Southeast Racing Parts (SIR) is a proposed specialty auto parts retailer focusing on the amateur car racing Set. SIR is an imaginative business venture With a positive prospect for growth and expansion. The business plan demonstrates a majority Of strengths and opportunities With only a minimum Of discernible weaknesses and threats. Most of the potential negatives in this business plan are small, manageable, and can be overcome. After careful analysis, it appears that SIR is a good business risk with the potential for significant success.
One of the most important opportunities for SIR is its proximity to its customers-? both physically and idealistically. The husband and wife team who will manage and operate the business are racing enthusiasts with many collective years of racing experience and connections. They understand and relate to the mentality and desires of their customers. Also, the location of their retail location is very appropriate, North Carolina is a hotbed of amateur racing enthusiasts-?the sport has increased tremendously in the United States in the past decade, with significant growth in the Southeast.
The fact that their store will be located directly across the street from a new go-kart/entertainment complex means that they will have immediate access to a large potential customer base. People will choose to shop at SIR based on convenience. One potential weakness: however, is based on the fact that they will be relying too much on one single retail location. The owners say they want to keep their business small in order to offer the highest quality customer service. It is certainly possible to operate a larger business and still be committed to the absolute best in customer service.
By limiting the size of their business right from the start, they will be reducing the opportunities for successful growth. SIR states via their proposed business plan on the Palo Alto Software website (2010) that their mission is to ‘become the premier destination for entry level and novice racing parts:” however, they will certainly not reach that goal if they continue to concentrate the majority Of their efforts on one retail location. Although they state that it will be a supplement to their retail business, the owners of SIR are also going to be engaging in mail order sales.
This is an opportunity to reach a much larger market, and should be a greater object of focus. While it is true that the sport of amateur auto racing is growing tremendously, it is still a small niche market. It is certainly a strength that SIR will have a nice color catalog and a portion of its profits will be augmented by mail order sales, but this area offers the company a much larger chance to tap into their core audience on a national level without much additional risk.
The business plan addresses the fact that the main competition is likely to come trot Internet-based companies tottering a lower price and convenience. If SIR is going to be doing all their mail order business solely via catalog telephone, and fax they simply will not be able to compete with an on- line operation offering lower prices and more selection. SIR states that this area is a logical next step for future expansion-?to be truly competitive and not be out-dated and outmoded from the inception SIR should include web-based sales in its business plan.
Another reason SIR should consider Internet over traditional mail order sales from the Start is that fact that a large part Of their plan for future growth includes establishing and expanding a line of own-brand researched. This is a significant strength and an opportunity in their business plan because house brands have very high profit margins. Plus, strengthening the brand strengthens the business. Establishing a brand is a complicated task; however, and must be done correctly. Corps own business plan reiterates that fact that racers are a picky bunch-?always looking for the highest quality items.
In order to prove to those save consumers that the house brand is on a par with name brand equipment, SIR will need to engage in significant brand- building activities. The Internet provides an excellent opportunity to create brand wariness and should not be overlooked as a key selling tool for the own-brand parts as well as their other products, Although there are respectable margins in many of the types to products that SIR is looking to sell, the initial investment is likely to be high.
Quality race parts are expensive, and due to the fact that there are numerous applications for parts and accessories, SIR will be required to create a substantial inventory from the beginning. A large variety of makes, models, years, and custom jobs means many different parts to serve the same purpose parts also quickly become obsolete, 50 there will need to be a plan in lace to get rid of unsuitable merchandise by returning it to the distributor or manufacturer, or selling to another vendor.
Either way, a better plan must be in place for purchasing and managing inventory to mitigate this potentially costly threat that was not addressed in the business plan. SIR did address the fact that they have established solid relationships with numerous vendors vivo are willing to Offer incentives and deals to get the new business Off the ground. Of course doing this will be advantageous to the manufacturers and distributors in the long UN, because if SIR does well, they Will grow and order more from the vendors.
Large vendors are not always willing to extend this kind of long-term investment to small start-up companies, so this is a definite strength that should be taken advantage of. The vendors are likely to have seen the potential in Corps growth because they have seen the growth in the marketplace in general and realize that SIR is in a position to take advantage off market trending in their favor. The business plan did an excellent job of identifying the target market and the trends that are moving in their favor.
While there are not very many professional racers, there are certainty large numbers to people who wish they could be. SIR identified two key segments of the population that will make up the core of their customer base: serious young cart racers who have chosen the sport over more traditional sports activities, and Baby Boomers who now have the time and resources available to indulge in a long-held dream of racing. It is rare for a business to have two very well delineated target markets that are relatively easy to target. This information will help them in their marketing efforts.
In terms of marketing and other necessary budgets, the owners of SIR are willing to wait to receive any profits from the business until the long-term debt has been satisfied. They plan reinvest whatever profits they see early on to finance the growth of the company. The owners have provided very detailed income statements and have outlined a very realistic model for small profits in years one and two, with the profit almost doubling by the third year. Based on their annual estimates, this is a reasonable growth calculation. Carp’s business plan is thorough and well Hough-out.
If they address the few threats and weaknesses pointed out in this analysis, the business should hue a good chance for success. If they are able to acquire the additional funding they will need to pay for startup costs and initial inventory purchases, SIR has an opportunity to realize an acceptable profit.