy our products for the great cause of reducing pollution.
    • We will initially offer discounts and gifts on our products present in several retail stores to encourage sales.

    6.3 Sales Forecast

    Considering our innovative idea and the quality of our products, our sales pattern is expected to increase with years. By analyzing our market segmentation strategy, our experts have forecasted the following sales on a yearly basis which are summarized in the column charts.

    Unit Sales - Baby Clothes Business Plan Sample

    The detailed information about sales forecast, total unit sales, total sales is given in the following table:

    Sales Forecast      
    Unit Sales Year 1 Year 2 Year 3
    Leggings and pull on pants 187,330 260,320 258,240
    One-piece outfits 802,370 815,430 823,540
    Pajamas and sleepers 539,320 770230 1,002,310
    Jackets and sweaters 265,450 322,390 393,320
    Shirts and pants 1,435,320 1,250,430 1,762,450
    Wearable blankets 134,240 394,340 842,230
    TOTAL UNIT SALES 3,364,030 3,813,140 5,082,090
    Unit Prices Year 1 Year 2 Year 3
    Leggings and pull on pants $140.00 $150.00 $160.00
    One-piece outfits $600.00 $800.00 $1,000.00
    Pajamas and sleepers $700.00 $800.00 $900.00
    Jackets and sweaters $650.00 $750.00 $850.00
    Shirts and pants $140.00 $120.00 $100.00
    Wearable blankets $1,150.00 $1,300.00 $1,450.00
    Sales
    Leggings and pull on pants $214,800 $274,000 $333,200
    One-piece outfits $120,050 $194,500 $268,500
    Pajamas and sleepers $50,110 $71,600 $93,000
    Jackets and sweaters $139,350 $194,600 $249,850
    Shirts and pants $62,350 $72,300 $82,250
    Wearable blankets $229,500 $365,500 $501,500
    TOTAL SALES
    Direct Unit Costs Year 1 Year 2 Year 3
    Leggings and pull on pants $0.70 $0.80 $0.90
    One-piece outfits $0.40 $0.45 $0.50
    Pajamas and sleepers $0.30 $0.35 $0.40
    Jackets and sweaters $3.00 $3.50 $4.00
    Shirts and pants $0.70 $0.75 $0.80
    Wearable blankets $3.00 $3.50 $4.00
    Direct Cost of Sales
    Leggings and pull on pants $98,300 $183,000 $267,700
    One-piece outfits $66,600 $119,900 $173,200
    Pajamas and sleepers $17,900 $35,000 $52,100
    Jackets and sweaters $19,400 $67,600 $115,800
    Shirts and pants $27,700 $69,200 $110,700
    Wearable blankets $64,200 $224,700 $385,200
    Subtotal Direct Cost of Sales $294,100 $699,400 $1,104,700

    Personnel plan

    Usually, a startup faces many problems in its initial stages. In fact, the problem is not how to start a clothing boutique or some other business, the actual problem is to find the best team for your company. Dan has developed following personnel plan for his company.

    7.1 Company Staff

    Dan will act as the Chief Operating Officer of the company. The company will initially hire following people:

    • 1 General Manager to manage the operations of the production unit.
    • 2 Administrators / Accountants to maintain financial records.
    • 2 Engineers responsible for operating and maintaining production unit.
    • 4 Sales and Marketing Executives responsible for delivering products to retailers and discover new ventures.
    • 30 Field Employees for operating the production unit and retail store.
    • 4 Drivers to transport products
    • 1 Front Desk Officer to act as a receptionist

    To ensure the best quality service, all employees will be selected through vigorous testing and will be trained for a month before starting their jobs.

    7.2 Average Salary of Employees

    The following table shows the forecasted data about employees and their salaries for next three years.

     Personnel Plan      
    Year 1 Year 2 Year 3
    General Manager $85,000 $95,000 $105,000
    Accountant $45,000 $52,000 $59,000
    Engineers $66,000 $73,000 $80,000
    Sales and Marketing Executives $145,000 $152,000 $159,000
    Workers for Facility $55,000 $65,000 $75,000
    Field Employees $410,000 $440,000 $480,000
    Drivers $60,000 $63,300 $70,000
    Front Desk Officer $20,000 $23,300 $30,000
    Total Salaries $801,000 $868,600 $953,000

    Financial Plan

    Dan hired experts to incorporate the financial aspect in the clothing business plan. The financial plan outlines the development of the company over the next three years.

    8.1 Important Assumptions

    The company’s financial projections are forecasted on the basis of following assumptions. These assumptions are quite conservative and are also expected to show deviation but to a limited level such that the company’s major financial strategy will not be affected.

     General Assumptions      
    Year 1 Year 2 Year 3
    Plan Month 1 2 3
    Current Interest Rate 10.00% 11.00% 12.00%
    Long-term Interest Rate 10.00% 10.00% 10.00%
    Tax Rate 26.42% 27.76% 28.12%
    Other 0 0 0

    8.2 Brake-even Analysis

     Brake-Even Analysis  
    Monthly Units Break-even 5530
    Monthly Revenue Break-even $159,740
    Assumptions:
    Average Per-Unit Revenue $260.87
    Average Per-Unit Variable Cost $0.89
    Estimated Monthly Fixed Cost $196,410

    Brake-even Analysis -Baby Clothes Business Plan Sample

    8.3 Projected Profit and Loss

    Projected Profit and Loss - Baby Clothes Business Plan Sample

     Pro Forma Cash Flow      
    Cash Received Year 1 Year 2 Year 3
    Cash from Operations
    Cash Sales $40,124 $45,046 $50,068
    Cash from Receivables $7,023 $8,610 $9,297
    SUBTOTAL CASH FROM OPERATIONS $47,143 $53,651 $59,359
    Additional Cash Received
    Sales Tax, VAT, HST/GST Received $0 $0 $0
    New Current Borrowing $0 $0 $0
    New Other Liabilities (interest-free) $0 $0 $0
    New Long-term Liabilities $0 $0 $0
    Sales of Other Current Assets $0 $0 $0
    Sales of Long-term Assets $0 $0 $0
    New Investment Received $0 $0 $0
    SUBTOTAL CASH RECEIVED $47,143 $53,651 $55,359
    Expenditures Year 1 Year 2 Year 3
    Expenditures from Operations
    Cash Spending $21,647 $24,204 $26,951
    Bill Payments $13,539 $15,385 $170,631
    SUBTOTAL SPENT ON OPERATIONS $35,296 $39,549 $43,582
    Additional Cash Spent
    Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
    Principal Repayment of Current Borrowing $0 $0 $0
    Other Liabilities Principal Repayment $0 $0 $0
    Long-term Liabilities Principal Repayment $0 $0 $0
    Purchase Other Current Assets $0 $0 $0
    Purchase Long-term Assets $0 $0 $0
    Dividends $0 $0 $0
    SUBTOTAL CASH SPENT $35,296 $35,489 $43,882
    Net Cash Flow $11,551 $13,167 $15,683
    Cash Balance $21,823 $22,381 $28,239

    8.3.1 Profit Monthly

    PROFIT MONTHLY - Baby Clothes Business Plan Sample

    8.3.2 Profit Yearly

    PROFIT YEARLY - Baby Clothes Business Plan Sample

    8.3.3 Gross Margin Monthly

    Gross Margin Monthly - Baby Clothes Business Plan Sample

    8.3.4 Gross Margin Yearly

    Gross Margin Yearly - Baby Clothes Business Plan Sample

    8.4 Projected Cash Flow

    The following table shows detailed data about pro forma cash flow, subtotal cash from operations, subtotal cash received, sub-total spent on operations, subtotal cash spent.

     Pro Forma Profit And Loss      
    Year 1 Year 2 Year 3
    Sales $309,069 $385,934 $462,799
    Direct Cost of Sales $15,100 $19,153 $23,206
    Other $0 $0 $0
    TOTAL COST OF SALES $15,100 $19,153 $23,206
    Gross Margin $293,969 $366,781 $439,593
    Gross Margin % 94.98% 94.72% 94.46%
    Expenses
    Payroll $138,036 $162,898 $187,760
    Sales and Marketing and Other Expenses $1,850 $2,000 $2,150
    Depreciation $2,070 $2,070 $2,070
    Leased Equipment $0 $0 $0
    Utilities $4,000 $4,250 $4,500
    Insurance $1,800 $1,800 $1,800
    Rent $6,500 $7,000 $7,500
    Payroll Taxes $34,510 $40,726 $46,942
    Other $0 $0 $0
    Total Operating Expenses $188,766 $220,744 $252,722
    Profit Before Interest and Taxes $105,205 $146,040 $186,875
    EBITDA $107,275 $148,110 $188,945
    Interest Expense $0 $0 $0
    Taxes Incurred $26,838 $37,315 $47,792
    Net Profit $78,367 $108,725 $139,083
    Net Profit/Sales 30.00% 39.32% 48.64%

    8.5 Projected Balance Sheet

    The following projected balance sheet shows data about total current assets, total long-term assets, total assets, subtotal current liabilities, total liabilities, total capital, total liabilities and capital.

     Pro Forma Balance Sheet      
    Assets Year 1 Year 2 Year 3
    Current Assets
    Cash $184,666 $218,525 $252,384
    Accounts Receivable $12,613 $14,493 $16,373
    Inventory $2,980 $3,450 $3,920
    Other Current Assets $1,000 $1,000 $1,000
    TOTAL CURRENT ASSETS $201,259 $237,468 $273,677
    Long-term Assets
    Long-term Assets $10,000 $10,000 $10,000
    Accumulated Depreciation $12,420 $14,490 $16,560
    TOTAL LONG-TERM ASSETS $980 $610 $240
    TOTAL ASSETS $198,839 $232,978 $267,117
    Liabilities and Capital Year 1 Year 2 Year 3
    Current Liabilities
    Accounts Payable $9,482 $10,792 $12,102
    Current Borrowing $0 $0 $0
    Other Current Liabilities $0 $0 $0
    SUBTOTAL CURRENT LIABILITIES $9,482 $10,792 $12,102
    Long-term Liabilities $0 $0 $0
    TOTAL LIABILITIES $9,482 $10,792 $12,102
    Paid-in Capital $30,000 $30,000 $30,000
    Retained Earnings $48,651 $72,636 $96,621
    Earnings $100,709 $119,555 $138,401
    TOTAL CAPITAL $189,360 $222,190 $255,020
    TOTAL LIABILITIES AND CAPITAL $198,839 $232,978 $267,117
    Net Worth $182,060 $226,240 $270,420

    8.6 Business Ratios

    The following table shows business ratios, ratio analysis, total assets, net worth.

     Ratio Analysis        
    Year 1 Year 2 Year 3 INDUSTRY PROFILE
    Sales Growth 4.35% 30.82% 63.29% 4.00%
    Percent of Total Assets
    Accounts Receivable 5.61% 4.71% 3.81% 9.70%
    Inventory 1.85% 1.82% 1.79% 9.80%
    Other Current Assets 1.75% 2.02% 2.29% 27.40%
    Total Current Assets 138.53% 150.99% 163.45% 54.60%
    Long-term Assets -9.47% -21.01% -32.55% 58.40%
    TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%
    Current Liabilities 4.68% 3.04% 2.76% 27.30%
    Long-term Liabilities 0.00% 0.00% 0.00% 25.80%
    Total Liabilities 4.68% 3.04% 2.76% 54.10%
    NET WORTH 99.32% 101.04% 102.76% 44.90%
    Percent of Sales
    Sales 100.00% 100.00% 100.00% 100.00%
    Gross Margin 94.18% 93.85% 93.52% 0.00%
    Selling, General & Administrative Expenses 74.29% 71.83% 69.37% 65.20%
    Advertising Expenses 2.06% 1.11% 0.28% 1.40%
    Profit Before Interest and Taxes 26.47% 29.30% 32.13% 2.86%
    Main Ratios
    Current 25.86 29.39 32.92 1.63
    Quick 25.4 28.88 32.36 0.84
    Total Debt to Total Assets 2.68% 1.04% 0.76% 67.10%
    Pre-tax Return on Net Worth 66.83% 71.26% 75.69% 4.40%
    Pre-tax Return on Assets 64.88% 69.75% 74.62% 9.00%
    Additional Ratios Year 1 Year 2 Year 3
    Net Profit Margin 19.20% 21.16% 23.12% N.A.
    Return on Equity 47.79% 50.53% 53.27% N.A.
    Activity Ratios
    Accounts Receivable Turnover 4.56 4.56 4.56 N.A.
    Collection Days 92 99 106 N.A.
    Inventory Turnover 19.7 22.55 25.4 N.A.
    Accounts Payable Turnover 14.17 14.67 15.17 N.A.
    Payment Days 27 27 27 N.A.
    Total Asset Turnover 1.84 1.55 1.26 N.A.
    Debt Ratios
    Debt to Net Worth 0 -0.02 -0.04 N.A.
    Current Liab. to Liab. 1 1 1 N.A.
    Liquidity Ratios
    Net Working Capital $120,943 $140,664 $160,385 N.A.
    Interest Coverage 0 0 0 N.A.
    Additional Ratios
    Assets to Sales 0.45 0.48 0.51 N.A.
    Current Debt/Total Assets 4% 3% 2% N.A.
    Acid Test 23.66 27.01 30.36 N.A.
    Sales/Net Worth 1.68 1.29 0.9 N.A.
    Dividend Payout 0 0 0 N.A.

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