How will the product be made? Marketed? Financed? Financial Report -Description of

How will the product be made? Marketed? Financed? Financial Report
-Description of Idea
-The need for the product
-Originality Statement
-Closest Competitors and Differentiators
SWOT Analysis
-Description of Target Market
-Comparative Advantage
How is it viable
-How will you manufacture/create it
How long will it take
-Sustainability
-Charity
Other???
-Market Analysis
-Customer persona
Description of 3 closest competitors + why product/company is essential and how it is different
Why there is a market for it
Refined Allocation of Roles
-Who is doing what on social media? Why? Ecwid? Crowdcube? Website Creation? Video presentation?
Company Marketing Plan
Financial
How you will construct sales projections
What costs you anticipate
How you plan to value the company
What expenses will factor in
How you will finance these operations, etc.
Table of Content
Our Brand 2
How It Works 3
Marketing Plan 4
Marketing Strategy 12
Operational Strategy 18
Refined Allocation of Roles 19
Financial Plan 23
Expense Forecast: 29
Five-Year financial Forecast 32
Risk Analysis 40
Our Brand
Adelaide + Austin is a children’s fashion and culture subscription box that immerses kids in cultures around the world with fun-filled monthly boxes. Our boxes are designed to expose kids to the lifestyles and stories of kids around the world. Every month, kids will receive a box that takes you on a flight to travel around the world using your imagination with Adelaide and Austin. Our boxes include heritage-inspired fashion, native crafts and recipes, collectible mini-poster stickers to put in your travel passport, and shared stories from kids around the world. Alongside our box delivery every month, we will also launch Spotify playlists of the trendiest kids’ music from our monthly selected culture for a fully immersive experience. Our collections hope to inspire curiosity, open-mindedness, and respect for all our differences and the upbringings, surroundings and traditions that make us all individuals.
How It Works
-Browse our boxes on our website or social media.
– Choose which box tier suits your needs. We offer 3 options – First-Time Flyer, Frequent Flyer, and First-Class. Discounts are given for signing up for an annual membership.
-Create an online account. We will ask you to select the size and gender of the clothing your child wears. We offer our clothing in sizes 4-16 for girls and boys. Additionally, we will ask for your child’s birth month and year to be sure they receive a little extra something special that month.
– Get ready for take off! Our boxes ship on the Monday before the first Friday of the month, for a Friday delivery.
Because we are a new business, we will only carry a limited number of boxes in certain sizes and genders for the first 3 months of rollout. There will be a pre-order system put into place 1 month before launch to gain better awareness for product and size demand. We will then be able to adjust inventory levels of the coming months’ boxes as we gain clearer insights into the demand for our product.
Originality Statement
Inspiring a world of respect and appreciation of differences by educating kids through creative immersive experiences that celebrate cultural diversity
Our Vision
A lot of the world’s hatred comes from a lack of understanding and respect for each other’s differences. Adelaide + Austin aims to create a less hateful and more understanding world by educating children about our differences in a captivating and fun way while also exploring cultural immersion through our multi-segmented box that transforms you into the life of one of the kids in our mini-stories.
Our Mission
Our mission is to create products that inspire cultural and diversity acceptance through immersive experiences. We believe that through creative educational activities, kids will be able to better understand why our differences are not bad things and why unique perspectives should be celebrated.
Our Values
Here at Adelaide + Austin we strive to create a fashion and education service that promotes diversity and inclusion. We believe that exposing children to different cultures allows them to celebrate their differences and appreciate the uniqueness of people around the world.
Marketing Plan
Market Analysis
Subscription Box Industry:
Parents are becoming more interested in home learning kits and play-based activities for children that encourage creativity, cognition, and imagination skills. Manufacturers throughout the kid’s activity box industry are gaining a reputation by providing safe and well-designed items and clearly stating this information on the package. They have been particularly focused on sticking to rules for various age groups to help purchasers make the best decision possible. Some of the important principles that reinforce confidence among families while purchasing kids’ activity boxes include using lead-free paints in painted toys as well as ensuring that painting materials are harmless.
The market for items for children aged 4-8 years is now quite strong, and sales of these products are projected to bring significant revenue to the kid’s activity boxes industry in the near future. Subscription boxes have grown in popularity as a result of their unique features, such as user product curation, surprise or mystery items within the box, and attractive appearance. Subscription boxes are now widely employed in a variety of industries, including food and beverage, pet care, literature, fitness and health, clothing, and personal care.
The growing e-commerce industry and increasing customer tastes toward personalized and selected products are driving the global market of the subscription box. Product demand has also been boosted by the emergence of subscription services as well as the increasing influence of social media. Moreover, several social media-based firms are implementing subscription boxes and collaborating with influencers, bloggers, and vloggers to raise brand awareness and generate continuous revenue. Other variables, such as celebrity endorsements, increased disposable incomes, and active retailer promotional activities, are expected to contribute to a positive market outlook.
Kids Apparel Industry:
The children’s apparel industry consists of clothing, footwear, and accessories for children ages 0 to 12. Clothing for older children/teens has its own collection of products and makers, as well as its own market research department. Due to the shutdown of retail and industrial sectors triggered by the Corona Virus pandemic, the worldwide garment market, as well as the kid’s wear market, has seen a major fall. Furthermore, market expansion was hampered by the cancellations of public events. However, the e-commerce channel is the market’s sole source of support and one of the most profitable divisions of the apparel industry is children’s wear. The market is expected to overtake both women’s and men’s clothing in their retail value growth as a result of a combination of demographic, economic, and societal variables, and sales in the category.
Additionally, a growing workforce and a rising disposable income are two major drivers supporting the growth of the market. As a result, the apparel market is expected to rise faster in the next few years. Increased innovation, product customization, and low pricing of children’s clothing and footwear are driving global market expansion. The children’s clothing industry has developed to maintain alongside the shifting trends as a result of the rise in social media influence and celebrities on parents and children.
Clothing for children is typically more casual than clothing for adults, and it is designed to be ideal for both rest and play. Hosiery and Cotton are the most common textiles used in children’s clothing. Distribution channels and product categories are the two divisions of the children’s clothing sector. Based on the type of goods, the market is classified into three categories: clothing, footwear, and accessories. Based on the distribution route, the market is segmented into online and offline retail stores.
Kids Cultural Education:
The skills that young people gain through studying Cultural Education courses contribute to the UK’s long-term development of a world-class cultural and Creative Industries sector in many areas. The Cultural and Creative Cultural Industries have made it plain that the education that children and teenagers receive in schools in cultural and creative subjects has a direct effect on the talent pool among individuals who work in this industry. Long-term investment in delivering quality cultural education to young people should be a fundamental component of the government’s plan for the long-term expansion of our creative economy, both at a national and global level.
Studying cultural education courses such as dance, music, drama, and art & design encourages young people to be curious, disciplined and determined across the curriculum. A high-quality cultural education across all schools should be their right and not a privilege, for all children, regardless of where they begin their lives. Another talent required in today’s workforce, in addition to literacy and numeracy, is creativity. Cultural education subjects enable young people to tap into their inherent creativity, allowing them to grow into more well-rounded and confident individuals.
Cultural activities can boost aspiration, ambition, discipline, and confidence, all of which can help with achievement. It can increase parental involvement in children’s and young people’s learning, boost teachers’, parents’, and students’ expectations, offer up career paths in the creative industries and have a significant impact on a school’s ethos. There is a significant disparity in accessibility to cultural activities among children and youth. We must not leave it up to chance whether cultural education has an impact on children’s lives; it is far too crucial for us to accept that these chances are influenced by geography, family background, or special educational needs.
Product/Market Need
Adelaide + Austin is a subscription box that is the first of its kind. Our services offer a way for kids to explore all parts of the world through our in-house designs and culture-specific crafts. In 2020, the children’s apparel market in the United States was valued at $34 billion. As this industry grows, we also see growth in the subscription service model due to the Covid-19 pandemic and the increase of parents purchasing clothes for their children. In a time where travel is limited, our boxes allow children to use their imaginations to travel anywhere in the world. The contents of our box are specially designed by our Adelaide + Austin team and create a new spin on children’s apparel. Our company addresses the need for education and creativity within the children’s apparel market. We want each of the components in our boxes to be a tool for learning and acceptance of cultural differences.
Target Market
Our target market consists of kids ages 5-14 who are curious about the world we live in and their parents, who only want the best for their kids. Our parent customer loves to travel, though the Covid-19 pandemic has made it more difficult to do so. Our boxes appeal to these parents as they provide exposure and education to their kids through experiences that can be done as a family. Our brand also engages the parents by bringing to light social issues such as discrimination and bullying that could negatively affect their children. Our initiative and brand vision aim to create a more hands-on learning experience with an emphasis on cultural fashion.
The kids we are targeting are a part of generation Alpha, who are increasingly tech-savvy and hyperconnected. The Covid-19 pandemic has changed the way generation Alpha is receiving their education. According to WGSN, edutainment is on the rise and one of the key components generation alpha will need to succeed in their future workplaces with cultural awareness and sensitivity. Our box aims to provide key cultural knowledge, acceptance in a kid-approved entertaining way for this future generation to live happy and fulfilling lives post-development.
Competitors
Rockets of Awesome (2016): kid’s apparel sizes 0-14
Similar to Adelaide + Austin, Rockets of Awesome offers children a clothing subscription service; however, where Adelaide + Austin aims to educate children through fashion, Rockets of Awesome just provides a styling service with their subscription boxes. Their boxes are only offered through a quarterly service and are curated based on their customers’ style quiz. Their service also allows parents and their kids to preview the boxes so that they can swap their clothing picks before their box ships. After the box is received, customers have a grace period where they can try on and return any items that don’t work. Unlike Adelaide + Austin, they offer an extension line where customers can purchase single clothing pieces without a subscription membership. Although Adelaide + Austin does not have an extension line with our initial launch, our 5-year-plan includes developing a clothing line, which will consist of an extension of designs based on where our team has traveled to.
Tiny Travelers: Educational Boxes
While Adelaide + Austin is a subscription box that aims to educate children through fashion from around the world, Tiny Travelers developed their boxes by producing books, puzzles and games intended to educate kids about the world we live in. Tiny Travelers is labeled as the #1 travel brand for kids, Tiny Travelers “was founded with the mission to help families embrace the diversity that makes our world the special place that it is”. Rather than operating on a subscription service model, Tiny Travelers has designed their boxes to be a “one-time purchase” box and are primarily sold on Amazon or in kids’ book and toy stores. To compete with Tiny Travelers, Adelaide + Austin feels that expanding our fashion education services through a subscription service model will give us a competitive advantage since it caters to a new way of product consumption.
Little Passports
Little Passports is a subscription service for kids 3-12 that inspires their creativity by curating boxes based on different cultures and stem education. This product is similar to Adelaide + Austin through their emphasis on education, but Tiny Travelers focuses on different areas of learning (History & Stem) and focuses on education through hands-on activities. Boxes include: Early Explorers (ages 3-5), World Edition (ages 6-10), USA Edition (ages 7-12), Science Junior(ages 5-8), and Science Expeditions (ages 8+). Boxes range from $23.95-$70+ and are delivered monthly to their members. “Little Passports has delivered more than 10 million activities worldwide to families looking to expand their children’s interest in the world around them”(BEGiN). Recently Little Passports has been acquired by BEGiN, which is a children’s education company that primarily focuses on early development. Seeing the growth of this business allows our team to visualize how Adelaide + Austin can grow through our subscription boxes.
Tea Collection
Tea Collection is a children’s retailer that incorporates fashion from different countries to connect children through their creative expression and carries baby (0-4T), girls (2-16), and boys (2-16) apparel. The design elements of this retailer are similar to Adelaide + Austin; however, Tea collection is more focused on fashion trends. Whereas Adelaide + Austin use their design elements to educate children on different areas of the world. Tea Collection wants to emphasize the commonality between children with different cultural backgrounds. This children’s retailer offers a higher-end line that uses modern design to create clothing that will last. Tea collection operates on its e-commerce platform as well as being carried at boutique locations. With the success of Tea Collection’s online and in-store sales platforms, Adelaide + Austin hopes to transition into brick-and-mortar retail after establishing their subscription boxes.
Comparative Advantage
Adelaide + Austin is a new and innovative subscription service that brings countries from all over the world right to your doorstep. As mentioned before, our boxes are designed to educate kids and fully immerse children into other cultures through fashion trends. This subscription service is the first of its kind and sets itself apart from its competitors. Our main competitors in this market are Rockets of Awesome, Tiny Travelers, Little Passports, and Tea collection. Adelaide + Austin has taken small elements from these companies to create a new way of learning for kids. Clothing is much more than the material it’s made out of, and we want to teach kids the meaning behind different countries’ designs. The specialized pieces in our boxes will tell a story of cultures from the past and present. Our Cosplay outfits will focus more on traditional pieces from our country of the month, whereas our ready-to-wear piece will focus on the current trends.
Our advantage over our competitors is our emphasis on education and how we educate our customers. Little Passports and Tiny Travelers are education subscription boxes that only focus on interactive teachings, such as board games or craft activities. Whereas Adelaide + Austin provides all the necessary elements for kids to learn and feel like they’ve traveled to our country of the month. Our apparel competitors, Rockets of Awesome and Tea Collection, offer a unique way for kids to shop, but they are not personalized like our Adelaide + Austin boxes. Our photographer, Ben Wang, travels each month to a new location and works alongside our editor, Jackie Dixon to develop the education aspect of the box. While abroad they photograph and interview people from around the area to get a more personal look at their culture. Once they return, they work with our head designer, Ashley Saeli, to create the clothing pieces for our boxes. Our team works very closely with the components of each box and we feel that this service will bring a new experience to kids’ fashion and education.
Marketing Strategy
Methods of Sales and Strategies
With the Launch of Adelaide + Austin’s new subscription boxes, our main platform of selling will be through our e-commerce website. The Adelaide + Austin website will be the primary place kids and their parents can shop. Our website will feature our three-tiers of boxes, and costs will vary based on which subscription plan our customers choose: Monthly vs. Annual plan. Not only will our website feature our products, but will also have mini online games that are based on Adelaide and Austin’s trip of the month. Our website will be kid-friendly and another resource that promotes cultural education.
Pricing Policy
At the beginning of our launch, we will be offering the 3 boxes below:
First Time Flyer –
1 outfit inspired by our team’s cultural travels designed in-house and manufactured overseas
1 Recipe Card
1 Local Craft Activity
Photo stickers for your passport*
1 Small Book Edition of the Adventures of Adelaide + Austin – our fictional duo that will travel the world with our team and be included in the stories we bring from the cultures we discover
Frequent Flyer Box –
Everything in the basic box
1 Cultural Cosplay Look designed in-house and manufactured overseas
First Class Box –
Everything in the mid-tier box
1 statement fashion piece
1 sweet treat
* Passports will be included in all customers boxes in the first delivery (1 per customer)
Every tier of our box is designed to bring an education enriching experience to your home every month. Our First Time Flyer box is sold for $45 per box or $39 annually is a great introductory option to the Adelaide + Austin brand and mission. The Frequent Flyer box takes our little travelers on a bigger adventure and is sold for $60 per box or $54 annually. Our First Class box is designed for those whose curiosity is never satisfied and includes an additional statement fashion piece and a special sweet treat. It is sold for $85 per box or $79 monthly for an annual subscription.
Our First Box: Take off to China
Our launch box will take our subscribers to China, where they will fly into the home country of two of A+ A’s founders. They will journey with Adelaide + Austin to experience the Chinese New Year celebrations for the year of the Tiger. The craft activity in the box will be a traditional Chinese sparrow kite. These kites were invented in China over 2300 years ago and were originally completely made from bamboo. These kites were first used to send military signals and track distances but slowly grew in popularity with the public. Today they are still a significant part of Chinese culture, with a kite festival being held every Spring. The kits will include paper with a sparrow outline for them to cut out, or they can create their own shape on the other side, paint to decorate the kite, bamboo dowels, crepe tail streamers, a kite reel, and instructions. Our recipe will be for Longevity Noodles, an item typically eaten during Chinese New Year to symbolize a happy and long life. It is encouraged when cooking and eating these noodles to try and keep them all in one piece for good luck. The culturally inspired outfits of our boxes are inspired by elements of Chinese culture. The boy’s outfit consists of an organic cotton graphic tee with a large dragon graphic – a symbol of luck, strength, and power in Chinese culture along with a French terry short with printed side panels. The boy’s cultural cosplay look is a take on the Tang Suit from the era of the Tang dynasty from 618-907. “Traditional Tang suits, based on the magua of the Manchu ethnicity, usually have Chinese characters on them to express good luck or best wishes” (Ho, 2022). Today, the Tang Suit is typically worn during special occasions like weddings and the Chinese New Year. Our boy’s statement fashion piece is a bomber jacket with a large, embroidered tiger on the back and the Chinese symbols for courage and bravery on the chest – a nod to the year of the Tiger celebration in our mini-story. The girl’s cultural outfit consists of a French terry crew neck sweatshirt with a graphic that shows symbolic flowers and their meanings in Chinese culture. The girls’ cosplay outfit is a representation of the cheongsam, the most famous traditional Chinese dress, printed with lilies, the symbol of luck for our business. Our girl’s statement fashion piece is a beautiful metallic printed tiered crepe dress.
Branding
Adelaide + Austin is a brand that prides itself on educating kids and building a large community that celebrates different cultures. Our subscription service was developed to educate and celebrate children around the world. The United States is a melting pot of different cultures and we want kids to feel represented through each of our boxes. We’ve created Adelaide and Austin, our Chief Travel Officers, to represent the curiosity and acceptance of children. Adelaide and Austin are two 4th graders who have set out on a mission to search for Adelaide’s heritage since she was adopted and doesn’t know much about where she comes from. Adelaide and Austin go to the library the first Friday of every Friday and use their imaginations to take them to a different country to see where Adelaide feels most at home. Each box represents a new adventure and we want to bring our customers along with us.
Database Marketing
We plan to utilize this marketing tactic to create a more personalized way to reach our customers. Key factors that we want to keep track of are how many subscriptions boxes our customers have received, which tier they are subscribed to, and whether they have opted in for a monthly or annual subscription plan. This method can allow us to market to customers to either upgrade their box status or entice them into signing up for our annual program. We also want to utilize database marketing to send out surveys for customer feedback. Since we are a newer brand, we want to take every measure to ensure the customer is satisfied and that we are producing quality boxes that help educate kids. We also want to use this as a way to reward our customers. During your birthday month, you will receive a special gift that correlates with the status of your box.
Sales Strategies
Since Adelaide + Austin will exclusively be sold on our e-commerce website, one of our main strategies will be to focus on our social media pages. To best reach our audience, we will focus on platforms such as Facebook, Instagram, Tik Tok, and Youtube. Before our first box’s launch, we will advertise on our pages and also partner with influencers who will receive early access to our box. This will allow us to get more exposure and once we gain more followers, we can use the “swipe-up” features to redirect users to our website. We want to focus part of our sales strategies on social media because recent studies have shown that the use of social media shopping will increase to 28% with generation alpha, who is our target customer.
Once our first box launches, we also plan on creating our Mileage Points reward system. This rewards program will consist of different tiers that correlate to the box you are subscribed to. For our First Time Flyers, they will receive a special edition Adelaide + Austin book that features the two traveling to see how birthdays are celebrated around the world. With our Frequent Flyer Box, customers will also receive the special edition Adelaide + Austin book as well as a specialty Adelaide + Austin Travel backpack. With our First Class Box, customers will receive all the items mentioned above and early access to next month’s box. Rewards members of all tiers will also receive our Adelaide + Austin Newsletter and be alerted whenever there are promotions on our website. We want to utilize the rewards program as a strategy to boost customer retention.
Advertising Strategies
Digital Advertising
When looking at the different ways to advertise to our customers, we have decided to focus more on digital advertising because we believe our customers will respond best to this method. To promote the launch of Adelaide + Austin, one of our main sales strategies will involve our activeness on our social media pages. As mentioned before, we are going to create accounts on Tik Tok, Instagram, Facebook, and Youtube to reach both our child and parent audiences. On our Instagram and Tik Tok specifically, we plan to run the accounts as if it were Adelaide and Austin running the accounts to show followers where they’re traveling and who they meet on their journeys. This way, kids can connect with Adelaide and Austin and use their imaginations the same way Adelaide and Austin do in our stories. For our Facebook page, we want to use that as a way for parents and customer service to connect to receive feedback, so we are continuously improving. The Facebook page will also be a place where parents can show how their kids use the different components in our boxes. Lastly, for our Youtube page, we want to highlight our Adelaide + Austin travel team and show the creative process that goes into designing each month’s box. As we expand our company, we hope to hire an animation team that can create a series based on Adelaide and Austin’s adventures around the world. Our social media pages will also be where we announce the launch of our first month’s box.
Along with our own social media pages, we plan to partner with different influencers to help promote our subscriptions services. For our adult audience, we want to partner with family channels and mommy bloggers, so they can see how other families use the Adelaide + Austin boxes to educate their kids. For our kid demographic, we would like to partner with younger influencers, so they can show what they received in the box and how they wear their specialized pieces. The influencers will be a reflection of who our customers are. With these partnerships, influencers will also be given a discount code for 20% off for your first box when signing up for our subscription service to entice their followers to sign up.
Our last digital marketing techniques will include email marketing to expand on our communication with customers. When signing up for Adelaide + Austin’s emails, you can get special behind the scene information on what Adelaide and Austin are up to on their adventures. Customers will also receive specialized messages from Adelaide and Austin on birthdays and holidays to celebrate our members. We will also use email to update customers on any news with Adelaide + Austin as the company expands into new projects further down the line.
Public Relations Events
As we mentioned before, Adelaide + Austin is an interactive brand that highlights the education of other cultures through clothing. After our initial launch on our social media platform, our PR team plans to invite customers in the local New York community to a children’s library to celebrate the launch of our first box. The library is where Adelaide and Austins first begin their adventures, and we want to replicate the story of our first book with our customers. We will invite customers to wear the clothing they received in their first box and once they arrive they will have the opportunity to meet our travel team and learn more about the creation of the components in the box. At this event, our head designer, Ashley Saeli, will show a preview of next month’s box. After we’ve established ourselves, we will want to host more events within different communities to bring kids together and celebrate the uniqueness behind different cultures featured in our boxes.
Phase II: Adelaide + Austin
After the first five years of Adelaide+Austin, we plan on expanding our company’s products by creating an extension line that is similar to our ready-to-wear pieces featured in our boxes. This extension will be similar to traditional kids retail but will compete more closely with Tea Collection. We will offer the same sizes as our subscription box and feature categories such as tops, pants, jackets, sweatshirts, dresses, and skirts. These pieces will be inspired by the countries our team travels to and will expand on the designs featured in our boxes. Customers will not have to sign up for a subscription to purchase our extension line, and we hope for this to be a strategy to bring in new customers to our existing subscription boxes. We will remain to sell on our E-commerce website, but as we grow we will want to have pop-up shops in major cities around the United States. This will allow us to meet customers face to face and test whether or not our company moves towards brick-and-mortar retail in our next phase of expansion.
Operational Strategy
Sourcing and Manufacturing
Our products will only be made from the most ethical sources we can find. As our team travels, we will constantly be evaluating our impact on people and the planet. Our apparel products will be manufactured overseas in China. They will be made from organic materials and use dyes that require little water to conserve our resources. We do not tolerate unsafe working conditions at our overseas manufacturers. As we travel, we plan to stop in regularly with them on unannounced visits to ensure they are treating their workers fairly. During our visits, we check for building safety, worker health and happiness levels, amenities of the factory, such as child and health care, along with overall cleanliness and workflow. We strive to be as transparent with our customers as possible and will offer them insights into our manufacturing whenever we can. This includes sharing live looks at our factory visits on social media as we travel. Our apparel products will be shipped DDP (delivered duty paid) to our warehouse to ensure less inventory loss risk during shipment.
Sustainability
Sourcing: As mentioned previously, sustainable sourcing is something we will constantly be evaluating as a business. Our fabrics will be made from organic fibers and our dyes will use minimal water. We will aim to use recycled material where we can and strive to improve traceability throughout our supply chain. Additionally, our goal is for all our workers and manufacturing partners to make a livable wage for the region they are in. We plan to use renewable energy sources to power our operations and encourage our suppliers to do the same.
Recycling Program: We encourage all our subscribers to send us back any clothing items from their boxes that they no longer have use for. We will send them a shipping label upon request that will send these items back to our headquarters. From there, these items will be donated to kids in foster care or who suffer from terminal illness along with any of our unsold inventory for the month.
Packaging: Our outer packaging will be made from 100% recycled cardboard and is fully recyclable. Additionally, we require our manufacturing partners overseas to ship in 100% recycled cardboard and recycled plastic poly bags.
Giving Back
Adelaide + Austin kids club is a 501c(3) not-for-profit organization. Members will be able to join Adelaide + Austin kids club. It provides monthly online cultural education events to promote diversity, equity, and inclusion. Kids from different cultures can meet, greet, and share perspectives on different cultures. Our designers will help children to understand different cultures and exchange ideas. Members pay a $25 annual fee and will receive 12 stickers picked by AI. The winner’s design will be sent to production for the next season’s subscription box. We also encourage children to send us back any clothing items from their boxes that they no longer have use for. We will send them a shipping label upon request that will send these items back to our headquarters. From there, these items will be donated to kids in the selected countries’ foster care or who suffer from terminal illness along with any of our unsold inventory for the month.
Refined Allocation of Roles
Adelaide and Austin
Meet our New York City, native Adelaide. She’s lived here her entire life with her two dads who adopted her when she was only 3 months old. Adelaide wasn’t much of a curious child until she met her new neighbor Austin. After his family moved in, Austin’s mom invited Adelaide and her parents over for a traditional Argentinian meal. Here she was able to learn about Austin’s family and their Argentinian and Nigerian background. Adelaide was in awe to learn about life outside the city and once she got home that night, she asked her dads what her heritage was. Since she was adopted, she didn’t know much about where she came from. The next day she knocked on Austin’s door and asked if he would join her in her adventures to search for her heritage.
From there on, Adelaide and Austin would go to the library each week in search of Adelaide’s heritage. The two children would use their imaginations and soon the New York City library became their transportation to a new part of the world. Join Adelaide and Austin on their first adventure to China where they explore and meet new friends in hopes to discover Adelaide’s culture.
Jackie Dixon- Chief Marketing Officer
Jackie received her undergraduate degree in Political Science from Saint Joseph’s University and is currently finishing up her final semester at Rutgers Business School within their Business of Fashion Program. She has had experience in the Fashion Industry with Retail Sales and Merchandise Buying. Jackie is now taking on the role of Adelaide + Austin’s new Chief Marketing Officer.
With the Marketing Strategy for Adelaide + Austin, Jackie wants to focus more on a digital marketing approach. She plans on running all social media accounts and working with our web design team to create an interactive and kid-friendly website. With Jackie’s previous experience in sales, she has learned how to identify a retailer’s customers and how to best market to them. She feels that these skills can translate over when running the social media accounts because she knows who her audience is and what content they respond well to. She also has plans to launch a loyalty rewards program for our customers once our first boxes are sold in hopes to increase brand awareness and customer retention. One of her first major events will be the Launch Party for Adelaide + Austin in a New York City library. She hopes to invite kids in the local area to experience the imagination and creativity of Adelaide and Austin as they begin their search to find Adelaide’s Heritage. As the brand expands, Jackie wants to host these library events in cities around the United States, so that children can experience their favorite traveler’s journeys and meet fellow members of our subscription service. Jackie is eager to begin her journey with Adelaide + Austin and help grow the brand.
Ashley Saeli – Chief Creative Officer
Ashley Saeli is a business-minded creative that drives product innovation in any organization she’s in. She has a B.F.A. with Honors in Fashion Design and an Entrepreneurship minor from Kent State University. She is currently pursuing her M.S. in Business of Fashion from Rutgers Business school. Ashley has worked at several small children’s apparel companies as their senior or head designer where she has gained experience expanding product lines and growing sales.
Ashley’s areas of expertise include branding, sourcing, production, packaging design, trend forecasting, apparel product design and technical design. She has a unique ability to understand the balance between pushing fashion-forward and capturing key elements that consumers are responding to – leading to her ability to design products that sell.
As a designer, Ashley loves to be inspired by her travels. When she was younger, she traveled frequently with her family to many areas of the U.S. and Europe. Her dad instilled in her and her sister during these adventures that cultural differences should not only be recognized but embraced, for these differences are what make us unique as individuals. She hopes that the garments she creates embrace the individuality of the wearer and bring joy and beauty into their everyday lives. Ashley is perfect for leading Adelaide + Austin’s vision of creating a less hateful and more understanding world by educating children about our differences due to her upbringing and goals as a designer.
May Huang – Chief Financial Officer
May is a CPA who holds a B.S. in Accounting from Metropolitan State University. May is currently working as a Controller at King Wood & Mallesons LLP. She has 20+ years of accounting, audit and audit technology experience with the “Big Four,” regional public accounting firms, and private industry.
While at Adelaide + Austin, May will be responsible for reviewing the company funding strategy, overseeing financial activities, preparing financial reports and analyzing financial data. May will focus on meeting revenue and earnings goals and keeping cash flow stable. She will work closely with different departments across Adelaide + Austin, assisting them in maximizing revenues and controlling expenses without sacrificing customer or employee satisfaction or the company’s reputation.
May will have a laser focus on cost improvement, this includes:
Continue to manage SG&A and overhead cost aggressively throughout periods of growth
In the short and medium-term, SG&A costs are expected to increase as new hires are made to better serve customers in underserved regions
Over the longer term, SG&A costs will become a small percentage of sales.
The business continues to look for additional ways to measure and improve productivity
Eliminate waste and improve process inefficiencies
Ben Wang – Chief Technology Officer
Ben received his undergraduate degree in Hospitality Management from Penn State University and is currently pursuing a master’s degree in Business of Fashion from Rutgers Business School. He is an expert in operational technologies and has been well trained on cutting-edge services and networks, such as accounting applications, information and communication protocols, and corporate programs.
In previous roles, Ben’s major responsibility was to handle the information systems in the company. Throughout these roles, he learned to recognize security breaches in the information system, evaluate technological needs at the company, and offer products and services that suit the company’s infrastructural needs. Ben was also able to assist consumers with preparing the products and services in the establishment.
Ben has been responsible for the development of several computer systems across different companies which has led to the growth and development of his information technology skills. He learns and possesses a wide range of skills and certifications necessary to undertake his numerous responsibilities as Chief Technology Officer at Adelaide + Austin.
***Emily’s roles to be refilled
Lead Writer/Editor – Jackie
As our team changes, Jackie Dixon has taken on the role of our new Lead Writer & Editor. Since Jackie has been Secretary for Team A, she feels that this role is important because she should look over each document before she submits it into Canvas. Jackie has always loved writing and is eager to take on this new position to create a unified voice for Adelaide + Austin. This role will also allow Jackie to translate her creativity from her marketing strategies into each week’s module submission. The Lead Writer/Editor will work closely in creating the script for our commercial and work on the Adventures of Adelaide and Austin Series.
Actor – Ashley
The lead presenter/actor will be responsible for being featured in our company videos. They will present the company vision, mission, strategy, financials, management team, especially information relating to their expected return on investment and its timing. With May’s expertise in the financial section and Ashley’s passion for Adelaide + Austin’s mission and product, they will be able to best showcase what our brand stands for and how we will operate as a company.
Written: Editor – Jackie, Ashley to take works cited
Changed in doc
Video: Actor – Ashley
Changed in doc
Financial: Financial Statement Analysis
Changed in doc
Everyone needs to read over doc before and confirm good to go before submission
Financial Plan
From the financial side, Adelaide + Austin will consider the company’s growing fund needs based on forecasts. As Winston Churchill says “The farther backward you can look, the further forward you can see.” We use financial statement analysis to gain insights into that company’s operations.
Pricing Strategy
We aim for approximately a 65% profit margin on all of our products. Our cost of goods sold breakdown per box tier is shown below along with justification for our cost assumptions. Our pricing strategy revolves around marking up our products enough to obtain our desired gross margin and is therefore how our boxes are priced. We believe and as our numbers show, we can become profitable within one year of operations.
Key Assumptions for Projected Financials
Revenues
Revenue has been projected on a product by product basis, considering specific drivers and assumptions for each product
Total Revenue is expected to grow from $806K in FY22 to $3,077K in FY26 representing a 21.75 % CAGR
Cost and expenses
Costs have been projected bottom-up across the entire produced volume
Variable CGOG: comprise mainly box, fabric sourced from China
Fixed COGS: include salaries and wages from the FTEs in US, depreciation, and administration fees
SG&A: mainly comprise sales employee costs, support, and administrative FTEs.
Cash flow items
Cash flow items are projected based on historical levels and management assumptions
Taxes are projected based on a 15% statutory tax rate
Cost of Goods Sold
First Time Flyer – Single
First Time Flyer – Annual
Frequent Flyer – Single
Frequent Flyer – Annual
Product 5
Product 6
Sales Price Per Unit
45
39
60
54
85
79
COGS Per Unit
13.5
13.5
20
20
30
30
Profit
31.5
25.5
40
34
55
49
Profit Margin
70.00%
65.38%
66.67%
62.96%
64.71%
62.03%
Cost Breakdown
First Time Flyer Box:
$6.00 outfit inspired by our team’s cultural travels designed in-house and manufactured overseas
$0.33 Recipe Card
$3.00 Local Craft Activity
$0.45 Photo stickers for your passport
$0.94 Mini Book of the Adventures of Adelaide + Austin
$2.00 Packaging (Box/Tissue paper/Sticker)
*$0.72 Passports will be included in the first delivery box per yearly subscriber
Culture-Inspired Outfit: Our outfits will be designed by our CCO and sent to our manufacturing partners in China for production. To keep costs low, we will source fabrics that are readily available in the market to use in our designs. We expect the cost of the outfit at a full-service factory landed and shipped DDP to be around $6.00 assuming a 500 unit MOQ.
Our size breakdown will be XS (sizes 4/5), S (6/7), M (8), L (10), and XL (12-14). Our size breakdown will be packed 1/2/2/2/1.
Recipe Card: Our recipe card will come on a 4×6” front and back printed postcard in premium plus cardstock from Vistaprint. Assuming an MOQ of 500 cards, we will be able to obtain a price of $0.33 per card. As our units increase, we will be able to lower our cost here to $0.16 per unit on a 2000 pc order.
Craft Activity: Our craft activities will vary each month. Materials can include items such as card stock and paper, non-lead paints, fabrics, yarns, and other decorating supplies. We believe because of the quantities we are ordering and the simplicity of the supplies, that we will be able to assume an approximate cost of $3.00/unit per craft.
Photo Stickers: Every box will include a 3×5” sheet of stickers to put in your passport. We will design these stickers every month utilizing photos from our travels. They will cost around $0.45 per sheet assuming a 500 unit order. At 1000pcs, costs drop to $0.36 per sheet. They can go down to $0.22 per sheet for 5000pcs. We plan on ordering these from sheetlabels.com.
Mini Book: Our mini booklets will cost approximately $0.94 apiece. This assumes a 24-page book with a saddle stitch binding in full color, 70 lbs opaque paper for the center pages, and 100 lbs opaque cover page. The book will have a finished size of 4×6”. We will be using a priority print service as our supplier. This assumes an MOQ of 500 pieces. Ordering more will bring our costs down. At 1000pcs, costs drop to $0.89/unit. This includes free shipping.
Packaging: Our mailer boxes will be printed on the outside with our logo and clouds on a recycled Kraft cardboard box. We plan to order our boxes from Packola at a cost of $2.81/box for 1000 units. The remaining $0.19 of this budget is allocated for tissue paper and a sticker to wrap our products in the box.
Passports: Passports will be sent out in the first box of an annual subscription. They are of the same quality as our mini books and purchased from the same printer at $0.72 per unit. They are 4.25×5.5” and are 20 pages. This includes free shipping.
Frequent Flyer Box:
$13.50 Basic box cost
$6.50 Cultural Cosplay Look designed in-house and manufactured overseas
Cultural Cosplay Outfit: Our cultural cosplay outfits will be designed by our CCO and sent to our manufacturing partners overseas for production in China. As with our cultural inspired outfit, the cosplay looks will also be designed from sourced fabrics that are readily available in the market to ensure we meet our targeted cost. We are assuming a slightly higher cost for these looks at $6.50/outfit landed due to usage of more specialty fabrics.
First Class box includes:
$20.00 Frequent Flyer box cost
$9.50 statement fashion piece
$0.50 sweet treat
Statement Fashion Piece: Our outfits will be designed by our CCO and sent to our manufacturing partners overseas for production. As with our other pieces, we plan on using readily available fabrics in the market to create these designs. We assume the highest cost for these pieces at $9.50 landed due to their more challenging construction, higher level of detail and technique work (i.e. embroidery vs. printing) and the lower quantities of production due to this being our most expensive box.
Sweet Treat: We expect these small goodies to have a low cost. We will include whatever local wrapped treats we can find at this budget.
Sales Projections:
We calculated our sales projections in line with the expected compound annual growth rate (CAGR) of 20.1% in the global subscription box market during 2021-2026. When projecting initial sales in 2022, we assumed that our least expensive box would be the most popular, as it is the most attainable for consumers. We also assumed that our solo boxes would initially sell better than our annual memberships. This is due to the fact that we are not yet an established brand and people will want to try our product before committing to an annual subscription. In our first month of sales, June 2022, we expect to sell 350 units units of our First Time Flyer single box, 150 units of our First Time Flyer annual subscription, 250 units of our Frequent Flyer single box, 100 units of our Frequent Flyer annual subscription, 200 units of our First Class single box and 75 units of our First Class annual subscription. With the average fashion subscription box costing $64, A+A’s pricing strategy sits right in the sweet spot of the market to obtain our target sales numbers. Further, niche boxes like ours make up 20% of the $18.8 Billion market. We believe these sales numbers to be attainable due to these facts, Adelaide + Austin’s comparative advantage, and our targeted marketing strategies.
For the first 7 months (through year end 2022), we project our single box sales to grow at a rate of 20% month over month and our subscriptions to grow at a 15% rate. At these rates, our sales generated for 2022 will be just over $806,000. The cost of goods sold for these products will be approximately $272,000 which leaves us with a target gross margin of $534,000. When projecting sales for the subsequent years, we first calculated what our 7 months of sales in 2022 would be if we sold the average amount sold per month for the entire year. We then assumed a 20% growth rate for years 2023 and 2024 – in line with the CAGR for the industry. In the years 2025 and 2026, we increased our growth rates to 22% and 25% respectively due to increased brand awareness, loyalty and trust by this time. With these assumptions, by 2026, we should be selling over 53,000 boxes per year and be generating just over in $3 Million in sales annually, with a gross margin of $2,037,819.
Five-Year Volume Demand Over Time
Five-Year Products Sold
2022
2023
2024
2025
2026
Product 1
4,521
9,299
11,159
13,614
17,018
Product 2
1,660
3,984
4,781
5,833
7,291
Product 3
3,229
6,642
7,971
9,725
12,156
Product 4
1,107
2,277
2,732
3,333
4,166
Product 5
2,583
5,314
6,377
7,780
9,725
Product 6
830
1,707
2,049
2,500
3,125
Total
13,929
29,224
35,069
42,784
53,480
Expense Forecast:
We have broken down our operating expenses into the following assumptions:
Web Development/Maintenance: We have allocated $500/month for web development and maintenance. Our domain name of adelaideandaustin.com along with a privacy + protection plan will cost us a minimal amount of $40 for two years. The rest of the expense we have allocated for this fund will be for IT maintenance and computer/cloud servicing.
Salary: We have assumed a salary expense of $40,000/month or $480,000 annually. Out of these allocated funds, our founders will receive a salary of $80,000/year ($320,000 of our allocated budget). The remaining $160,000 will be used to hire two warehouse workers at a $50,000 salary along with $60,000 to use to hire animation and web developers on a freelance basis. If we do not use all of our freelance funds at the end of the year, the remaining funds will be distributed to the founders as savings bonuses.
Travel/R&D: We have budgeted $15,000/month for travel and R&D costs. Two of our founders, Jackie and Ben, will travel once per month to the country we are currently researching for our boxes. We expect round trip flights to cost approximately $2500 per person. We calculate our hotel costs at an average of $200USD/night for 7 night trips totalling $2,800 for the rooms for their trips. Additionally $100/person is allocated per day for food and transportation totally $1,400/month. The remaining $5,800/month allocated for travel and R&D is reserved for Ashley and May’s bi-monthly sourcing trips to their manufacturers in China.
Office/Warehouse Lease: We have budgeted $12,000/month for our estimated warehouse space. While our company is small, all our employees will be working from home to save on office space expenses. We have found an 8,500 sq. ft. warehouse space in Elizabeth, NJ within our budget. This amount of space should have plenty of space for our growing company. Therefore, we estimate our warehousing costs to remain steady for the foreseeable future.
Marketing/Advertising: For our marketing budget, we have allotted $8,000 each month for the first seven months and increased the budget by 5% starting in 2023. When looking into how much funds we should allocate into our marketing budget, most resources said that for newer companies you should allocate 12%-20% of projected revenues. Right now, we have our first year’s projected revenues at $ 806,807 and 12% of that gave us $8,000 monthly in our first year. We’ve separated our office equipment and research & development, so these were not necessarily accounted for in our overall marketing budget. As mentioned in our marketing strategy, a lot of our resources will go into social media. “According to an analysis conducted by THE CONTENT FACTORY, the average organization spends between $200 and $350 per day on social media marketing. This works out to between $6,000 and $10,500 per month or between $72,000 and $126,000 per year” (Cost Breakdown: How Much Should Social Media Marketing Cost?). We plan to begin with $6000 a month for our social media marketing strategies and will allocate the other $2000 for our email marketing and PR events. Email marketing will only need a budget of $500 a month, which will leave the other $1,500 for our local library events.
Office Equipment: We have budgeted $20,000 in office equipment during our first month of business. This equipment will include any build outs and structures needed to put in our warehouse along with computers for the team. We have budgeted $5,000 a month for subsequent months for additional computer, photography, and videography equipment as well as for our software programs such as Quickbooks and Adobe Creative Cloud.
Legal: We have assumed a legal cost of approximately $1,000 a month. This cost will initially cover the costs of incorporating the business along with trademarking our name and logo. In the subsequent months, our lawyer on retainer will provide us with a legal console when need be regarding supplier and employee contracts.
Miscellaneous: Our allocated $300/month in miscellaneous expenses are used as a safety net in our risk mitigation strategy. This allows us for a little extra cash on hand for unforeseen additional operating expenses.
We expect the operating costs for travel and R&D, marketing/advertising, office equipment, legal and miscellaneous to increase each year as our business grows. Since we plan to sign our warehouse lease for multiple years, this expense should stay steady. We have also estimated no increase in the web development cost because we believe we will better be able to manage the site as we continue running our business. For our salary expense, we have held our 2022 assumptions through 2023 and will plan on 10% increases in years after.
Operating Costs
Operating Expenses – 2022-2026
Assumptions
2022
2023
2024
2025
2026
Web Development/Maintenance
0.0%
0.0%
0.0%
0.0%
Salary
0.0%
0.0%
10.0%
10.0%
10.0%
Travel/R&D
12%
15.0%
20.0%
10.0%
Office/Warehouse Lease
0.0%
0.0%
0.0%
0.0%
Marketing/Advertising
5.0%
5.0%
5.0%
5.0%
Office Equipment
8.0%
10.0%
15.0%
15.0%
Legal
5.0%
5.0%
5.0%
5.0%
Miscellaneous
5.0%
5.0%
5.0%
5.0%
Expenses
2022
2023
2024
2025
2026
Web Development/Maintenance
$ 3,500
$ 6,000
$ 6,000
$ 6,000
$ 6,000
Salary
$ 280,000
$ 480,000
$ 528,000
$ 580,800
$ 638,880
Travel/R&D
$ 105,000
$ 201,600
$ 231,840
$ 278,208
$ 306,029
Office/Warehouse Lease
$ 84,000
$ 144,000
$ 144,000
$ 144,000
$ 144,000
Marketing/Advertising
$ 56,000
$ 100,800
$ 105,840
$ 111,132
$ 116,689
Office Equipment
$ 50,000
$ 92,571
$ 101,829
$ 117,103
$ 134,668
Legal
$ 7,000
$ 12,600
$ 13,230
$ 13,892
$ 14,586
Miscellaneous
$ 2,100
$ 3,780
$ 3,969
$ 4,167
$ 4,376
Total Operating Expenses
$ 587,600
$ 1,041,351
$ 1,134,708
$ 1,255,302
$ 1,365,228
Five-Year financial Forecast
2022
2023
2024
2025
2026
Sales
$806,807
$1,681,913
$2,018,296
$2,462,321
$3,077,902
Cost of Sales
$272,547
$568,351
$682,021
$832,066
$1,040,083
Gross Margin
$ 534,260
$ 1,113,562
$ 1,336,275
$ 1,630,255
$ 2,037,819
Web Development/Mainte
$3,500
$6,000
$6,000
$6,000
$6,000
Salary
$280,000
$480,000
$528,000
$580,800
$638,880
Travel/R&D
$105,000
$201,600
$231,840
$278,208
$306,029
Office/Warehouse Lease
$84,000
$144,000
$144,000
$144,000
$144,000
Marketing/Advertising
$56,000
$100,800
$105,840
$111,132
$116,689
Office Equipment
$50,000
$92,571
$101,829
$117,103
$134,668
Legal
$7,000
$12,600
$13,230
$13,892
$14,586
Miscellaneous
$2,100
$3,780
$3,969
$4,167
$4,376
Total Operating Expenses
$ 587,600
$ 1,041,351
$ 1,134,708
$ 1,255,302
$ 1,365,228
Net Income
$ (53,340)
$ 72,211
$ 201,567
$ 374,953
$ 672,591
Initial Funds
With these projections and expense assumptions, we will need approximately $500,000 to launch our business and operate until our projected sales cover our expected expenses. This includes the cost of our inventory as well as our operating expenses. To finance our launch, we are obtaining funds from the following sources.Personal Funds: Our founding team of four are each contributing $25,000 for 20% equity in Adelaide + Austin initially for a total of $100,000.
Crowdcube: On Crowdcube, we hope to obtain an additional $50,000 in funding. We believe that the mission and vision of Adelaide + Austin will capture the attention of investors and our growth plan will sell them on our business
Family and Friends: We believe we can obtain an additional $50,000 in funding from donations from family and friends via Kickstarter.
Bank Loan: We will be using a bank loan to finance the remaining $150,000 needed until we start collecting payments from our customers. We will obtain the bank loan by using our inventory and office equipment purchases as collateral.
Venture Capital: We will be seeking $150,000 in a seed round of funding through Venture Capital. We have allocated 20% equity for the VC’s funds (a $700,000 valuation).
Valuation
Due to the uniqueness of our product, we feel that finding an accurate EBITDA multiple to compare our product to is unlikely. Because of this we have chosen to use the Discounted Free Cash Flow Method of Valuation. Additionally, it is increasingly difficult to compare numbers directly with other brands because our closest competitors’ financial statements are not publicly available. While this method of valuation requires many assumptions, we feel we can accurately break down how many boxes and memberships we can sell. To account for the additional risk of a startup, we have used a 40% discount rate/cost of capital when projecting our valuation. According to Entrepreneurial Finance Professor Sokolinski, a 40% discount rate is what VC’s typically use when valuing a start-up. Since we are pursuing VC funding, we found that using this discount rate is the best method to accurately assess the viability of our business.
Competitive Financial Analysis
According to Deloitte’s 2022 Retail industry outlook, consumers are “active and outgoing, seeking experiences outside the home (84% in 2022 vs. 42% in 2021) and “expecting seamless experience across channels (96%), this is aligned with Adelaide + Austin, our mission that we are a purpose-driven brand with a mission to embrace how big and beautifully diverse the world truly is. We build bridges and cultural understanding for today’s globally-minded families.
The retail industry is expecting revenue growth of 5%. The leaders in the industry are tapping into digital capabilities, modernizing the supply chain, and making the workforce future-ready.
With the strategy focusing on strengthening revenue growth and keeping the company cost low, Adelaide + Austin’s rapid growth will overperform the retail industry average. We will have a higher gross margin of 65% with an 80% annual growth rate.
Adelaide + Austin
Industry
CAGR
21.75%
9%
Operating Expense as a percentage of net sales
19%
40%
Gross Margin
65%
29.27%
Operating Margin
12.62%
5.45%
Sales Growth %
20%
4%
Net Income Growth %
80%
0.79%
Adelaide + Austin
Rockets of Awesome
Tiny Travelers
Little Passports
Tea Collection
M&A
No
N/A
N/A
2021 acquired by BEGiN
N/A
Funding
100K
84M
6M
2.5M
# of Employees
4
51-200 employees
11-50 employees
11-50 employees
397
Founded
2022
2015
2019
2009
2002
Pricing
$39-$85
$10-$50
$10-$50
$23.95-$70
$10-$50
Subscription Service
Yes
Yes
No
Yes 1M
Yes
Shop
No
Yes
Yes
No
No
Annual Revenue
$1.6M
$7.3M
N/A
N/A
N/A
Risk Analysis
Area
Risk
Risk Level
Effect
Mitigation
Sales Revenue
First Month’s Sales
High
With the first month’s revenue projections, we have predicted selling 1,125 boxes across all 6 products. However, with this being a new brand we do run the risk of not meeting our goals depending on exposure and sales strategies
Our team has done ample research on the children’s apparel market and subscription service industry to create projected revenue in the first month’s sales. In addition, our marketing team has created different strategies to promote Adelaide + Austin before our first launch. We are focusing a lot on our social platforms and influencer partners to increase exposure to the brand.
Growth in Boxes
High
Along with our first month’s sales revenue projections, we predicted growth for the next 4 years of our company. We do run the risk of not meeting projections based on competitors’ responses to our initial box
We plan to use database marketing to provide customer feedback forms after every month to continuously improve. We are also creating an Adelaide + Austin Facebook page where we invite members to share their experiences with the boxes. Customer Service representatives will be in charge of monitoring posts and relaying information back to the Adelaide + Austin Production team.
Sales Return
Moderate
In our sales projections, we have not accounted for any returns in our boxes. Parents will be prompted to fill out their child’s clothing sizes based on our designer’s measurements and each month will be sent that size. However, we cannot be sure whether or not the clothing will fit our customers
On our website, we will provide US children’s measurements and a feature that allows you to compare sizes to other clothing brands to get an accurate read on your child’s size. We will also take into consideration the surveys mentioned above about quality and fit for the next month’s box
Operating Expenses
Website
Moderate
Our team plans on creating and running our website for Adelaide and Austin, however, we do run the risk of online security and systems reliability.
For operating expenses, we have allocated 500 a month for the first seven months, and as we grow, so will our budget. Our website development team will be constantly monitoring the website and making sure the correct updates are made so that our platform is safe and reliable.
Travel Expenses
Moderate
With our team traveling each month, we do run the risk of going over budget which could affect the budgets in other areas of operating expenses.
Our research team has looked into travel costs for the first seven months and has allocated $15,000 each month. We plan on only sending out our photographer and lead writer, to begin with, and any money not spent will be rolled over to the next month.
Payback Period
Cash Flow
Net Cash Flow
Discounted Cash Flow
Net Discounted Cash Flow
Year 0
-$500,000.00
-$500,000.00
-$500,000.00
-$500,000.00
Year 1
-$53,340.00
-$553,340.00
-$38,100.00
-$538,100.00
Year 2
$72,211.00
-$481,129.00
$36,842.35
-$501,257.65
Year 3
$201,567.00
-$279,562.00
$73,457.36
-$427,800.29
Year 4
$374,953.00
$95,391.00
$97,603.34
-$330,196.95
Year 5
$672,591.00
$767,982.00
$125,057.83
-$205,139.12
Scenario Analysis – 2023
Normal Scenario
Best Case
Worst Case
Sales Price per Product (RRP)
$60.00
$75
55
Cost per Product
$21.17
15
$25.00
Contribution Margin per Unit
0.6471666667
0.8
$0.55
Operating expenses
$1,041,351.43
$900,000.00
$1,100,000.00
Break Even in Units
26818
15000
36667
Break even in Dollars
$1,609,093
1125000
2016667
Contribution Margin Income Statement
Number of Expected Sales
29224
35,000
22500
Sales in Dollars
$1,753,440.00
$2,625,000
1237500
Costs
$618,672.08
525000
$562,500.00
Overall Contribution Margin
18912.79867
28000
$12,272.73
Net Income
$93,416.49
$265,306
-$425,000.00
NPV in 2023
-$487,581.38
-$399,882.59
-$752,079.59
One of the first risk assessments we looked at was the Scenario Analysis. We looked at three different cases within our first year of sales from Best Case, Worst Case, and our projected Base Case. As mentioned before our initial investment into Adelaide + Austin will be $500,000 with a discount rate of 40%. In our Best Case, we looked at an increase in average sale price and units sold and a decrease in the average cost in the box and fixed costs, which gives us the highest net income and NPV possible in the first year. Since our company is new and we have a projected payback period of 3.72 years, all three NPV’s have negative outcomes. However, with both our normal and best-case scenario in 2023, we see Adelaide + Austin producing positive net incomes. With our worst-case scenario, we see a negative net income. All three scenarios do indicate risk, so our Adelaide + Austin team needs to work on increasing sales by more than 20%.
Sensitivity Analysis – Year 1
Sensitivity Analysis
Income Statement
Actual
Projected annual forecast
Year
2022
2023
2024
2025
2026
Date
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
Revenue
806807
1681913
2018296
2,462,321
3,077,901
Cost of goods sold
$272,547
568351
682021
832,066
1,040,083
Fixed Cost
340,000
624,000
672,000
724,800
782,880
Operating profit
194,260
489,562
664,275
905,455
1,254,938
Interest expense, net
0
0
0
0
0
Pretax profit
-53,340
72,211
201,567
374,953
672,591
Tax expense
($4,001.00)
5,416
$15,118.00
28,122
50,444
Net income
-49,339
66,795
$186,449.00
346,831
622,147
Revenue growth
20%
20%
22%
25%
Gross profit margin
66%
66%
66%
66%
66%
SG&A as % of revenue
42%
37%
33%
29%
25%
Tax rate
7.50%
7.50%
7.50%
7.50%
7.50%
2023 Gross profit margin ranges
$489,562
58.20%
62.20%
66.20%
70.20%
74.30%
2023 Revenue
28.00%
$420,132
$491,894
$517,461
$635,417
$707,178
growth rate
23.00%
$379,345
$448,304
$517,262
$586,221
$655,179
ranges ->
20.00%
$354,873
$422,150
$489,562
$556,703
$623,979
17.00%
$330,402
$461,591
$461,591
$527,186
$592,781
14.00%
$305,930
$305,930
$433,756
$497,668
$561,581
In our sensitivity analysis, our team looked at two different factors that could potentially affect our operating profit: gross profit margin and revenue growth rate. We looked at 2023, where we project our gross profit margin to remain the same and our revenue to increase by 20%. As you can see above, both factors are sensitive rates with our operating profit outcome, but with lower sales growth, our net income will be affected negatively. In order to make a profit in 2023, we must hit our sales goal of 20%, but can be more lenient with our profit margin. We will continue to aim for a 66.2% Profit margin to compete with other children’s retailers.
Conclusion:
While Adelaide + Austin is a new entrant into the market, we will differentiate our services by providing consumers a sustainable advantage. According to the survey, “some of the SBS market spaces, like beauty boxes, currently appear to be saturated, as evidenced by the decline in their growth rate. Other categories, such as meal kits, apparel, and kids’ boxes, have been growing, so they may be viable models for new entrants.” Adelaide + Austin will leverage the market opportunities coming our way to ensure we meet target sales projections and margins.
Income Statement:
Income Statement – 2022-2026
2022
2023
2024
2025
2026
Income Statement
Revenue
$ 806,807
$ 1,681,913
$ 2,018,296
$ 2,462,321
$ 3,077,902
COGS
$ 272,547
$ 568,351
$ 682,021
$ 832,066
$ 1,040,083
Gross Margin
$ 534,260
$ 1,113,562
$ 1,336,275
$ 1,630,255
$ 2,037,819
Operating Expenses
Web Development/Maintenance
$ 3,500
$ 6,000
$ 6,000
$ 6,000
$ 6,000
Salary
$ 280,000
$ 480,000
$ 528,000
$ 580,800
$ 638,880
Travel/R&D
$ 105,000
$ 201,600
$ 231,840
$ 278,208
$ 306,029
Office/Warehouse Lease
$ 84,000
$ 144,000
$ 144,000
$ 144,000
$ 144,000
Marketing/Advertising
$ 56,000
$ 100,800
$ 105,840
$ 111,132
$ 116,689
Office Equipment
$ 50,000
$ 92,571
$ 101,829
$ 117,103
$ 134,668
Legal
$ 7,000
$ 12,600
$ 13,230
$ 13,892
$ 14,586
Miscellaneous
$ 2,100
$ 3,780
$ 3,969
$ 4,167
$ 4,376
Total Expenses
$ 587,600
$ 1,041,351
$ 1,134,708
$ 1,255,302
$ 1,365,228
Earnings Before Interest & Taxes
$ (53,340)
$ 72,211
$ 201,567
$ 374,953
$ 672,591
Employee Bonuses
$ –
$ –
$ –
$ –
$ –
Interest Expense
$ 10,500
$ 8,400
$ 7,000
$ 5,600
$ 4,200
Earnings Before Taxes
$ (63,840)
$ 63,811
$ 194,567
$ 369,353
$ 668,391
Income Taxes
7.5%
$ (4,788)
$ 4,786
$ 14,593
$ 27,702
$ 50,129
Net Earnings
$ (59,052)
$ 59,025
$ 179,975
$ 341,652
$ 618,262
Balance Sheet – 2022-2026
USD$000
2022
2023
2024
2025
2026
Projection
Accounts Receivable (Days)
51
51
51
51
51
Inventory (Days)
75
75
75
75
75
Accounts Payable (Days)
107
107
107
107
107
Capital Expenditures
$ –
$ –
$ –
$ –
$ –
Debt Issuance (Repayment)
$ –
$ –
$ –
$ –
$ –
Equity Issued (Repaid)
$ –
$ –
$ –
$ –
$ –
Prepaid Expenses Growth Rate
2%
2%
2%
2%
Accrued Expenses Growth Rate
1%
1%
1%
1%
Balance Sheet
Assets
Current assets:
Cash
$ 112,264
$ 691,932
$ 978,606
$ 1,454,639
$ 2,210,688
Accounts Receivable
$ 112,264
$ 234,032
$ 280,838
$ 342,623
$ 428,279
Prepaid expenses
$ –
$ –
$ –
$ –
Inventory
$ 56,132
$ 231,491
$ 314,861
$ 449,315
$ 659,742
Total current assets
$ 280,660
$ 1,157,456
$ 1,574,305
$ 2,246,577
$ 3,298,708
Property & Equipment
$ –
$ –
$ –
$ –
$ –
Total Assets
$ 280,660
$ 1,157,456
$ 1,574,305
$ 2,246,577
$ 3,298,708
Liabilities
Current liabilities:
$ (400,000)
$ 80,000
$ 228,000
$ 428,800
$ 687,680
Accounts Payable
$ 80,000
$ 440,000
$ 542,400
$ 687,040
$ 878,144
Accrued expenses
$ –
$ –
$ –
$ –
Total current liabilities
$ (320,000)
$ 520,000
$ 770,400
$ 1,115,840
$ 1,565,824
Long-term debt
$ 150,000
$ 120,000
$ 100,000
$ 80,000
$ 60,000
Total Liabilities
$ (170,000)
$ 640,000
$ 870,400
$ 1,195,840
$ 1,625,824
Shareholder’s Equity
Equity Capital
$ 500,000
$ 500,000
$ 500,000
$ 500,000
$ 500,000
Retained Earnings
$ (49,340)
$ 17,456
$ 203,905
$ 550,737
$ 1,172,884
Shareholder’s Equity
$ 450,660
$ 517,456
$ 703,905
$ 1,050,737
$ 1,672,884
Total Liabilities & Shareholder’s Equity
$ 280,660
$ 1,157,456
$ 1,574,305
$ 2,246,577
$ 3,298,708
Cash Flow Statement – 2022-2026
USD$000
2022
2023
2024
2025
2026
Cash Flow Statement
Operating Cash Flow
Net Earnings
$ (49,340)
$ 66,795
$ 186,450
$ 346,832
$ 622,147
Plus: Depreciation & Amortization
$ 280,000
$ 480,000
$ 528,000
$ 580,800
$ 638,880
Less: Changes in Working Capital
$ 88,396
$ (62,873)
$ 27,776
$ 51,599
$ 104,978
Cash from Operations
$ 142,264
$ 609,668
$ 686,673
$ 876,033
$ 1,156,049
Investing Cash Flow
Investments in Property & Equipment
$ 30,000
$ 30,000
$ 400,000
$ 400,000
$ 400,000
Cash from Investing
$ 30,000
$ 30,000
$ 400,000
$ 400,000
$ 400,000
Financing Cash Flow
Issuance (repayment) of debt
$ –
$ –
$ –
$ –
$ –
Issuance (repayment) of equity
$ –
$ –
$ –
$ –
$ –
Cash from Financing
$ –
$ –
$ –
$ –
$ –
Net Increase (decrease) in Cash
$ 112,264
$ 579,668
$ 286,673
$ 476,033
$ 756,049
Opening Cash Balance
$ 112,264
$ 691,932
$ 978,606
$ 1,454,639
Closing Cash Balance
$ 112,264
$ 691,932
$ 978,606
$ 1,454,639
$ 2,210,688
Profitability Ratios
Gross Margin
66.22%
66.21%
66.21%
66.21%
66.21%
Operating Margin
-6.61%
4.29%
9.99%
15.23%
21.85%
Net Profit Margin
-6.12%
3.97%
9.24%
14.09%
20.21%
Efficiency Ratios
Total Asset Turnover
2.87
1.45
1.28
1.10
0.93
Net Asset Turnover
8.02
12.24
6.64
3.90
2.50
Inventory Turnover
4.86
2.46
2.17
1.85
1.58
Inventory Days
75.17
148.67
168.51
197.10
231.53
Receivable Turnover
7.19
7.19
7.19
7.19
7.19
Receivable Days
50.79
50.79
50.79
50.79
50.79
Payables Turnover
3.41
1.29
1.26
1.21
1.18
Payables Days
107.14
282.57
290.28
301.38
308.17
Working Capital Requirement
125.96
199.45
219.29
247.89
282.31
Working Capital Funding Gap
18.82
-83.12
-70.98
-53.49
-25.86
PP&E Turnover
0.00
0.00
0.00
0.00
0.00
Tax Ratio
7.50%
7.50%
7.50%
7.50%
7.50%
Liquidity Ratios
Current Ratio
1.56
1.13
1.24
1.39
1.60
Acid Test (Quick Ratio)
1.25
0.91
0.99
1.11
1.28
Leverage Ratios
Debt to Equity
-3.04
6.87
0.49
0.15
0.05
Debt to Tangible Net Worth
-3.04
6.87
0.49
0.15
0.05
Total Liabilities to Equity
-6.69
65.31
6.72
3.08
1.81
Total Assets to Equity
-5.69
66.31
7.72
4.08
2.81
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